<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
<TABLE>
<C> <S>
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 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
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</TABLE>
Commission File Number: 1-13092
MALAN REALTY INVESTORS, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
Michigan 38-1841410
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
</TABLE>
<TABLE>
<S> <C>
30200 Telegraph Rd., Ste. 105 48025
Bingham Farms, Michigan (Zip Code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: (248) 644-7110
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of Each Class: Name of Each Exchange on Which Registered:
-------------------- ------------------------------------------
<S> <C>
Common Stock, Par Value $0.01 Per Share New York Stock Exchange
9 1/2% Convertible Subordinated Debentures due 2004 New York Stock Exchange
</TABLE>
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K: [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $61,913,000 (computed on the basis of $12.625 per
share), which was the last sale price on the New York Stock Exchange on February
29, 2000. (For this computation, the Registrant has excluded the market value of
all shares of its Common Stock reported as beneficially owned by executive
officers and directors of the Registrant; such exclusion shall not be deemed to
constitute admission that any such person is an "affiliate" of the Registrant.)
As of February 29, 2000, 5,172,404 shares of Common Stock, Par Value $0.01 Per
Share, and $42,743,000 aggregate principal 9 1/2% Convertible Subordinated
Debentures due 2004, were outstanding.
LIST OF DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates by reference information from the
Registrant's definitive proxy statement for the annual shareholders' meeting to
be held in 2000, which is to be filed with the Securities and Exchange
Commission within 120 days of the close of Registrant's fiscal year.
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1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I
Item 1. Business.................................................... 4
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings........................................... 7
Item 4. Submission of Matters to a Vote of Security Holders......... 7
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder 8
Matters.....................................................
Item 6. Selected Financial Data..................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations...................................
Item 7a. Quantitative and Qualitative Disclosure About Market Risk... 15
Item 8. Consolidated Financial Statements and Supplementary Data.... 15
Item 9. Changes in and Disagreements with Accountants on Accounting 32
and Financial Disclosure....................................
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 32
Item 11. Executive Compensation...................................... 32
Item 12. Security Ownership of Certain Beneficial Owners and 32
Management..................................................
Item 13. Certain Relationships and Related Transactions.............. 32
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules, and 33
Reports on Form 8-K.........................................
Signatures................................................................... 34
</TABLE>
3
<PAGE> 3
PART I
ITEM 1. BUSINESS
Malan Realty Investors, Inc. (the "Company") is a self-administered and
self-managed real estate investment trust ("REIT") engaged in the ownership,
management, leasing, acquisition, development and redevelopment of commercial
retail properties. The Company's operating units are comprised of approximately
65 commercial retail properties. All financial results are aggregated into one
operating segment since the properties have similar economic characteristics.
The Company also manages properties owned by unrelated third parties on a
limited basis.
The Company is one of the original developers of properties for Kmart
Corporation ("Kmart") and ranks among the leading operators of shopping centers
in the United States. Since its initial public offering ("IPO") in 1994, the
Company has maintained a strategy of reducing the Kmart concentration of its
portfolio by acquiring shopping centers anchored by national retailers other
than Kmart. Subsequent acquisitions include 18 community shopping centers
anchored by, or containing as a tenant, Wal-Mart Corporation. ("Wal-Mart"),
three community shopping centers located in Michigan having other national
retailers as the major tenant, and a 12-plex cinema complex leased and operated
by a major national motion picture company. In addition, two of the Company's
properties anchored by Kmart were redeveloped into multiplex cinema complexes.
These two theaters, completed in September 1998 and March 1999, respectively,
are operated by Cinemark USA, one of the nation's leading theater operators.
At the time of the IPO, Kmart represented 60.1% of the Company's rental income
and 77.5% of the gross leaseable area within the Company's portfolio. In 1999,
approximately 28.8% of the Company's total revenues were derived from Kmart and
at December 31, 1999, 49.2% of its gross leaseable area was leased to Kmart.
Wal-Mart accounted for approximately 4.9% of the Company's total revenues in
1999 and approximately 7.7% of its gross leaseable area at December 31, 1999.
The Company's total gross leaseable area has grown from approximately 4.7
million square feet at the time of the IPO to approximately 6.0 million
currently.
Objectives of the Company include maximizing growth and enhancing the value of
its portfolio through effective operating, acquisition, development and
financing strategies and management policies and disposition of noncore assets.
The Company believes that attractive opportunities exist to increase rental
revenues through effective leasing and management of the properties in its
portfolio. The Company has demonstrated its ability to create additional value
through the acquisition and redevelopment of existing community shopping
centers, freestanding retail stores and entertainment facilities, as well as the
development of new commercial properties in selected geographical markets with
an emphasis on small to medium-sized communities where such properties can be
positioned among the leading centers in their respective trade area.
The Company's primary target area is the Midwestern United States; however
management is aware that attractive opportunities may exist outside of this
geographic area and the Company may pursue such opportunities if management
believes they will enhance overall shareholder value. In addition, certain of
the properties owned by the Company have parcels of undeveloped land which are
available for future development. The Company will also pursue certain expansion
opportunities available within the current portfolio.
The Company is taxed as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company generally
is not subject to federal income taxes to the extent it distributes at least 95%
of its real estate investment trust taxable income (as defined in the Code) to
its shareholders.
The Company presently has 22 full time employees and believes that its
relationship with its employees is good.
4
<PAGE> 4
ITEM 2. PROPERTIES
<TABLE>
<CAPTION>
GROSS
LEASABLE
OWNERSHIP AREA
INTEREST YEAR LAND (GLA) PERCENT
(EXPIRATION DEVELOPED/ AREA (SQ. FT.) LEASED
PROPERTY INCL. OPTIONS) RENOVATED (ACRES) (A) OF GLA
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ILLINOIS (16)
Bricktown Square, Chicago, IL Fee 1987/1989 26.00 306,009 94%
Wal-Mart Plaza, Champaign, IL Fee 1994 1.00 11,458 100%
Kmart, Chicago, IL Fee 1977 8.51 96,268 100%
Wal-Mart Plaza, Decatur, IL Fee 1992/1999 5.95 45,114 100%
Fairview Heights, IL Ground Lease (2051) 1976/1992 12.65 96,268 100%
Kmart, Franklin Park, IL Fee 1975 9.84 96,268 100%
Wal-Mart Plaza, Jacksonville, IL Fee 1995 6.89 52,726 83%
Kmart, Lansing, IL Fee 1976/1992 10.48 96,268 100%
Stage/Staples, Lincoln, IL Fee 1975 4.86 39,797 100%
Kmart, Loves Park, IL Ground Lease (2026) 1971/1991 12.50 106,084 100%
Cinemark Theatre, Melrose Park,
IL Ground Lease (2048) 1973/1989 10.90 69,313 100%
Kmart, New Lenox, IL Fee 1977 8.72 88,580 100%
Tinseltown 17, North Aurora, IL Fee 1967/1998 11.36 65,416 100%
Kmart, Rockford, IL Fee 1971/1991 10.70 110,471 100%
Sherwood Plaza, Springfield, IL Fee 1975/1991 13.85 124,885 96%
Woodriver Plaza, Woodriver, IL Fee 1987 19.40 147,470 100%
INDIANA (8)
Cedar Square, Crawfordsville, IN Fee 1991/1996 11.32 25,750 70.1%
Clifty Crossing, Columbus, IN Fee 1989 19.90 190,919 94%
Wal-Mart Plaza, Decatur, IN Fee 1994/1997 5.80 36,300 100%
Wal-Mart Plaza, Huntington, IN Fee 1995 1.00 12,485 100%
Broadway Center, Merrillville, IN Fee 1974/1997 19.89 177,692 94%
Flatrock Village, Rushville, IN Fee 1988 14.00 73,608 91%
Kmart, Valparaiso, IN Ground Lease (2050) 1974/1990 9.61 93,592 100%
Cherry Tree Plaza, Washington, IN Fee 1988 20.60 143,682 100%
<CAPTION>
ANCHOR TENANTS
(LEASE EXPIRATION/
PROPERTY OPTION EXPIRATION)
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<S> <C>
ILLINOIS (16)
Bricktown Square, Chicago, IL Toys 'R' Us (2013/2038)
Kids 'R' Us (2014/2039)
Marshall's (2000/2015)
Sportmart (2003/2018)
Meridian Entertainment Group (2008/2018)
Frank's Nursery (2009/2029)
Wal-Mart Plaza, Champaign, IL Wal-Mart (B)/Sam's Club (B)
Kmart, Chicago, IL Kmart (2011/2061)
Wal-Mart Plaza, Decatur, IL Wal-Mart (B)
Fairview Heights, IL Kmart (2001/2051) (C)
Kmart, Franklin Park, IL Kmart (2011/2061)
Wal-Mart Plaza, Jacksonville, IL Wal-Mart (B)/Country Market (B)
Kmart, Lansing, IL Kmart (2011/2061)
Stage/Staples, Lincoln, IL Stage Dept Store (2009/2019)
Staples (2009)
Kmart, Loves Park, IL Kmart (2011/2026)
Cinemark Theatre, Melrose Park,
IL Cinemark USA (2019/2034)
Kmart, New Lenox, IL Kmart (2011/2061)
Tinseltown 17, North Aurora, IL Cinemark USA (2018/2033)
Kmart, Rockford, IL Kmart (2011/2061)
Sherwood Plaza, Springfield, IL Kmart (2011/2061)
Woodriver Plaza, Woodriver, IL Wal-Mart (2007/2037)
INDIANA (8)
Cedar Square, Crawfordsville, IN Wal-Mart (B)
Clifty Crossing, Columbus, IN Wal-Mart (2009/2039)
Jay C Foods (2009/2034)
Wal-Mart Plaza, Decatur, IN Wal-Mart (B)
Wal-Mart Plaza, Huntington, IN Wal-Mart (B)
Broadway Center, Merrillville, IN Kmart (2011/2061)
Flatrock Village, Rushville, IN Wal-Mart (2008/2038)
Kmart, Valparaiso, IN Kmart (2011/2050)
Cherry Tree Plaza, Washington, IN Wal-Mart (2008/2038)
Jay C Foods (2008/2033)
</TABLE>
5
<PAGE> 5
<TABLE>
<CAPTION>
GROSS
LEASABLE
OWNERSHIP AREA
INTEREST YEAR LAND (GLA) PERCENT
(EXPIRATION DEVELOPED/ AREA (SQ. FT.) LEASED
PROPERTY INCL. OPTIONS) RENOVATED (ACRES) (A) OF GLA
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
KANSAS (14)
Ace Hardware, Arkansas City, KS Fee 1976 4.41 39,797 56%
Wal-Mart Plaza, Chanute, KS Fee 1995 1.00 15,447 92%
Wal-Mart Plaza, El Dorado, KS Fee 1996 1.70 20,000 84%
Big Lots, Emporia, KS Fee 1976 6.55 39,797 100%
Ace Hardware, Garden City, KS Fee 1977/1991 5.60 39,797 60%
Great Bend, KS Fee 1977 5.41 55,552 0%
Orscheln Farm Supply, Hays, KS Fee 1977/1991 4.96 40,050 100%
Food 4 Less, Independence, KS Fee 1976/1990 4.12 39,797 100%
Pine Ridge Plaza, Lawrence, KS Fee 1974/1989 31.57 193,033 100%
Southwind Theater, Lawrence, KS Fee 1997 7.89 42,497 100%
Standard Supply, Liberal, KS Fee 1977 4.57 40,279 100%
Kmart, Salina, KS Fee 1978/1991 16.00 87,406 100%
Kmart, Topeka, KS Fee 1974 13.93 108,960 100%
South City Center, Wichita, KS Fee 1976 13.74 130,380 100%
MARYLAND (1)
Kmart, Forestville, MD Fee 1979 8.00 84,180 100%
MICHIGAN (7)(D)
Wal-Mart Plaza, Benton Harbor, MI Fee 1995 1.30 14,280 100%
Orchard-14, Farmington Hills, MI Fee 1973/1997 11.49 139,670 83%
Clinton Pointe Shopping Center, Fee 1992 11.72 135,330 95%
Clinton Township, MI
The Shops at Fairlane Meadows, Fee 1987 17.73 137,508 100%
Dearborn, MI
Wal-Mart Plaza, Owosso, MI Fee 1993/1996 10.00 62,379 100%
Wal-Mart Plaza, Sturgis, MI Fee 1994 1.00 12,000 100%
Westland Shopping Center, Fee 1996 6.99 85,000 78%
Westland, MI
MINNESOTA (1)
Wal-Mart Plaza, Little Falls, MN Fee 1996 1.00 12,456 100%
MISSOURI (5)
Kmart, Cape Girardeau, MO Fee 1974/1991 5.68 79,856 100%
Kmart, Jefferson City, MO Fee 1973/1991 9.76 124,798 100%
Prairie View Plaza, Ground Lease (2050) 1975/1992 3.24 104,440 99%
Kansas City, MO
Manchester Plaza, Manchester, MO Fee 1977 14.89 117,255 97%
Kmart Plaza, Springfield, MO Fee 1978/1991 7.41 98,878 98%
<CAPTION>
ANCHOR TENANTS
(LEASE EXPIRATION/
PROPERTY OPTION EXPIRATION)
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<S> <C>
KANSAS (14)
Ace Hardware, Arkansas City, KS Westlake Hardware (2009/2019)
Wal-Mart Plaza, Chanute, KS Wal-Mart (B)
Wal-Mart Plaza, El Dorado, KS Wal-Mart (B)
Big Lots, Emporia, KS Big Lots (2002/2012)
Ace Hardware, Garden City, KS Westlake Hardware (2010/2020)
Great Bend, KS
Orscheln Farm Supply, Hays, KS Orscheln Farm Supply
(2004/2014)
Food 4 Less, Independence, KS Food 4 Less (2001/2026)
Pine Ridge Plaza, Lawrence, KS Kmart (2018/2068)
Kohl's (2019/2055)
Southwind Theater, Lawrence, KS Hollywood Theaters (2017/2027)
Standard Supply, Liberal, KS Standard Supply (2003/2013)
Kmart, Salina, KS Kmart (2011/2061)
Kmart, Topeka, KS Kmart (2011/2049)
South City Center, Wichita, KS Kmart (2011/2061)
MARYLAND (1)
Kmart, Forestville, MD Kmart (2011/2061)
MICHIGAN (7)(D)
Wal-Mart Plaza, Benton Harbor, MI Wal-Mart (B)/Lowe's (B)
Orchard-14, Farmington Hills, MI Kmart (2011/2061)
Clinton Pointe Shopping Center, Office Max (2007/2017)
Clinton Township, MI Sports Authority (2017/2067)
Target (B)
The Shops at Fairlane Meadows, Best Buy (2009/2024)
Dearborn, MI Kids 'R' Us (2003/2018)
Target (B)
Mervyn's (B)
Wal-Mart Plaza, Owosso, MI Wal-Mart (B)
Wal-Mart Plaza, Sturgis, MI Wal-Mart (B)
Westland Shopping Center, Dick's Sporting Goods (2011/2026)
Westland, MI
MINNESOTA (1)
Wal-Mart Plaza, Little Falls, MN Wal-Mart (B)
MISSOURI (5)
Kmart, Cape Girardeau, MO Kmart (2011/2061)
Kmart, Jefferson City, MO Kmart (2011/2061)
Prairie View Plaza, Kmart (2011/2050)
Kansas City, MO
Manchester Plaza, Manchester, MO Kloss Furniture (2004/2054)
Kmart Plaza, Springfield, MO Kmart (2011/2061)
</TABLE>
6
<PAGE> 6
<TABLE>
<CAPTION>
GROSS
LEASABLE
OWNERSHIP AREA
INTEREST YEAR LAND (GLA) PERCENT
(EXPIRATION DEVELOPED/ AREA (SQ. FT.) LEASED
PROPERTY INCL. OPTIONS) RENOVATED (ACRES) (A) OF GLA
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OHIO (2)
Wal-Mart Plaza, Mansfield, OH Fee 1993/1998 3.90 55,316 94%
Shannon Station, Van Wert, OH Fee 1989 20.20 145,607 97%
WISCONSIN (11)
Kmart Plaza, Ft. Atkinson, WI Fee 1979 8.90 88,608 73%
Kmart, Green Bay, WI Fee 1974/1992 11.59 118,988 100%
Country Fair Shopping Center, Fee 1960/1991 10.50 152,166 91%
Hales Corners, WI
Kmart, Janesville, WI Fee 1968/1991 13.78 104,000 100%
Kmart Plaza, Kenosha, WI Fee 1973/1994 9.95 119,726 100%
Westland Plaza, Madison, WI Fee 1978/1992 12.40 122,534 88%
Kmart, Madison, WI Fee 1968/1991 12.53 106,058 100%
Northway Mall, Marshfield, WI Ground Lease (2022) 1978/1994 21.63 287,267 96%
Kmart, Milwaukee, WI Fee 1971 11.23 117,791 100%
Kmart, Oshkosh, WI Fee 1968/1992 10.00 104,000 100%
Kmart, Stevens Point, WI Fee 1972/1990 8.00 109,197 100%
---------
TOTAL 6,038,503
=========
<CAPTION>
ANCHOR TENANTS
(LEASE EXPIRATION/
PROPERTY OPTION EXPIRATION)
- -------------------------------------------------------------------
<S> <C>
OHIO (2)
Wal-Mart Plaza, Mansfield, OH Wal-Mart (B)
Shannon Station, Van Wert, OH Wal-Mart (2009/2039)
Roundy's (2010/2030)
WISCONSIN (11)
Kmart Plaza, Ft. Atkinson, WI Kmart (2004/2054)
Kmart, Green Bay, WI Kmart (1999/2049)
Country Fair Shopping Center, Kmart (2011/2061)
Hales Corners, WI
Kmart, Janesville, WI Kmart (2003/2038)
Kmart Plaza, Kenosha, WI Kmart (2011/2061)
Westland Plaza, Madison, WI Kmart (2002/2053)
Kmart, Madison, WI Kmart (2002/2042)
Northway Mall, Marshfield, WI Kmart (2011/2022)
JC Penney (1999/2019)
Younkers (2004/2019)
Kmart, Milwaukee, WI Kmart (2011/2061)
Kmart, Oshkosh, WI Kmart (2003/2038)
Kmart, Stevens Point, WI Kmart (2011/2061)
TOTAL
</TABLE>
(A) Includes only Company owned square footage.
(B) These stores and the underlying pads are owned and managed by third parties
not related to the Company.
(C) Kmart subleases this property to Hobby Lobby.
(D) In addition to the operating properties listed, the Company leases 6,193
square feet of office space for its headquarters in Bingham Farms, Michigan.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Company is involved in routine
litigation. However, there are no material legal proceedings presently pending
against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
7
<PAGE> 7
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange under the
symbol "MAL". As of February 29, 2000 the Company had approximately 200
stockholders of record. The following table sets forth, for the periods
indicated, the high and low sales price as reported on the New York Stock
Exchange, the dividends declared and paid by the Company per common share for
each such period, and the income tax treatment of such distributions:
<TABLE>
<CAPTION>
ORDINARY RETURN CAPITAL UNRECAP.
TAXABLE OF GAIN SEC 1250
HIGH LOW DIVIDENDS DIVIDEND CAPITAL DISTRIBUTION GAIN
------ ------ --------- -------- ------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
- ----
First Quarter.................................. $18.31 $17.31 $0.425 30.9% 69.1% --% --%
Second Quarter................................. $18.13 $17.13 0.425 30.9 69.1 -- --
Third Quarter.................................. $17.75 $16.25 0.425 30.9 69.1 -- --
Fourth Quarter................................. $17.75 $14.50 0.425 30.9 69.1 -- --
------
$ 1.70
======
1999
- ----
First Quarter.................................. $15.88 $13.50 $0.425 32.6% 54.0% 12.1% 1.3%
Second Quarter................................. $15.88 $13.88 0.425 32.6 54.0 12.1 1.3
Third Quarter.................................. $15.50 $12.63 0.425 32.6 54.0 12.1 1.3
Fourth Quarter................................. $14.13 $12.00 0.425 32.6 54.0 12.1 1.3
------
$ 1.70
======
</TABLE>
The Company has paid regular quarterly distributions to its shareholders of
$.425 per share ($1.70 per share on an annualized basis) on the Common Stock
since the completion of the IPO. The Company intends to continue to declare
quarterly distributions to its shareholders. However, distributions by the
Company are determined by the Board of Directors and will depend on the
Company's actual results of operations, cash flows from operations, economic
conditions and other factors, such as debt service requirements, cash
requirements, including the repayment or refinancing of indebtedness, capital
expenditure requirements, including improvements to and expansions of existing
properties, the development of additional properties, and such other factors as
the Board of Directors deems relevant.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information for the Company
on a historical basis and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
all of the financial statements and notes thereto included elsewhere in this
Form 10-K.
8
<PAGE> 8
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues
Rental income............................................. $ 30,662 $ 28,084 $ 24,092 $ 23,836 $ 22,100
Percentage and overage rents.............................. 1,307 1,215 1,177 1,164 963
Recoveries from tenants................................... 10,688 9,954 9,271 9,340 8,662
Interest and other income................................. 615 311 443 623 522
Gain on sale of real estate............................... 1,602
-------- -------- -------- -------- --------
Total revenues.............................................. 44,874 39,564 34,983 34,963 32,247
Operating expenses
Property operating and maintenance.......................... 3,115 2,876 2,867 2,769 1,961
Other operating expenses.................................. 1,752 1,615 1,493 1,481 1,216
Real estate taxes......................................... 8,612 8,134 7,891 7,715 7,511
General and administrative................................ 2,024 2,068 1,545 1,664 1,463
Depreciation and amortization............................. 6,368 5,633 5,068 4,920 4,597
Impairment of real estate................................. 431
-------- -------- -------- -------- --------
Total operating expenses.................................... 21,871 20,757 18,864 18,549 16,748
-------- -------- -------- -------- --------
Operating income............................................ 23,003 18,807 16,119 16,414 15,499
Interest expense............................................ 17,550 16,770 15,576 15,815 13,749
-------- -------- -------- -------- --------
Income before extraordinary item and cumulative effect of
change in accounting principle............................ 5,453 2,037 543 599 1,750
Extraordinary item -- loss on extinguishment of debt........ (289) (191)
-------- -------- -------- -------- --------
Income before cumulative effect of change in accounting
principle................................................. 5,164 1,846 543 599 1,750
Cumulative effect of change in accounting principle......... (522)
-------- -------- -------- -------- --------
Net income.................................................. $ 4,642 $ 1,846 $ 543 $ 599 $ 1,750
======== ======== ======== ======== ========
Basic and diluted earnings per share........................ $ 0.90 $ 0.41 $ 0.15 $ 0.17 $ 0.49
======== ======== ======== ======== ========
Weighted-average basic shares............................... 5,170 4,507 3,546 3,464 3,547
======== ======== ======== ======== ========
Weighted-average diluted shares (1)......................... 5,170 4,524 3,591 3,475 3,547
======== ======== ======== ======== ========
PRO FORMA DATA (3)
Pro forma amount assuming the change in accounting method
for percentage rent revenue is applied retroactively:
Income before extraordinary item............................ $ 5,453 $ 1,970 $ 475 $ 659 $ 1,723
======== ======== ======== ======== ========
Basic and diluted earnings per share before extraordinary
item...................................................... $ 1.05 $ 0.44 $ 0.13 $ 0.19 $ 0.49
======== ======== ======== ======== ========
Net income.................................................. $ 5,164 $ 1,779 $ 475 $ 659 $ 1,723
======== ======== ======== ======== ========
Basic and diluted earnings per share........................ $ 1.00 $ 0.39 $ 0.13 $ 0.19 $ 0.49
======== ======== ======== ======== ========
CASH FLOW DATA
Cash provided by operating activities....................... $ 10,872 $ 10,069 $ 5,149 $ 7,117 $ 8,541
Cash used for investing activities.......................... (4,623) (40,627) (8,216) (2,162) (33,337)
Cash provided by (used for) financing activities............ (7,290) 31,739 (2,182) (7,084) 22,142
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents...... $ (1,041) $ 1,181 $ (5,249) $ (2,129) $ (2,654)
======== ======== ======== ======== ========
OTHER DATA
Funds from operations (2)
Basic..................................................... $ 10,214 $ 8,094 $ 5,581 $ 5,467 $ 6,310
======== ======== ======== ======== ========
Diluted................................................... $ 17,017 $ 15,697 $ 13,846 $ 13,937 $ 14,897
======== ======== ======== ======== ========
Cash distributions declared per basic common share.......... $ 1.70 $ 1.70 $ 1.70 $ 1.70 $ 1.70
======== ======== ======== ======== ========
Total gross leasable area at period end..................... 6,038 6,209 5,653 5,707 5,695
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Real estate, before accumulated depreciation................ $267,117 $261,783 $215,785 $207,590 $206,085
Total assets................................................ 253,480 256,837 216,138 217,852 223,360
Mortgage indebtedness....................................... 126,601 122,279 88,585 83,643 83,734
Convertible debentures...................................... 42,743 44,925 56,680 61,285 61,285
Convertible notes........................................... 27,000 27,000 27,000 27,000 27,000
Shareholders' equity........................................ 47,141 51,237 33,942 34,993 41,243
</TABLE>
(1) In accordance with Statement of Financial Accounting Standards, No. 128,
"Earnings per Share", conversion of all of the debt securities would be
antidilutive and as such are not included in the weighted average diluted
shares reported above.
(2) Management considers funds from operations ("FFO") to be an appropriate
measure of performance of an equity real estate investment trust. The
Company calculates FFO as net income or loss excluding gains and losses from
sales of property, further adjusted for certain non-cash items including
depreciation and amortization of real estate assets. It is the opinion of
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. See "Funds From Operations" in Item 7 -- "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Diluted FFO assumes the conversion of all debt securities.
(3) In 1999, the Company changed its method of accounting for percentage rental
revenue in accordance with SEC Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements." See Note 9 in the accompanying
financial statements.
9
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the "Selected
Financial Data" and the Company's consolidated financial statements and notes
thereto appearing elsewhere in this Form 10-K.
RESULTS OF OPERATIONS
Comparison of Year Ended December 31, 1999 to Year Ended December 31, 1998
Total revenues increased $5.310 million from 1998. Approximately $1.602
million of the increase resulted from a gain of $1.751 million on the sale of a
freestanding Kmart retail building located in Colma, California in March 1999
offset by a loss of $149,000 incurred on the sale of property in Gary, Indiana
in August 1999. Minimum rents and recoveries from tenants increased $3.312
million resulting primarily from the Company's acquisitions of a 12 shopping
center portfolio in May 1998 and the Wal-Mart Plaza in 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. Percentage rent increased approximately $92,000 from 1998
primarily due to overall increases in percentage rents from Kmart and Wal-Mart,
the Company's two largest tenants, offset by a decrease resulting from a change
in the method in which the Company accounts for these revenues. Interest and
other income increased approximately $304,000 primarily from the receipt of
nonrecurring lease termination fees from two tenants in 1999.
Total operating expenses increased $1.114 million from 1998. Property
operating and maintenance expense, other operating expenses, real estate taxes
and depreciation and amortization increased $239,000, $137,000, $478,000 and
$735,000, respectively, primarily due to the acquisitions and redevelopments
discussed above. General and administrative expense decreased $44,000, primarily
due to decreased compensation expense offset by an increase in state franchise
and income taxes due to the acquisitions referred to above. In 1998, the Company
recorded an impairment of real estate of approximately $431,000 due to the write
down of its interest in the Gary, Indiana asset to its net realizable value in
accordance with Statement of Financial Accounting Standards (SFAS) No. 121. No
impairments of real estate have been recorded in 1999.
Interest expense (including related amortization of deferred financing costs)
increased approximately $780,000 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.
Interest capitalized on redevelopment projects in 1999 was $161,000 compared to
$447,000 in 1998.
The Company recorded a net extraordinary loss of approximately $289,000 on the
early extinguishment of debt in 1999 in connection with the pay down of a
portion of the Company's Securitized Mortgage Loan and repurchases of its 9 1/2
percent Subordinated Convertible Debentures due 2004 ("Debentures"). In 1998,
the Company recorded a loss of $191,000 on Debenture repurchases.
In the fourth quarter 1999, the Company changed its method of accounting for
percentage rental revenue, effective January 1, 1999, in accordance with the
U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 101. The
cumulative effect of such change as of January 1, 1999 was to decrease revenues
by $522,000 and this charge has been recorded in 1999.
Overall, net income increased approximately $2.796 million to $4.642 million
in 1999 primarily as a result of net gains on the sales of properties combined
with an increase in operating income resulting from acquisitions and
redevelopments offset by an increase in extraordinary losses recorded on the
extinguishment of debt and the cumulative effect of a change in accounting
principle discussed above.
Comparison of Year Ended December 31, 1998 to Year Ended December 31, 1997
Total revenue increased approximately $4.581 million which is attributable to
increases in minimum rent and recoveries from tenants of approximately $3.992
million and $683,000, respectively resulting primarily from the Company's
acquisitions of properties. The acquisitions of a 12 shopping center portfolio
in May 1998, the Westland Shopping Center in February 1998, and the Southwind
Theater complex in Lawrence Kansas in November 1997, accounted for approximately
$2.130 million, $852,000 and $630,000, respectively, of the increase in
revenues. Interest and other income decreased approximately $132,000 primarily
due to nonrecurring lease termination income received
10
<PAGE> 10
in 1997 and lower amounts of working capital available for investment in 1998
due to funding of ongoing redevelopment projects.
Total operating expenses increased approximately $1.893 million. Other
operating expenses and general and administrative expenses increased
approximately $122,000 and $523,000, respectively, primarily due to increased
compensation expense. Real estate taxes and depreciation and amortization
expense increased approximately $243,000 and $565,000, respectively, primarily
as a result of the acquisitions discussed above. An impairment of real estate of
approximately $431,000 was recorded in 1998 due to the reduction of the
Company's carrying value in a shopping center in Gary, Indiana to its net
realizable value.
The Company incurred an extraordinary loss on extinguishment of debt of
$191,000 on the repurchase and retirement of $9.625 million aggregate principal
of Debentures. The loss resulted primarily from the charge off of deferred
financing costs associated with the retired debt.
Interest expense (including related amortization of deferred financing costs)
increased approximately $1.194 million primarily 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. Interest capitalized as part of the cost of redevelopment
projects totaled $447,000 in 1998 and $50,000 in 1997.
Overall, net income increased approximately $1.303 million to $1.846 million
primarily as a result of an increase in operating income from acquisitions
offset by losses incurred from the write down of real estate assets and the
extinguishment of debt.
Impact of Recently Adopted Accounting Standards
In December 1999, the SEC issued SAB No. 101 -- Revenue Recognition in
Financial Statements which addresses the proper recognition of certain revenue
items including contingent (percentage) rents. Certain of the Company's leases
contain provisions whereby additional rent is due from a tenant once the tenant
has achieved a certain sales level i.e. contingent rental. Under SAB No. 101, a
lessor should not recognize contingent rental income until the changes in the
factor(s) on which the contingent lease payments is (are) based actually occur.
The Company had previously recorded accrued percentage rental income as lessee's
specified sales targets were met or achievement of the sales target was
probable.
The Company has elected to adopt the provisions of SAB No. 101 in the fourth
quarter 1999, effective January 1, 1999. The cumulative effect of such adoption
is a reduction in percentage rental revenue of approximately $522,000 as of
January 1, 1999.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" effective for
fiscal year beginning after June 15, 2000. This Statement requires companies to
record derivatives on the balance sheet as assets and liabilities, measured at
fair value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivatives and
whether it qualifies for hedge accounting. The Company is evaluating the impact
of this statement on its consolidated financial statements.
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. In 1999, the Company developed a high-level plan to address the
risks posed by the Year 2000 issues which included the testing of internal
systems and inquiry of third parties with which the Company conducts business
including major tenants, vendors, contractors and creditors.
While the Company had a Year 2000 contingency plan in place as part of its
final Year 2000 Plan, it did not experience any Year 2000 related business
interruptions that are known at this time. Management feels that there is a
reasonably low level of risk that the Company will experience any significant
collateral Year 2000 related problems that have not materialized to date. The
Company would generally expect to manage business interruption relating to Year
2000 issues that may still occur in a manner similar to other potential
interruption issues encountered in the regular course of business. The Company
intends to execute contingency plans as necessary as the year progresses.
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.
11
<PAGE> 11
Funds From Operations
Management considers Funds From Operations ("FFO") to be an appropriate
measure of performance of an equity real estate investment trust. The Company
calculates FFO as prescribed by the National Association of Real Estate
Investment Trusts (NAREIT), as further clarified in a 1995 opinion 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 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 Company reports 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.
The following table shows the components that comprise the Company's FFO for
each of the three years ended December 31, 1999. The computation of FFO for 1997
has been restated to conform with the 1999 and 1998 presentation.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Net income.................................................. $ 4,642 $ 1,846 $ 543
Depreciation and Amortization:
Depreciation of buildings and improvements.................. 6,044 5,399 4,845
Amortization of tenant allowances and improvements.......... 173 113 97
Amortization of leasing costs............................... 146 114 96
Gain on sale of real estate................................. (1,602) -- --
Impairment of real estate................................... -- 431 --
Loss on extinguishment of debt.............................. 289 191 --
Cumulative effect of change in accounting principle......... 522 -- --
------- ------- -------
Funds From Operations, Basic................................ 10,214 8,094 5,581
Interest expense on convertible securities.................. 6,520 7,287 7,916
Amortization of deferred financing costs on convertible
securities................................................ 283 316 349
------- ------- -------
Funds From Operations, Diluted.............................. $17,017 $15,697 $13,846
------- ------- -------
Weighted average shares outstanding:
Basic..................................................... 5,170 4,507 3,546
------- ------- -------
Diluted................................................... 5,170 4,524 3,591
------- ------- -------
Diluted, assuming conversion of convertible securities.... 9,372 9,206 8,704
------- ------- -------
</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, redevelopment opportunities
at certain of the Company's existing properties and disposition of noncore
assets.
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 $4.71
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
Bank One (the "Bank One Line") and from available cash reserves.
In February 2000, the Company completed the acquisition of a ground lease
interest in a portion of its property in Topeka, Kansas. Terms of the agreement
included a purchase price of $525,000 plus payment of all closing costs. As a
result of the acquisition, the Company now owns the fee interest in the entire
property.
12
<PAGE> 12
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. The theater was
constructed under an agreement with Cinemark USA ("Cinemark") and replaced a
freestanding former Builders Square building which had been vacant since 1995.
In accordance with the agreement, 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 store was redeveloped
and subdivided at a cost of approximately $619,000, including capitalized
interest, taxes and leasing commissions, 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.
In June 1999, construction was completed at the Company's property in Lincoln,
Illinois to redevelop the unleased 25,000 square feet of a 40,000 square foot
former Kmart store into an office supply store under a lease agreement with
Staples, Inc. Total cost of the redevelopment was approximately $769,000,
including capitalized interest, taxes and leasing commissions, and was funded
out of available working capital.
Phase II of the redevelopment of the Pine Ridge Plaza in Lawrence, Kansas
began during 1999 with the completion of a 5,000 square foot International House
of Pancakes restaurant in November. Current plans also call for the addition of
two "big box" national retailers consisting of 20-25,000 square feet each and
approximately 15,000 square feet of additional in-line retail space.
Construction on one of the two big box retailers is anticipated to begin in the
second quarter 2000, after finalization of lease terms. 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 incurred $1.279 million for capital expenditures
which were funded primarily out of reserves required for the Company's
collateralized mortgages and partially from operating cash flows. Approximately
$1.1 million is anticipated to be incurred in 2000 for capital expenditures,
also to be funded from similar sources.
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 excluding costs associated with the
redevelopment projects discussed above was $268,000. These expenditures are
generally funded by operating cash flows and increased revenues resulting from
such expenditures. In 2000, the Company anticipates spending approximately
$657,000 on 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 Securitized Mortgage Loan to have the
property released from the collateral pool. Net proceeds from the sale of $3.5
million after mortgage repayment and selling expenses were used to reduce the
outstanding balances on the Company's lines of credit.
In August 1999, the Company completed the sale of its interest in Miller Mall,
a 130,000 square foot shopping center in Gary, Indiana for $650,000. Net
proceeds after expenses of sale of approximately $425,000 were used for general
working capital purposes.
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.
13
<PAGE> 13
Payments of interest and principal amortized over 20 years are due monthly.
Proceeds of the loan were utilized to fund 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.
In October 1999, the Company obtained a $5.484 million mortgage loan with Bank
of America collateralized by its interest in the ground lease of the Cinemark
theater in North Aurora, Illinois. Terms of the mortgage include payments of
interest at 8.7% annually and principal amortized over a 30 year term. The loan
is due in full on November 1, 2009. As part of the loan agreement, the Company
transferred its interest in the ground lease to a wholly owned subsidiary, Malan
Aurora Corp. Funds from the loan were used to pay down the outstanding balances
on the Company's lines of credit. In connection with the loan agreement the
Company has a standby letter of credit agreement with Bank One in the amount of
$250,000. The letter of credit serves as additional collateral to ensure
performance of certain environmental remediation of the property, which is the
responsibility of a former tenant.
The Company has outstanding as of December 31, 1999 and 1998 $42.743 million
and $44.925 million, respectively, of Debentures and $27 million of Convertible
Notes, which are convertible into shares of Common Stock at a price of $17.00
per share. The Debentures carry a rating of B3 from Moody's Investors Services,
Inc. In 1998 the Company implemented a plan to repurchase and retire up to $15
million aggregate principal of Debentures. During 1999, the Company made
repurchases of $2.182 million principal of Debentures which were funded from
available working capital. A total of $11.807 million principal of Debentures
have been repurchased under the plan. The Company may make future repurchases of
Debentures as funds become available.
In December 1999, the Company completed an extension and modification of the
Greenwich Capital Line to November 2001. Modified terms included the release of
two properties from the collateral pool and substitution of two additional
properties and an increase in the interest rate to 250 basis points over LIBOR.
In March 2000, the Company added its property in Topeka, Kansas to the
collateral pool, bringing to 17 the number of properties which collateralize the
line.
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.
The Bank One Line calls for monthly payments of interest at the rate of 200
basis points over LIBOR, is collateralized by the Company's interest in
Orchard-14 Shopping Center in Farmington Hills, Michigan and is due March 31,
2000. The Company intends to negotiate an extension of this line. The Greenwich
Capital Line is a revolving line of credit of up to $25 million which expires
November 2001 and is collateralized by 17 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 250 basis points. The
maximum borrowings under the Greenwich Capital Line and the Bank One Line as of
February 29, 2000 were $17.5 million and $4.5 million, respectively, and there
was $11.7 million and $3.0 million, respectively, outstanding as of that date.
The Company's major tenant, Kmart, accounted for approximately 28.8% of its
gross revenue and 27.8% of its base minimum rent in 1999. Since its IPO, the
Company has substantially reduced its exposure to Kmart through acquisitions and
redevelopments of properties, lease termination agreements with Kmart and the
assumption of certain Kmart sublease agreements. At the IPO, Kmart accounted for
approximately 60.1% of the Company's annualized base minimum rents.
Each of the above statements regarding anticipated operating results are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Company believes the statements and
projections are based upon reasonable assumptions, actual results may differ
from those projected. Key factors that could cause actual results to differ
materially include economic downturns, successful and timely completion of
acquisitions, renovations and development programs, leasing activities and other
risks associated with the commercial
14
<PAGE> 14
real estate business, and as detailed 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 from 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 7A. 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 December 31, 1999, a one percent increase or decrease in interest rates would
decrease or increase, respectively, the Company's earnings and cash flows by
approximately $112,000 on an annualized basis.
Based on the Company's consolidated debt and interest rates in effect at
December 31, 1999, a one percent increase or decrease in interest rates would
decrease or increase the fair value of debt by approximately $3.1 million.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Independent Auditors' Report................................ 16
Consolidated Balance Sheets as of December 31, 1999 and
1998...................................................... 17
Consolidated Statements of Operations for Each of the Three
Years in the Period Ended
December 31, 1999......................................... 18
Consolidated Statements of Shareholders' Equity for Each of
the Three Years in the Period Ended December 31, 1999..... 19
Consolidated Statements of Cash Flows for Each of the Three
Years in the Period Ended December 31, 1999............... 20
Notes to Consolidated Financial Statements.................. 21
Consolidated Financial Statement Schedule III -- Real Estate
and Accumulated Depreciation.............................. 30
</TABLE>
Schedules other than the one above are omitted because they are not applicable,
not required, or the information required to be set forth therein is included in
the consolidated financial statements or the notes thereto.
15
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Malan Realty Investors, Inc.
We have audited the consolidated financial statements and the consolidated
financial statement schedule listed at Item 8 of Malan Realty Investors, Inc.
and Subsidiaries (the "Company"). These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1999
and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity with generally
accepted accounting principles. Also in our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
As discussed in Note 9 to the financial statements, in 1999 the Company
changed its method of accounting for percentage rents.
DELOITTE & TOUCHE LLP
Detroit, Michigan
January 27, 2000
16
<PAGE> 16
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS:
Real Estate (Notes 2 and 7):
Land.................................................... $ 29,124 $ 28,178
Buildings and improvements.............................. 237,993 233,605
-------- --------
Total................................................. 267,117 261,783
Less: accumulated depreciation........................ (26,584) (21,286)
-------- --------
Total................................................. 240,533 240,497
Other Assets:
Accounts receivable (net of allowance of $156 and $140
at December 31, 1999 and 1998)......................... 1,149 1,662
Deferred financing and other............................ 7,554 9,450
Cash and cash equivalents............................... 1,857 2,898
Restricted cash -- mortgage escrow deposits............. 2,387 2,330
-------- --------
TOTAL ASSETS.......................................... $253,480 $256,837
======== ========
LIABILITIES:
Mortgages (Note 2)........................................ $126,601 $122,279
Convertible debentures (Note 2)........................... 42,743 44,925
Convertible notes (Note 2)................................ 27,000 27,000
Accounts payable and other................................ 2,699 4,031
Accrued distributions payable............................. 2,198 2,200
Accrued property taxes.................................... 1,315 1,265
Accrued interest payable.................................. 3,783 3,900
-------- --------
Total liabilities..................................... 206,339 205,600
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
SHAREHOLDERS' EQUITY (NOTE 3)
Common stock ($.01 par value, 30 million shares
authorized, 5,172,404 and 5,168,742 shares issued and
outstanding as of December 31, 1999 and 1998)........... 52 52
Additional paid in capital................................ 74,169 74,117
Accumulated distributions in excess of net income......... (27,080) (22,932)
-------- --------
Total shareholders' equity............................ 47,141 51,237
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............ $253,480 $256,837
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
17
<PAGE> 17
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
REVENUES
Minimum rent (Note 4)..................................... $30,662 $28,084 $24,092
Percentage and overage rents (Note 9)..................... 1,307 1,215 1,177
Recoveries from tenants................................... 10,688 9,954 9,271
Interest and other income................................. 615 311 443
Gain on sale of real estate............................... 1,602
------- ------- -------
TOTAL REVENUES.......................................... 44,874 39,564 34,983
------- ------- -------
EXPENSES
Property operating and maintenance........................ 3,115 2,876 2,867
Other operating expenses.................................. 1,752 1,615 1,493
Real estate taxes......................................... 8,612 8,134 7,891
General and administrative................................ 2,024 2,068 1,545
Depreciation and amortization............................. 6,368 5,633 5,068
Impairment of real estate................................. 431
------- ------- -------
TOTAL OPERATING EXPENSES................................ 21,871 20,757 18,864
------- ------- -------
OPERATING INCOME............................................ 23,003 18,807 16,119
INTEREST EXPENSE............................................ 17,550 16,770 15,576
------- ------- -------
Income before extraordinary item and cumulative effect of
change in accounting principle............................ 5,453 2,037 543
Extraordinary Item -- loss on extinguishment of debt........ (289) (191)
------- ------- -------
Income before cumulative effect of change in accounting
principle................................................. 5,164 1,846 543
Cumulative Effect of Change in Accounting Principle (Note
9)........................................................ (522)
------- ------- -------
NET INCOME.................................................. $ 4,642 $ 1,846 $ 543
======= ======= =======
BASIC AND DILUTED EARNINGS PER SHARE BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (NOTE 11)....................................... $ 1.05 $ 0.45 $ 0.15
======= ======= =======
BASIC AND DILUTED EARNINGS PER SHARE BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (NOTE 11)........ $ 1.00 $ 0.41 $ 0.15
======= ======= =======
BASIC AND DILUTED EARNINGS PER SHARE (NOTE 11).............. $ 0.90 $ 0.41 $ 0.15
======= ======= =======
PRO FORMA (NOTE 9)
PRO FORMA AMOUNT ASSUMING THE CHANGE IN ACCOUNTING METHOD
FOR PERCENTAGE RENT REVENUE IS APPLIED RETROACTIVELY:
INCOME BEFORE EXTRAORDINARY ITEM............................ $ 5,453 $ 1,970 $ 475
======= ======= =======
BASIC AND DILUTED EARNINGS PER SHARE BEFORE EXTRAORDINARY
ITEM...................................................... $ 1.05 $ 0.44 $ 0.13
======= ======= =======
NET INCOME.................................................. $ 5,164 $ 1,779 $ 475
======= ======= =======
BASIC AND DILUTED EARNINGS PER SHARE........................ $ 1.00 $ 0.39 $ 0.13
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
18
<PAGE> 18
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except per share data)
<TABLE>
<CAPTION>
ACCUMULATED
DISTRIBUTIONS
ADDITIONAL IN TOTAL
PAR PAID-IN EXCESS OF SHAREHOLDERS'
VALUE CAPITAL NET INCOME EQUITY
----- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997.................................... $35 $45,960 $(11,002) $34,993
Conversion of debentures.................................. 2 4,469 4,471
Directors compensation paid in stock...................... 48 48
Stock options exercised................................... 8 8
Distributions -- $1.70 per share.......................... (6,121) (6,121)
Net income................................................ 543 543
--- ------- -------- -------
BALANCE, DECEMBER 31, 1997.................................. 37 50,485 (16,580) 33,942
Conversion of debentures.................................. 2 2,080 2,082
Secondary sale of 1,300,000 common shares of Malan Realty
Investors, Inc., net of costs........................... 13 21,466 21,479
Directors compensation paid in stock...................... 48 48
Stock options exercised................................... 38 38
Distributions -- $1.70 per share.......................... (8,198) (8,198)
Net income................................................ 1,846 1,846
--- ------- -------- -------
BALANCE, DECEMBER 31, 1998.................................. 52 74,117 (22,932) 51,237
Directors compensation paid in stock...................... 48 48
Stock options exercised................................... 4 4
Distributions -- $1.70 per share.......................... (8,790) (8,790)
Net income................................................ 4,642 4,642
--- ------- -------- -------
BALANCE, DECEMBER 31, 1999.................................. $52 $74,169 $(27,080) $47,141
=== ======= ======== =======
</TABLE>
See Notes to Consolidated Financial Statements
19
<PAGE> 19
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME................................................ $ 4,642 $ 1,846 $ 543
-------- -------- --------
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization........................... 6,368 5,633 5,068
Amortization of deferred financing costs................ 1,849 1,929 1,620
Directors compensation issued in stock.................. 48 48 48
Net gains on sales of real estate....................... (1,602)
Impairment of real estate............................... 431
Loss on extinguishment of debt.......................... 289 191
Change in operating assets and liabilities that provided
(used) cash:
Accounts receivable and other......................... 677 (907) (982)
Accounts payable, deferred income and other accrued
liabilities.......................................... (1,399) 898 (1,148)
-------- -------- --------
Total adjustments....................................... 6,230 8,223 4,606
-------- -------- --------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES......... 10,872 10,069 5,149
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate developed, acquired or improved, net of
mortgages assumed....................................... (12,516) (40,677) (8,195)
Deposits to escrow........................................ (20,635) (19,149) (17,274)
Disbursements from escrow................................. 20,578 18,959 17,253
Proceeds from sales of real estate........................ 7,950 240
-------- -------- --------
NET CASH FLOWS USED FOR INVESTING ACTIVITIES............ (4,623) (40,627) (8,216)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Draws on lines of credit.................................. 17,400 29,350 6,200
Repayment of lines of credit.............................. (21,206) (19,050) (1,500)
Net proceeds from secondary equity offering............... 21,479
Principal payments on mortgages........................... (4,153) (494) (1,428)
Debt extinguishment costs................................. (233)
Net proceeds from mortgages............................... 12,281 18,000 1,670
Distributions to shareholders............................. (8,793) (7,621) (5,973)
Debt issuance costs....................................... (622) (338) (1,159)
Proceeds from stock options exercised..................... 4 38 8
Repurchases of debentures................................. (1,968) (9,625)
-------- -------- --------
NET CASH FLOWS PROVIDED BY (USED FOR) FINANCING
ACTIVITIES............................................. (7,290) 31,739 (2,182)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (1,041) 1,181 (5,249)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 2,898 1,717 6,966
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 1,857 $ 2,898 $ 1,717
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- CASH
PAID FOR INTEREST DURING THE YEAR......................... $ 15,976 $ 15,457 $ 14,058
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
20
<PAGE> 20
MALAN REALTY INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General -- The Company is engaged in the ownership, management, leasing,
acquisition, development and redevelopment of shopping centers and entertainment
facilities and leases space to tenants pursuant to lease agreements. The lease
agreements provide for terms ranging from one to 25 years and, in some cases,
for annual rentals which are subject to upward adjustment based on operating
expense levels and sales volume.
Basis of Combination and 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., Malan Aurora Corp. 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.
Real Estate is stated at cost less accumulated depreciation and amortization.
Depreciation and amortization are provided on a straight line basis over the
estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings................................................... 40 Years
Improvements................................................ 10-40 Years
</TABLE>
Maintenance and repairs are charged to expense as incurred. Renovations which
improve or extend the life of the asset are capitalized.
Deferred Financing and Other consists primarily of deferred financing costs
and lease procurement costs. Deferred financing costs at December 31, 1999 and
1998 of $12,689,000 and $12,634,000, respectively, are amortized on a straight
line basis over the terms of the applicable debt agreements. Accumulated
amortization of deferred financing costs at December 31, 1999 and 1998 was
$7,453,000 and $5,902,000, respectively, and amortization expense for 1999, 1998
and 1997 was $1,849,000 $1,929,000 and $1,620,000, respectively, and is included
in interest expense in the Consolidated Statement of Operations.
Lease procurement costs of $2,842,000 and $2,291,000 at December 31, 1999 and
1998, respectively, consist of direct leasing costs, tenant allowances and
tenant improvements and are amortized on a straight line basis over the terms of
the applicable tenant lease. Accumulated amortization of lease procurement costs
at December 31, 1999 and 1998 was $848,000 and $529,000, respectively, and
amortization expense for 1999, 1998 and 1997 was $318,000, $227,000, and
$193,000, respectively.
Revenue Recognition -- Minimum rents are recognized on a straight line basis
over the terms of the leases. Effective January 1, 1999, the Company began
recording percentage rental revenue when lessees' specified sales targets are
achieved. Prior to 1999, the Company recorded accrued percentage rental revenue
when lessees' specified sales targets had been met or achievement of the sales
targets was probable. Recoveries from tenants are recognized as revenue in the
period that applicable costs are chargeable to tenants.
Income Taxes -- The Company has elected to be taxed as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"). As a REIT, the Company generally will not be subject to federal
income taxation at the corporate level to the extent it distributes annually at
least 95% of its real estate investment trust taxable income, as defined in the
Code, to its shareholders and satisfies certain other requirements. Accordingly,
no provision has been made for federal income taxes in the accompanying
financial statements.
Earnings per common share -- Earnings per share ("EPS") are computed on both a
basic and diluted basis. Basic EPS excludes potential share dilution and is
computed by dividing earnings available to common shareholders by the
weighted-average number of common shares outstanding for the period. 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.
21
<PAGE> 21
Distributions of $1.70 per common share were declared for each of the years
ended December 31, 1999, 1998 and 1997 of which $0.92, $1.17 and $1.70,
respectively, represent a return of capital for federal income tax purposes.
Cash and cash equivalents consist of deposits in banks and certificates of
deposit with maturities of three months or less at the date of purchase.
Long-lived assets and long-lived assets to be disposed of -- The Company's
long-lived assets are periodically reviewed throughout the year for impairments
in value. The review is based principally on the projected, undiscounted cash
flow from the related asset.
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.
Segment Information -- The Company's operating units are comprised of
approximately 65 commercial retail properties. All financial results are
aggregated into one operating segment since the properties have similar economic
characteristics.
Impact of Recently Adopted Accounting Standards -- In June 1998, the Financial
Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" effective for fiscal years beginning after
June 15, 2000. This Statement requires companies to record derivatives on the
balance sheet as assets and liabilities, measured at fair value. Gains or losses
resulting from changes in the values of those derivatives would be accounted for
depending on the use of the derivatives and whether it qualifies for hedge
accounting. The Company is evaluating the impact of this statement on its
consolidated financial statements.
2. MORTGAGES, DEBENTURES AND NOTES
The following table sets forth certain information regarding the Company's
debt:
<TABLE>
<CAPTION>
BALANCE
INTEREST MATURITY DECEMBER 31,
COLLATERAL RATE DATE 1999 1998
------------------------------------ ------------------------ ------------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Mortgages
Greenwich Capital Line of 16 Retail Properties LIBOR + 250 Basis Points November 2001 $ 11,194 $ 15,000
Credit.....................
UDAG Loan.................... Bricktown Square 5% increasing to 9% March 2023 7,919 8,006
Securitized Mortgage Loan.... 24 Retail Properties 7.518%(1) August 2002 59,375 63,000
Daiwa Finance Corp........... The Shops at Fairlane Meadows 8.18% February 2007 12,554 12,676
Bloomfield Acceptance 13 Retail Properties 7.55% June 2028(2) 20,589 17,755
Company....................
Wells Fargo Bank............. Westland Shopping Center 8.02% November 2007 5,789 5,842
Bank of America, USA......... North Aurora, IL-Tinseltown Theater 8.7% November 2009 5,479 --
Mercantile Bank.............. Lawrence, KS-Southwind Theater 7.49% February 2006 3,702 --
-------- --------
Total Mortgages.............. $126,601 $122,279
======== ========
Convertible Debentures....... Unsecured 9.5% July 2004 $ 42,743 $ 44,925
======== ========
Convertible Notes............ Bricktown Square 8.5% July 2003 $ 27,000 $ 27,000
======== ========
</TABLE>
(1) Overall blended rate. The interest rate on four different tranches are
either fixed or capped through the use of interest rate cap and floor
agreements. The effective interest rate is fixed at 7.518% through February
10, 2002; thereafter, the interest rate on $38.375 million of the mortgage
loans converts to a variable rate based on certain requirements. Net
settlement costs paid under interest rate cap agreements are recorded on an
accrual basis and recognized as an adjustment to interest expense.
(2) Loan is a 30-year loan expiring June 11, 2028. The loan is prepayable at the
end of 15 years, or June 11, 2013. Subsequent to that date, all cash flow
from the property in excess of operating expenses is to be applied against
accrued interest and principal with the balance of the loan due no later
than June 11, 2028. It is the Company's intention to repay the loan on the
optional prepayment date of June 11, 2013.
The Greenwich Capital Line of Credit is a revolving line of credit provided by
Greenwich Capital Markets, Inc., a division of National Westminister Bank, Plc.
for up to $25 million. Under the financial covenants of the agreement, the
maximum allowable borrowing under the facility at December 31, 1999 was $17.5
million of which $11.2 million was outstanding. In March 2000, the Company added
its property in Topeka, Kansas to the collateral pool, bringing the total
available borrowing to approximately $18.6 million.
22
<PAGE> 22
The Company has a revolving line of credit with Bank One which allows for
borrowings up to $4.5 million. The line is collateralized by the Company's
interest in Orchard-14 Shopping Center in Farmington Hills, Michigan. As of
December 31, 1999 there were no outstanding borrowings on the line.
The Company has Convertible Debentures (the "Debentures") and Convertible
Notes (the "Notes"), which are convertible into shares of Common Stock at a
price of $17 per share. The Debentures are 10-year unsecured general obligations
of the Company and carry a rating of B3 from Moody's Investors Services, Inc.
The Notes are nine-year general obligations due July 15, 2003 secured by a first
mortgage on Bricktown Square in Chicago, Illinois. The Debentures are redeemable
by the Company at par beginning July 15, 2001. In 1998, approximately $2.1
million aggregate principal of Debentures were converted into 125,286 shares of
stock.
In September 1998, the Company's Board of Directors approved a plan to
repurchase and retire up to $15 million aggregate principal of Debentures.
Through December 31, 1999, the Company had repurchased $11.807 million principal
of Debentures. The repurchases were funded from the Company's available working
capital. The Company recorded an extraordinary gain in 1999 of approximately
$170,630, and an extraordinary loss of approximately $191,050 in 1998 related to
the repurchases.
Interest capitalized as part of the cost of redevelopment projects totaled
$161,000, $447,000 and $50,000 in 1999, 1998 and 1997, respectively.
Several of the above debt agreements contain various financial covenants, all
of which the Company was in compliance with as of December 31, 1999.
Approximate scheduled principal payments for the years subsequent to December
31, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 588
2001........................................................ 11,836
2002........................................................ 60,067
2003........................................................ 27,738
2004........................................................ 43,525
2005 and thereafter......................................... 52,590
--------
Total................................................... $196,344
========
</TABLE>
3. SHAREHOLDER RIGHTS AND STOCK OPTION AND COMPENSATION PLANS
Shareholder Rights Plan--In January 1999, the Board of Directors of the
Company (the "Board") adopted a Rights Agreement. In connection with the Rights
Agreement, the Board declared a dividend of one preferred share purchase right
(a "Right") for each outstanding share of the Company's Common Stock. Upon the
occurrence of a Distribution Date, as described below, each Right entitles a
shareholder to purchase 1/1000th of a newly issued share of Series A Junior
Participating Preferred Stock of the Company at an exercise price of $42,
subject to adjustment. The Rights will become exercisable only if a person or
group (i) acquires beneficial ownership of 15% or more of the Company's
outstanding common stock; (ii) announces a tender or exchange offer, the
consummation of which would result in the acquiring person or group owning 15%
or more of the Company's outstanding common stock. The date on which either
event described in (i) or (ii) occurs is a Distribution Date. Until the Rights
become exercisable, the Rights will be evidenced by certificates for common
stock and will be transferred only with such certificates.
If any person or group intentionally acquires 15% or more of the Company's
outstanding common stock, then each Right (except for those held by the
acquiring person) "flips in" and entitles the holder to purchase for the
exercise price, shares of the Company's common stock having a market value of
twice the then current exercise price (a "flip-in" event).
In addition, in the event that, after a person or group has intentionally
acquired 15% or more of the Company's outstanding common stock, the Company was
acquired in a merger or other business combination transaction or more than 50%
of its assets or earnings power were sold, each Right will entitle its holder to
purchase, at the Right's then-current exercise price, shares of common stock of
such other person having a market value of twice the then-current exercise price
(a "flip-over" event).
The Company may redeem the Rights for $.001 per Right at any time prior to the
earlier of a flip-in event or the expiration of the Rights. The Rights expire on
January 15, 2009 unless the Rights are earlier redeemed by the Company. The
Company has authorized 20,000 shares of Series A Junior Participating Preferred
Stock.
23
<PAGE> 23
Employee Option Plan--The Company has a stock option plan (the "Employee
Option Plan") to enable its employees to participate in the ownership of the
Company. Under the Employee Option Plan, executive officers and employees of the
Company may be granted options to acquire shares of Common Stock of the Company
("Options"). The Employee Option Plan is administered by the compensation
committee of the Board of Directors (the "Board"), which is authorized to select
the executive officers and other employees to whom Options are to be granted. No
member of the compensation committee is eligible to participate in the Employee
Option Plan. The aggregate number of shares of Common Stock that may be issued
upon the exercise of all Options is 400,000 shares.
The exercise price of each Option granted is equal to the fair market value of
the underlying shares on the date of grant. With the exception of those granted
on the date of the Company's initial public offering, which vested over a
three-year period at the rate of 33 1/3% per year, Options vest over a five-year
period at the rate of 20% per year, beginning on the first anniversary of the
date of grant and are exercisable until the tenth anniversary of the date of
grant.
Directors Option Plan--The Company has a stock option plan for non-employee
directors (the "Directors Option Plan"). Under the Directors Option Plan,
following each Annual Meeting of the Board each non-employee Director is
automatically granted an option to purchase 1,000 shares of Common Stock.
All Options granted under the Directors Option Plan will have an exercise
price equal to the fair market value of the underlying shares on the date of the
grant. Each Option granted will vest immediately upon grant but will not become
exercisable by the Director until six months following the date of grant.
Options granted to a Director will remain exercisable until the tenth
anniversary of the date of grant or, if earlier, until one year after the
Director ceases to be a member of the Board for any reason. The aggregate number
of shares that may be issued under the Directors Option Plan is 80,000 shares.
The following table summarizes the activity for the Company's Stock Option
Plans:
<TABLE>
<CAPTION>
EMPLOYEE OPTION PLAN DIRECTORS OPTION PLAN
----------------------------------------- ------------------------------------------
SHARES EXERCISE WEIGHTED SHARES EXERCISE WEIGHTED
SUBJECT PRICE AVERAGE SUBJECT PRICE AVERAGE
TO OPTION PER SHARE EXERCISE PRICE TO OPTION PER SHARE EXERCISE PRICE
--------- ------------- -------------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997................. 304,000 $13.375-17.00 $15.383 8,292 $14.375-14.50 $14.465
Options Granted 1997..................... 4,000 $17.125 $17.125
Options Exercised 1997................... (634) $13.375 $13.375
------- ------
Balance December 31, 1997................ 303,366 $13.375-17.00 $15.383 12,292 $14.375-17.125 $15.331
Options Granted 1998..................... 21,000 $16.580 $16.580 4,000 $17.688 $17.688
Options Exercised 1998................... (150) $13.375 $13.375 (2,500) $14.375-14.50 $ 14.45
------- ------
Balance, December 31, 1998............... 324,216 $13.375-17.00 $15.422 13,792 $14.375-17.688 $16.174
Options Granted 1999..................... 4,000 $15.375 $15.375
Options Forfeited 1999................... (15,000) $15.375 $15.375
Options Exercised 1999................... (300) $13.375 $13.375
------- ------
Balance, December 31, 1999............... 308,916 $13.375-17.00 $15.383 17,792 $14.375-17.688 $15.994
======= ======
Options Exercisable at December 31,
1999................................... 261,700 $15.571 17,792 $15.994
======= ======= ====== =======
</TABLE>
The Company has elected to report compensation by applying the requirements of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees and therefore has recorded no charge to income for stock options. The
effect on the Company's net income and earnings per share for 1999, 1998 and
1997 would have been immaterial had the Company recognized compensation expense
using the Black-Scholes option pricing model utilizing the following values and
weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Option value.......................................... $ .12 $ .05 $ .54
Dividend yield........................................ 12.7% 10.1% 9.9%
Expected volatility................................... 8% 8% 17%
Risk-free interest rate............................... 6% 6% 6%
Expected lives (in years)............................. 10 10 10
</TABLE>
The outstanding stock options at December 31, 1999 have a weighted average
contractual life of 5.21 years.
Stock Compensation Plan--In order to provide an opportunity for them to
increase their ownership, the Company has a stock compensation plan for
non-employee directors (the "Stock Compensation Plan"). Under the Stock
Compensation Plan, each non-employee Director may make an election by June 30 of
each year to receive all or a
24
<PAGE> 24
portion of the Director's compensation for the following calendar year in the
form of Common Stock of the Company in lieu of cash. Once made, the election is
irrevocable for the following year's compensation.
The number of shares of Common Stock to be paid to a Director instead of cash
compensation will be determined based on the closing price of the Common Stock
on the New York Stock Exchange on the day before the compensation is earned by
the Director (i.e., the day before a Board meeting). A maximum of 100,000 shares
may be issued under the Stock Compensation Plan. During 1999, 1998 and 1997, a
total of 3,362, 2,870 and 2,740 shares, respectively, were issued under the plan
reflecting compensation of $48,000 in each year.
401(K) Plan--The Company has a 401(k) retirement plan (the "401(k) Plan")
covering substantially all of its employees. Under the 401(k) Plan, participants
are able to defer, until termination of employment with the Company, up to 20%
of their annual compensation. The Company intends to match a portion of the
participants contributions in an amount to be determined each year by the Board.
Compensation expense in connection with the 401(k) Plan for 1999, 1998 and 1997
was $34,000, $32,000 and $24,000, respectively.
4. COMMITMENTS AND CONTINGENCIES
Revenues derived from the Company's major tenant, Kmart, amounted to 28.8%,
35.5% and 39.0% of total revenues for the years ended December 31, 1999, 1998
and 1997, respectively. Amounts billed and owing from the major tenant were
$133,000 and $75,000 at December 31, 1999 and 1998, respectively.
In connection with the mortgage agreement with Bank of America, collateralized
by the Tinseltown Theater in North Aurora, Illinois, the Company has a standby
letter of credit agreement with Bank One in the amount of $250,000. The letter
of credit serves as additional collateral to guarantee performance of certain
environmental remediation of the property, which is the responsibility of a
former tenant.
Approximate future minimum rent under operating leases for the years
subsequent to December 31, 1999, assuming no new or renegotiated leases or
option extensions, are as follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 29,268
2001........................................................ 27,006
2002........................................................ 24,514
2003........................................................ 21,257
2004........................................................ 18,930
2005 and thereafter......................................... 125,621
--------
Total................................................... $246,596
========
</TABLE>
Approximate future minimum rental payments under the terms of all
non-cancelable operating leases in which the Company is the lessee, principally
for ground leases and office rent, subsequent to December 31, 1999, are as
follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $ 443
2001........................................................ 402
2002........................................................ 295
2003........................................................ 270
2004........................................................ 270
2005 and thereafter......................................... 7,594
------
Total................................................... $9,274
======
</TABLE>
Rent expense for operating leases for the years ended December 31, 1999, 1998
and 1997 was $482,000, $491,000 and $498,000, respectively.
The Company, as an owner of real estate, is subject to various environmental
laws. Compliance by the Company with existing laws has not had a material
adverse financial effect during the three-year period ended December 31, 1999,
nor does management believe it will have a material impact in the future.
However, management cannot predict the impact of new or changed laws or
regulations on its current properties or properties that it may acquire.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value was determined using
available market information and appropriate valuation methodologies.
25
<PAGE> 25
Cash and Cash Equivalents--The carrying amount for cash and cash equivalents
approximates fair value due to the short maturity of these instruments.
Interest Rate Hedging Instruments--The Company entered into interest rate
agreements to reduce its exposure to changes in the cost of the floating rate
portion of its Securitized Mortgage Loan.
As of December 31, 1999, the following interest rate cap agreements were
outstanding:
<TABLE>
<CAPTION>
NOTIONAL FREQUENCY
AMOUNT LIBOR OF RATE
(IN THOUSANDS) CAP RATE RESETS TERM
- -------------- -------- --------- ----
<S> <C> <C> <C>
$38,375 6.67% Monthly July 1995 to February 2002
$38,375 8.75% Monthly February 2002 to August 2002
</TABLE>
The Company is exposed to credit risk in the event of nonperformance by the
counterparties to its interest rate cap agreements, but has no off-balance sheet
risk of loss. The Company anticipates that its counterparties will fully perform
their obligations under the agreements.
The carrying value of the interest rate caps as of December 31, 1999 and 1998
was $738,096 and $1,024,000, respectively, and the fair value was $333,000 and
$122,000, respectively.
Mortgages--The fair value of the mortgages is based on the present value of
contractual cash flows and is as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
CARRYING ESTIMATED FAIR CARRYING ESTIMATED FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------------- -------- --------------
<S> <C> <C> <C> <C>
Greenwich Capital Line of Credit............................ $11,194 $ 11,194 $15,000 $ 15,000
UDAG Loan................................................... 7,919 4,621 8,006 4,589
Securitized Mortgage Loan................................... 59,375 59,375 63,000 63,000
Daiwa Finance Corp.......................................... 12,554 12,554 12,676 12,676
Bloomfield Acceptance Company............................... 20,589 20,589 17,755 17,755
Wells Fargo Bank............................................ 5,789 5,788 5,842 5,842
Bank of America............................................. 5,479 5,479 -- --
Mercantile Bank............................................. 3,702 3,702 -- --
-------- -------- -------- --------
TOTAL....................................................... $126,601 $123,302 $122,279 $118,862
======== ======== ======== ========
</TABLE>
Convertible Debentures and Convertible Notes--The fair value of the
Convertible Debentures is based on the traded value at the close of business at
year end. The carrying value of the Convertible Debentures as of December 31,
1999 and 1998 was $42.743 and $44.925 million, respectively. The estimated fair
value based upon the traded value at the close of business on December 31, 1999
and 1998 was $37.665 million and $43.128 million, respectively. Management
believes that the carrying value of the Convertible Notes as of December 31,
1999 and 1998 approximates the fair value.
The fair value estimates presented herein are based on information available
to management as of December 31, 1999 and 1998. Although management is not aware
of any factors that would significantly affect the estimated fair value amounts,
such financial instruments have not been comprehensively revalued for purposes
of these financial statements since that date, and current estimates of fair
value may differ significantly from the amounts presented herein.
6. SIGNIFICANT NONCASH TRANSACTIONS
Significant noncash transactions for the three years ended December 31, 1999
are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1999 1998 1997
------ ------ ------
(in thousands)
<S> <C> <C> <C>
Conversion of debentures into common stock, net of
unamortized costs (125,286 shares in 1998 and 270,878
shares in 1997)........................................... $2,082 $4,471
Distributions declared not yet paid......................... $2,198 $2,200 $1,620
</TABLE>
26
<PAGE> 26
7. PROPERTY ACQUISITIONS AND DISPOSITIONS
During the three years ended December 31, 1999, the Company acquired the
following properties:
<TABLE>
<CAPTION>
GROSS
ACQUISITION LEASABLE CAPITALIZED
DATE PROPERTY LOCATION AREA (SQ. FT.) COSTS
----------- ------------------------ ----------------- -------------- -----------
(in thousands)
<C> <S> <C> <C> <C>
11/24/97 Southwind Theater Lawrence, KS 42 $ 4,207
2/23/98 Westland Shopping Center Westland, MI 85 7,925
MIDWEST ACQUISITION
5/29/98 Wal-Mart Plaza Champaign, IL 11 1,110
5/29/98 Wal-Mart Plaza Jacksonville, IL 53 4,907
5/29/98 Wal-Mart Plaza Crawfordsville, 26 2,019
IN
5/29/98 Wal-Mart Plaza Decatur, IN 36 2,995
5/29/98 Wal-Mart Shops Huntington, IN 13 1,171
5/29/98 Wal-Mart Plaza Chanute, KS 16 1,257
5/29/98 Wal-Mart Outparcel El Dorado, KS 20 1,546
5/29/98 Wal-Mart Outlet Shops Benton Harbor, MI 14 1,460
5/29/98 Wal-Mart Plaza Owosso, MI 60 5,127
5/29/98 Wal-Mart Plaza Sturgis, MI 12 1,241
5/29/98 Wal-Mart Plaza Little Falls, MN 13 972
5/29/98 Wal-Mart Plaza Mansfield, OH 55 5,830
1/27/99 Wal-Mart Plaza Decatur, IL 45 4,710
--- -------
Totals 501 $46,477
=== =======
</TABLE>
In February 2000, the Company completed the acquisitions of a ground lease
interest in a portion of its property in Topeka, Kansas at a price of $525,000
plus closing costs.
During 1999, the Company sold its properties in Colma, California for $7.665
million and Gary, Indiana for $650,000. Net gains of $1.602 million were
realized on the sales. In conjunction with the sale of Colma, California the
Company paid down $3.625 million on its Securitized Mortgage Loan. The Company
recorded an extraordinary loss of $459,000 on the debt extinguishment primarily
from the charge off of deferred financing costs associated with the pay down and
a related prepayment penalty.
8. SUMMARIZED PRO FORMA INFORMATION (UNAUDITED)
The following unaudited pro forma information is presented as if (i). the June
1998 offering of 1.3 million shares of common stock, (ii). the acquisition of
the Westland Shopping Center (iii), the Midwest Acquisition and (iv). the
revenue adjustment discussed in Note 9 had occurred on January 1, 1998. In
management's opinion, all adjustments necessary to reflect these transactions
have been recorded. The pro forma information is not necessarily indicative of
what the actual results of operations of the Company would have been had such
transactions actually occurred as of January 1, 1998, nor do they purport to
represent the results of the operations of the Company for future periods (in
thousands except per share amounts).
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
1998
------------------
<S> <C>
Total revenues.............................................. $41,229
Net income.................................................. $ 2,559
Earnings per share:
Basic....................................................... $ .50
Diluted..................................................... $ .50
</TABLE>
9. CHANGE IN METHOD OF ACCOUNTING FOR PERCENTAGE RENTAL REVENUE
In December 1999, the SEC issued SAB No. 101 -- Revenue Recognition in
Financial Statements which addresses the proper recognition of certain revenue
items including contingent (percentage) rents. Certain of the Company's leases
contain provisions whereby additional rent is due from a tenant once the tenant
has achieved a certain sales level i.e. contingent rental.
27
<PAGE> 27
Under SAB No. 101, a lessor should not recognize contingent rental income
until the changes in the factor(s) on which the contingent lease payments is
(are) based actually occur. The Company had previously recorded accrued
percentage rental income as lessees' specified sales targets were met or
achievement of the sales target was probable.
The Company has elected to adopt the provisions of SAB No. 101 in the fourth
quarter 1999, effective January 1, 1999. The cumulative effect of such adoption
is a reduction in percentage rental revenue as of January 1, 1999 of
approximately $522,000.
The effect of the change on the quarters and year end 1999 is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR
------------------------------------------- ENDED
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, DEC. 31,
1999 1999 1999 1999 1999
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Net income under previous method of accounting for
percentage rents.......................................... $2,135(1) $1,182(1) $764(1) $1,100 $5,181
Effect of change in accounting for percentage rents......... (103) (130) (45) 261 (17)
Cumulative effect of change in accounting principle......... (522) -- -- -- (522)
------ ------ ---- ------ ------
Net income under current method of accounting for percentage
rents..................................................... $1,510 $1,052 $719 $1,361 $4,642
====== ====== ==== ====== ======
PER SHARE AMOUNTS:
Basic and diluted earnings per share under previous method
of accounting for percentage rents........................ $ .41(1) $ .23(1) $.15(1) $ .21 $ 1.00
Effect of change in accounting for percentage rents......... (.02) (.03) (.01) .05 --
Cumulative effect of change in accounting principle......... (.10) -- -- -- (.10)
------ ------ ---- ------ ------
Basic and diluted earnings per share under current method of
accounting for percentage rents........................... $ .29 $ .20 $.14 $ .26 $ .90
====== ====== ==== ====== ======
</TABLE>
(1) Net income as previously reported in the Company's Form 10-Q as filed for
the applicable quarter.
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the three month periods indicated are
as follows. 1999 amounts are restated for change in method of accounting for
percentage rental revenue as discussed in Note 9 (in thousands except per share
amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- -------
<S> <C> <C> <C> <C>
1999
- -----
Revenues.................................................... $12,749 $10,803 $10,278 $11,044
Income before extraordinary item and cumulative effect of
change in accounting principle............................ $ 2,491 $ 1,052 $ 719 $ 1,191
Income before cumulative effect of change in accounting
principle................................................. $ 2,032 $ 1,052 $ 719 $ 1,361
Net income.................................................. $ 1,510 $ 1,052 $ 719 $ 1,361
Basic and diluted earnings per share before extraordinary
items and cumulative effect of change in accounting
principle................................................. $ .48 $ .20 $ .14 $ .23
Basic and diluted earnings per share before cumulative
effect of change in accounting principle.................. $ .39 $ .20 $ .14 $ .26
Basic and diluted earnings per share........................ $ .29 $ .20 $ .14 $ .26
1998
- -----
Revenues.................................................... $ 9,054 $ 9,312 $10,211 $10,987
Income before extraordinary item............................ $ 299 $ 403 $ 220 $ 1,115
Net income.................................................. $ 299 $ 403 $ 64 $ 1,080
Basic and diluted earnings per share before extraordinary
item...................................................... $ .08 $ .10 $ .04 $ .22
Basic and diluted earnings per share........................ $ .08 $ .10 $ .01 $ .21
</TABLE>
28
<PAGE> 28
11. EARNINGS PER SHARE
Earnings per share ("EPS") data were computed as follows (in thousands except
per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Net income before extraordinary item and cumulative effect
of change in accounting principle......................... $5,453 $2,037 $ 543
Extraordinary item -- loss on extinguishment of debt........ (289) (191) --
------ ------ ------
Net income before cumulative effect of change in accounting
principle................................................. 5,164 1,846 543
Cumulative effect of change in accounting principle......... (522) -- --
------ ------ ------
Net income.................................................. $4.642 $1,846 $ 543
====== ====== ======
Weighted Average Shares Outstanding
Basic....................................................... 5,170 4,507 3,546
Net shares issuable upon exercise of dilutive options....... -- 17 45
------ ------ ------
Shares applicable to diluted earnings....................... 5,170 4,524 3,591
====== ====== ======
Basic and Diluted EPS:
Earnings per share before extraordinary item and cumulative
effect of change in accounting principle.................. $ 1.05 $ 0.45 $ 0.15
====== ====== ======
Earnings per share before cumulative effect of change in
accounting principle...................................... $ 1.00 $ 0.41 $ 0.15
====== ====== ======
Earnings per share.......................................... $ 0.90 $ 0.41 $ 0.15
====== ====== ======
</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.
29
<PAGE> 29
MALAN REALTY INVESTORS, INC.
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
($ in thousands)
<TABLE>
<CAPTION>
COST CAPITALIZED
INITIAL COST TO SUBSEQUENT TO
COMPANY ACQUISITION
---------------------- ---------------------
BUILDINGS & BUILDINGS &
STATE/TYPE (# OF PROPERTIES) ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
- ---------------------------- ------------ ------- ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
ILLINOIS:
Community Shopping Centers (6)............................ $34,919 $ 6,357 $ 45,070 $ 28 $ 1,266
Freestanding Retail Properties (8)........................ * 1,598 18,623 1,991
Entertainment Facilities (2).............................. 5,479 159 6,071 9,021
INDIANA:
Community Shopping Centers (7)............................ * 3,405 24,501 2,207
Freestanding Retail Properties (1)........................ * 2,241 19
KANSAS:
Community Shopping Centers (5)............................ * 942 11,135 2,902 3,851
Freestanding Retail Properties (8)........................ * 691 6,578 553
Entertainment Facility (1)................................ 1,118 3,090
MARYLAND:
Freestanding Retail Properties (1)...................... * 282 2,534 177
MICHIGAN:
Community Shopping Centers (7)............................ 12,554 6,144 44,619 540
MINNESOTA:
Community Shopping Centers (1)............................ * 125 847
MISSOURI:
Community Shopping Centers (4)............................ * 969 11,764 118 705
Freestanding Retail Properties (1)........................ * 85 768
OHIO:
Community Shopping Centers (2)............................ * 1,645 11,118 68
WISCONSIN:
Community Shopping Centers (7)............................ * 2,045 21,535 1,510
Freestanding Retail Properties (4)........................ * 511 4,885 706
------- ------- -------- ------ -------
$52,952 $26,076 $215,379 $3,048 $22,614
======= ======= ======== ====== =======
</TABLE>
* Certain properties are included as collateral for securitized mortgages
The changes in total real estate for the three years ended December 31, 1999
are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance at Beginning of Year................................ $261,783 $215,785 $207,590
Acquisitions.............................................. 9,476 41,767 7,110
Improvements.............................................. 3,062 4,918 1,099
Dispositions.............................................. (7,204) (256) (14)
Impairment of real estate................................. (431)
-------- -------- --------
Balance at end of year...................................... $267,117 $261,783 $215,785
======== ======== ========
</TABLE>
The changes in accumulated depreciation for the three years ended December 31,
1999 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Balance at Beginning of Year................................ $ 21,286 $15,817 $10,907
Depreciation for year..................................... 6,130 5,469 4,910
Dispositions.............................................. (832)
-------- ------- -------
Balance at end of year...................................... $ 26,584 $21,286 $15,817
======== ======= =======
</TABLE>
30
<PAGE> 30
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD LIFE ON WHICH
----------------------------------- DEPRECIATION IN LATEST
BUILDINGS & ACCUMULATED DATE OF DATE INCOME STATEMENT
LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED
------- ------------ -------- ------------ ------------ -------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 6,385 $ 46,336 $ 52,721 $ 5,442 1975-1995 6/94-1/99 40 YEARS
1,598 20,614 22,212 2,720 1967-1977 6/94 40 YEARS
159 15,092 15,251 897 1998-1999 6/94
3,405 26,708 30,113 3,048 1973-1997 6/94-5/98 40 YEARS
2,260 2,260 319 1974 6/94 40 YEARS
3,844 14,986 18,830 1,446 1974-1996 6/94-5/98 40 YEARS
691 7,131 7,822 995 1976-1978 6/94 40 YEARS
1,118 3,090 4,208 154 1997 11/97 40 YEARS
282 2,711 2,993 385 1979 6/94 40 YEARS
6,144 45,159 51,303 4,283 1970-1996 6/94-5/98 40 YEARS
125 847 972 34 1996 5/98 40 YEARS
1,087 12,469 13,556 1,761 1973-1978 6/94 40 YEARS
85 768 853 106 1974 6/94 40 YEARS
1,645 11,186 12,831 1,001 1989-1998 11/94-5/98 40 YEARS
2,045 23,045 25,090 3,177 1960-1979 6/94 40 YEARS
511 5,591 6,102 816 1968-1976 6/94 40 YEARS
------- -------- -------- -------
$29,124 $237,993 $267,117 $26,584
======= ======== ======== =======
</TABLE>
31
<PAGE> 31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item 10 is incorporated herein by reference
to the information included under the captions "Election of Directors" and
"Management" in the Company's definitive Proxy Statement for the 1999 Annual
Meeting of Stockholders (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item 11 is incorporated herein by reference
to the information included in the Proxy Statement under the captions "Executive
Compensation" and "Management -- Compensation of Directors".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item 12 is incorporated herein by reference
to the information included under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
32
<PAGE> 32
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
A. The following documents are filed as part of this report:
(a)(1) Consolidated Financial Statements:
See Index to Consolidated Financial Statements and Supplementary
Data on page 15 of this Annual Report on Form 10-K.
(a)(2) Consolidated Financial Statement Schedule:
See Index to Consolidated Financial Statements and Supplementary
Data on page 15 of this Annual Report on Form 10-K.
(a)(3) Exhibits:
The following exhibits listed on the attached Exhibit Index are
included as part of this Annual Report on Form 10-K as required by
Item 601 of Regulation S-K:
(b) Reports on Form 8-K:
During the three-month period ending December 31, 1999, there were
no reports on Form 8-K filed. There was one report on Form 8-K
filed on September 7, 1999 which reported certain amendments to
the Company's by-laws which was inadvertently not reported on the
1999 Third Quarter Form 10-Q.
33
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<S> <C> <C>
*By: /s/ ANTHONY S. GRAMER Date: March 15, 2000
-----------------------------------------------
Anthony S. Gramer
Chief Executive Officer and President
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ANTHONY S. GRAMER Chief Executive Officer, March 15, 2000
- ----------------------------------------------------- President and Director
Anthony S. Gramer
/s/ ELLIOTT J. BRODERICK Chief Accounting Officer March 15, 2000
- -----------------------------------------------------
Elliott J. Broderick
* Director March 15, 2000
- -----------------------------------------------------
Robert D. Kemp, Jr.
* Director March 15, 2000
- -----------------------------------------------------
William McBride III
* Director March 15, 2000
- -----------------------------------------------------
William F. Pickard
* Director March 15, 2000
- -----------------------------------------------------
Richard T. Walsh
*By: /s/ ANTHONY S. GRAMER
-----------------------------------------------
Anthony S. Gramer,
as attorney-in-fact
</TABLE>
34
<PAGE> 34
MALAN REALTY INVESTORS, INC.
FORM 10-K
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <C> <S>
3(a) -- Amended and Restated Articles of Incorporation of Malan
Realty Investors, Inc. (incorporated herein by reference to
Exhibit 3(a) filed with the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994 (the "1994
Second Quarter Form 10-Q")).
3(b) -- Amended and Restated By-Laws of Malan Realty Investors, Inc.
(incorporated herein by reference to Exhibit 3(b) filed with
Form 8-K dated September 7, 1999.
4(a) -- Indenture, dated as of June 24, 1994, between Malan Realty
Investors, Inc. and The Bank of New York, as Trustee, with
respect to the 9 1/2% Convertible Subordinated Debentures
due 2004 (incorporated herein by reference to Exhibit 4(a)
filed with the 1994 Second Quarter Form 10-Q.)
4(b) -- Indenture, dated as of June 24, 1994, between Malan Realty
Investors, Inc. and IBJ Schroeder, as Trustee, with respect
to the 8 1/2% Secured Convertible Notes due 2003
(incorporated herein by reference to Exhibit 4(b) filed with
the 1994 Second Quarter Form 10-Q).
4(c) -- Rights Agreement, dated as of January 15, 1999, between
Malan Realty Investors, Inc. and The Bank of New York
(incorporated herein by reference to Exhibit 4(c) filed with
Form 8-K dated January 15, 1999.
*10(a) -- The Malan Realty Investors, Inc. 1994 Stock Option Plan
(incorporated herein by reference to Exhibit 10(a) filed
with the 1994 Second Quarter Form 10-Q).
*10(b) -- Employment Agreement, dated as of June 25, 1994, between the
Company and Anthony S. Gramer (incorporated herein by
reference to Exhibit 10(b) filed with the 1994 Second
Quarter Form 10-Q).
10(c) -- Note Purchase Agreement, dated as of June 24, 1994, between
Malan Realty Investors, Inc. and Merrill Lynch Global
Allocation Fund, Inc. (incorporated herein by reference to
Exhibit 10(e) filed with the 1994 Second Quarter Form 10-Q).
10(d) -- Mortgage, Security Agreement, Assignment of Rents and
Financing Statement, dated as of June 24, 1994, made by
Malan Realty Investors, Inc. to IBJ Schroeder Bank & Trust
Company, as modified by First Modification of Mortgage,
Security Agreement, Assignment of Rents and Financing
Statement, dated as of August 1, 1994 (incorporated herein
by reference to Exhibit 10(g) filed with the 1994 Second
Quarter Form 10-Q).
10(e) -- Registration Rights Agreement, dated as of June 24, 1994,
between the Company and Merrill Lynch Global Allocation
Fund, Inc. (incorporated herein by reference to Exhibit
10(h) filed with the 1994 Second Quarter Form 10-Q).
*10(f) -- Malan Realty Investors, Inc. 1995 Stock Option Plan for
Non-Employee Directors (incorporated herein by reference to
Exhibit 10(p) filed with the 1994 Form 10-K).
*10(g) -- Malan Realty Investors, Inc. 1995 Stock Compensation Plan
for Non-Employee Directors (incorporated herein by reference
to Exhibit 10(q) filed with the 1994 Form 10-K).
10(h) -- Purchase and Sale Agreement, dated as of April 13, 1995,
between the Company and Clinton Pointe Joint Venture
(incorporated herein by reference to Exhibit 10(s) filed
with the 1995 First Quarter Form 10-Q).
10(i) -- Agreement of Sale and Purchase, dated as of July 18, 1995,
among TG-Ford Associates and Ford Motor Land Development
Corporation, collectively, and Malan Realty Investors, Inc.
(incorporated herein by reference to Exhibit 10(x) filed
with the 1995 Second Quarter Form 10-Q).
10(j) -- $63,000,000 Amended and Restated Credit Agreement, dated as
of August 16, 1995, between Malan Realty Investors, Inc. and
National Westminster Bank Plc, New York Branch (incorporated
herein by reference to Exhibit 10(y) filed with the
Company's Amended Quarterly Report on Form 10-Q/A for the
quarter ended September 30, 1995 (the "1995 Third Quarter
Form 10-Q/A").
10(k) -- $63,000,000 Malan Mortgage Securities Trust 1995-A, Trust
and Servicing Agreement, dated as of August 16, 1995, by and
among Malan Depositor, Inc., as Depositor, Banker's Trust
Company, as Servicer, and Marine Midland Bank, as Trustee
(incorporated herein by reference to Exhibit 10(z) filed
with the 1995 Third Quarter Form 10-Q/A).
</TABLE>
35
<PAGE> 35
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <C> <S>
*10(l) -- First Amendment to Employment Agreement, dated as of August
15, 1997 between the Company and Anthony S. Gramer
(incorporated herein by reference to Exhibit 10(m) filed
with the 1997 Form 10-K).
*10(m) -- Change in Control Agreement, dated as of August 15, 1997
between the Company and Michael K. Kaline (incorporated
herein by reference to Exhibit 10(n) filed with the 1997
Form 10-K)
*10(n) -- Change in Control Agreement, dated as of August 15, 1997
between the Company and Elliott Broderick (incorporated
herein by reference to Exhibit 10(o) filed with the 1997
Form 10-K)
10(o) -- Revolving Loan Agreement among Malan Revolver, Inc., as
Company, Malan Realty Investors, Inc. As Parent and
Greenwich Capital Markets, Inc. As Lender dated as of
November 24, 1997 (incorporated herein by reference to
Exhibit 10(p) filed with the 1999 Form 10-K).
10(p) -- Agreement For Purchase of Real Estate between Brandon
Associates Westland, L.L.C., "Seller" and Malan Realty
Investors, Inc., "Buyer" dated as of January 29, 1998
(incorporated herein by reference to Exhibit 10(q) filed
with the 1997 Form 10-K).
10(q) -- Agreement of Sale and Purchase between Sandor Development
Company, as agent for sellers, and Malan Realty Investors,
Inc. as buyer dated as of May 6, 1998. (incorporated herein
by reference to exhibit 10(r) filed with the June 1, 1998
Amendment No. 1 to Form S-2).
10(r) -- Loan Agreement among Malan Midwest LLC., and Bloomfield
Acceptance Company, LLC., dated as of May 29, 1998
(incorporated herein by reference to exhibit 10(s) filed
with the June 1, 1998 Amendment No. 1 Form S-2).
*10(s) -- Second Amendment to Employment Agreement, dated as of
December 15, 1999 between the Company and A.S. Gramer.
10(t) -- First Modification of Revolving Loan Agreement, Note,
Indenture of Mortgage, Deed of Trust, Deed to Secure Debt,
Security Agreement, Financing Statement, Fixture Filing and
Assignment of Rents and Leases, and other Loan Documents,
Partial Release and Spreader Agreement among Malan Revolver,
Inc., as Company, Malan Realty Investors, Inc.., as Parent
and Greenwich Capital Markets, Inc., as Lender dated as of
December 21, 1999.
21 -- Subsidiaries
23(A) -- Consent of Deloitte & Touche LLP
24 -- Powers of Attorney
27 -- Financial Data Schedule
</TABLE>
* A management contract or compensatory plan or arrangement required to be filed
pursuant to Item 14(c) of Form 10-K.
36
<PAGE> 1
10 (s)
SECOND AMENDMENT TO
MALAN REALTY INVESTORS, INC.
EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is
entered into on the 15th day of December, 1999, by and between MALAN REALTY
INVESTORS, INC. (the "Company"), a Michigan corporation with its principal place
of business at 30200 Telegraph Road, Bingham Farms, Michigan, and ANTHONY S.
GRAMER ("Executive"), President and Chief Executive Officer of the Company.
RECITALS
WHEREAS, the Company and Executive entered into a certain Employment
Agreement, dated June 25, 1994 (hereinafter referred to as the "Employment
Agreement"), which Employment Agreement was amended on August 15, 1997, and
WHEREAS, the Company and Executive desire to amend the Employment
Agreement to extend the term of Executive's employment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. Paragraph 2 of the Employment Agreement is amended in its entirety
by substituting the following:
"2. TERM OF EMPLOYMENT. Executive's `term of employment,' as this
phrase is used through this Agreement, shall be for a period of
four (4) years beginning January 1, 2000 and ending December 31,
2003, and any extension thereof. The term of employment shall
automatically be extended without further action by the parties
as of December 31, 2003 and each succeeding December 31
thereafter, unless either party shall have served 90 days'
written notice upon the other prior to December 31, 2003 or prior
to December 31 of each succeeding year, as the case may be, of
its intention that the Agreement shall terminate at the end of
the then current term of employment."
2. This Second Amendment is effective January 1, 2000.
3. Except as amended hereby, the Employment Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment to Employment Agreement or have caused this Amendment to be duly
executed on their behalf, as of the day and year first above written.
MALAN REALTY INVESTORS, INC.
/s/ Anthony S. Gramer By: /s/ Anthony S. Gramer
- --------------------- -----------------------
Its: President and CEO
1
<PAGE> 1
EXHIBIT 10(t)
THIS DOCUMENT PREPARED BY AND
WHEN RECORDED MAIL TO:
Ferdinand J. Gallo III, Esq.
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
(Cook County, Illinois)
(Space above this line for Recorder's use)
FIRST MODIFICATION OF REVOLVING LOAN AGREEMENT, NOTE, INDENTURE OF MORTGAGE,
DEED OF TRUST, DEED TO SECURE DEBT, SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF RENTS AND LEASES, AND OTHER LOAN
DOCUMENTS, PARTIAL RELEASE AND SPREADER AGREEMENT
THIS FIRST MODIFICATION OF REVOLVING LOAN AGREEMENT, NOTE, INDENTURE OF
MORTGAGE, DEED OF TRUST, DEED TO SECURE DEBT, SECURITY AGREEMENT, FINANCING
STATEMENT, FIXTURE FILING AND ASSIGNMENT OF RENTS AND LEASES, AND OTHER LOAN
DOCUMENTS, PARTIAL RELEASE AND SPREADER AGREEMENT (this "MODIFICATION") is made
as of the 21st day of December, 1999, and shall be deemed effective as of the
24th day of November, 1999, is made by and among MALAN REVOLVER, INC., a
Michigan corporation (the "COMPANY"), MALAN REALTY INVESTORS, INC., a Michigan
corporation ("PARENT", and together with Company, hereinafter sometimes referred
to as the "BORROWER"), and GREENWICH CAPITAL MARKETS, INC., a Delaware
corporation (together with its successors and assigns, hereinafter referred to
as the "LENDER").
WHEREAS, Borrower has previously requested the Loans from Lender;
WHEREAS, in connection with the Loans, Borrower and Lender entered into
and executed that certain Revolving Loan Agreement dated as of November 24, 1997
(the "CREDIT AGREEMENT"), pursuant to which Lender agreed to make the Loans to
Borrower. ALL CAPITALIZED TERMS USED BUT NOT OTHERWISE DEFINED HEREIN SHALL HAVE
THE MEANINGS ASCRIBED THERETO IN THE CREDIT AGREEMENT, AS MODIFIED HEREBY;
WHEREAS, Borrower has previously executed and delivered to Lender that
certain Note dated November 24, 1997 made by Borrower to the order of Lender, in
the original principal amount of up to Fifty Million and No/100ths Dollars
($50,000,000.00), together with all future advances, extensions, renewals,
substitutions, modifications and amendments thereof (sometimes, herein, the
"EXISTING NOTE");
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WHEREAS, repayment of the Existing Note is secured by, inter alia, that
certain Indenture of Mortgage, Deed of Trust, Deed to Secure Debt, Security
Agreement, Financing Statement, Fixture Filing and Assignment of Rents and
Leases dated as of November 24, 1997 by Company in favor of, or for the benefit
of, Lender, original counterparts of which were recorded in the jurisdictions
and under the filing numbers set forth in SCHEDULE A attached hereto, each
constituting a first priority lien on the Collateral Properties as collateral
for the Loan (sometimes referred to herein as the "MORTGAGE"), encumbering each
of the Collateral Properties set forth on MORTGAGE EXHIBITS A-1 through A-16
attached hereto and made a part hereof;
WHEREAS, repayment of the Existing Note is further secured by that
certain Assignment of Leases, Rents and Security Deposits dated as of November
24, 1997 by Company, in favor of Lender, original counterparts of which were
recorded in the jurisdictions and under the filing numbers set forth in SCHEDULE
B attached hereto (sometimes referred to herein as the "ASSIGNMENT OF RENTS AND
LEASES");
WHEREAS, repayment of the Existing Note is further secured by first
priority liens on, and security interests in, certain collateral more
particularly described in those certain UCC Financing Statements naming Company
as debtor and Lender as secured party, which were filed in the jurisdictions and
under the filing numbers set forth in SCHEDULE C attached hereto (sometimes
referred to herein as the "FINANCING STATEMENTS");
WHEREAS, in connection with the Loans made to Borrower pursuant to the
Existing Note, Lender required that each of Company and Parent execute and
deliver a certain Environmental Health and Safety Indemnity Agreement dated as
of November 24, 1997 (the "ENVIRONMENTAL INDEMNITY"), pursuant to which each of
Company and Parent, jointly and severally, agreed to indemnify Lender and the
other "Indemnified Parties" (as defined therein) with respect to hazardous
wastes on, in, under or affecting the Original Collateral Properties;
WHEREAS, the Credit Agreement, the Existing Note, the Mortgage, the
Assignment of Rents and Leases, the Financing Statements, the Environmental
Indemnity, and all other documents and instruments now or heretofore evidencing
or securing repayment of the Obligations, or any portion thereof, evidenced by
the Existing Note are hereinafter collectively referred to as the "LOAN
DOCUMENTS"; and
WHEREAS, Borrower has requested that Lender modify the Credit Agreement
and the other Loan Documents to (I) decrease the Maximum Commitment from Fifty
Million and No/100ths Dollars ($50,000,000) to Twenty-Five Million and No/100ths
Dollars ($25,000,000), (II) extend the Revolver Termination Date; (III) release
certain of the Original Collateral Properties identified in MORTGAGE EXHIBITS
A-2 and A-4 attached hereto and made a part hereof from the Lien of the Mortgage
and the other Loan Documents; (IV) accept certain new Collateral Properties
identified in MORTGAGE EXHIBITS A-17 and A-18 attached hereto and made a part
hereof as additional collateral security for the Loans (the "MODIFICATION
COLLATERAL PROPERTIES"); and (V) to modify certain defined terms, and Lender has
so agreed, subject to adjusting the Base
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Rate and the Euro-Dollar Margin, and on the other terms and conditions more
specifically set forth herein.
NOW, THEREFORE, for and in consideration of the foregoing premises and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Lender do hereby agree as follows:
A. INCORPORATION OF PREAMBLES/REPRESENTATION AND WARRANTIES
1. The preambles to this Modification are fully incorporated herein by
this reference thereto with the same force and effect as though restated herein.
2. There has been no material adverse change in the representations
made or information heretofore supplied by or on behalf of Company or Parent to
Lender as to (I) the composition, structure, finances, business operations,
credit prospects or financial condition of Borrower, Parent, or any tenant under
any lease or tenancy of space in the Original Collateral Properties or the
Modification Collateral Properties; (II) the rental income, condition, or
ownership of the Original Collateral Properties or the Modification Collateral
Properties; and (iii) all other features of the transaction, other than any
changes which have been previously disclosed in writing to, and approved by
Lender.
3. Each of Company and Parent, jointly and severally, hereby represents
and warrants to Lender that all of the representations and warranties in each of
the Loan Documents, both before and after giving effect to the amendments and
modifications thereto in this Modification, are true, correct and complete on
the date hereof (the "MODIFICATION DATE"), with the same force and effect as if
made on such date, except to the extent the same may have been previously
modified with the prior written consent of Lender.
4. Each of Company and Parent hereby further represents and warrants
that (I) no Event of Default exists under the Credit Agreement, the Existing
Note or the Loan Documents, as such documents or instruments may be modified by
this Modification, nor does any fact, matter, circumstance or occurrence exist
which, with the passage of time or the giving of notice, or both, would
constitute an Event of Default, (II) neither Company nor Parent has any defense,
offset or counterclaim with respect to the payment of any sum owed to Lender
pursuant to, or with respect to any covenant in, the Loan Documents, (III)
Company and Parent have paid or caused to be paid, all fees due Lender under the
Credit Agreement, the Existing Note and the Loan Documents as of the
Modification Date, including, without limitation, the Commitment Fee set forth
in SECTION 2.8(B) of the Credit Agreement, (IV) Lender, on and as of the
Modification Date, has fully performed all obligations to each of Company and
Parent, as applicable, which it may have had or has on and as of the
Modification Date, and neither Company nor Parent has any knowledge of any
default by Lender under the terms and provisions of the Credit Agreement, the
Existing Note or the Loan Documents, as such documents or instruments may be
modified by this Modification, and (V) other than as expressly set forth herein,
by entering into this Modification, Lender does not waive any condition or
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obligation in the Loan Documents.
5. All references in the Mortgage, the Assignment of Rents and Leases,
the Environmental Indemnity, and all other Loan Documents to the "Agreement" or
the "Loan Agreement" are hereby deemed to be referenced to the Credit Agreement,
as modified by this Modification.
6. In the event of any conflict among the terms of the Credit Agreement
and the other Loan Documents as modified by this Modification, the terms of the
Credit Agreement as modified by this Modification shall govern and control. All
terms and provisions of the Loan Documents corresponding to terms and provisions
of the Credit Agreement prior to the date of this Modification shall be deemed
modified in accordance with the terms of this Modification.
B. MODIFICATION OF CREDIT AGREEMENT
1. Effective as of the Modification Date, the Credit Agreement is
modified as follows:
(A) In SECTION 1.1 of the Credit Agreement, the definitions of
"Aggregate Debt Service," "Agreement," "Assignment of Rents and Lease,"
"Base Rate," "Borrowing Base," "Closing Date," "Commitment,"
"Environmental Indemnity," "Loan Documents," "Maximum Commitment,"
"Mortgage," "Net Operating Income," "Note," "Original Collateral
Property," and "Revolver Termination Date" are deleted in their
entirety and the following definitions are substituted in their place
and stead:
AGGREGATE DEBT SERVICE means, for any period, the amount
determined by applying a twenty-five year mortgage
amortization schedule to the Loans outstanding as of the last
day of each fiscal quarter, using an annual interest rate
equal to the Treasury Rate plus two and one-half percent
(2.50%), determined on an annualized basis.
AGREEMENT means this Revolving Loan Agreement (including all
schedules, exhibits, annexes and appendices hereto), as
amended and modified by the Modification, together with all
future advances, extensions, renewals, substitutions,
modifications, supplements and amendments thereof.
ASSIGNMENT OF RENTS AND LEASES means the Assignment of Leases,
Rents and Security Deposits, dated as of November 24, 1997, by
and between Company, as assignor, and Lender, as assignee, as
amended by the Modification, as the same may be amended,
supplemented or otherwise modified from time to time.
BASE RATE means, for any day, a rate per annum equal to the
higher of (I) the Prime Rate for such day plus one percent
(1.00%), and (II) the sum of
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three and one-half percent (3.50%) plus the Federal Funds Rate
for such day.
BORROWING BASE shall mean the aggregate Allocated Loan Amounts
as of any date of determination, of all Collateral Properties,
as such amount shall be decreased in connection with each
Property Release by an amount equal to one hundred twenty-five
percent (125%) of the Allocated Loan Amount for the related
Release Property. CLOSING DATE means, as the context requires,
the Initial Closing Date, the Modification Effective Date and
each Property Closing Date.
COMMITMENT means an amount up to Twenty-Five Million and
No/100ths Dollars ($25,000,000.00).
ENVIRONMENTAL INDEMNITY means the Environmental Health and
Safety Indemnity Agreement dated as of November 24, 1997, made
jointly and severally by Company and Parent, as modified by
the Modification, together with all future advances,
extensions, renewals, substitutions, modifications,
supplements and amendments thereof.
LOAN DOCUMENTS means this Agreement, the Note, each Notice of
Advance, each Notice of Interest Rate Election, the
Environmental Indemnity, the Mortgage, the Assignment of Rents
and Leases, the SNDA/Estoppel Indemnity, the Undertaking and
the Manager's Consent and Subordination Agreement, as each may
have been amended by the Modification, together with all
future advances, extensions, renewals, substitutions,
modifications, supplements and amendments thereof.
MAXIMUM COMMITMENT means Twenty-Five Million and No/100ths
Dollars ($25,000,000.00).
MORTGAGE means the Indenture of Mortgage, Deed of Trust, Deed
to Secure Debt, Security Agreement, Financing Statement,
Fixture Filing and Assignment of Rents and Leases, dated as of
November 24, 1997 by Company as mortgagor and grantor, to and
for the benefit of Lender as mortgagee and beneficiary, and,
if applicable, the Trustee thereunder, as amended by the
Modification, together with all future advances, extensions,
renewals, substitutions, modifications, supplements and
amendments thereof, that encumbers Borrower's interest in each
of the Collateral Properties on a joint and several basis to
the full extent of the obligations of Borrower hereunder and
under the other Loan Documents.
NET OPERATING INCOME means, when used with respect to each
Collateral Property, for any trailing twelve month period, the
cash rents, receipts and other case revenues received or paid
to or for the benefit of the Company in the ordinary course
therefrom (other than (I) pre-paid rents and revenues, (II)
security deposits except to the extent applied in satisfaction
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of tenants' obligations for rent, (III) rents and revenues
attributed to tenants under Leases who are not occupying the
premises demised under such Leases and not open for business,
and (IV) non-recurring receipts or revenues), including
proceeds of rental interruption insurance, minus all expenses
paid or accrued related to the ownership, operation or
maintenance of such property, including but not limited to
taxes, assessments and the like, insurance, utilities,
property management fees, payroll costs, maintenance, repair
and landscaping expenses, marketing expenses, and general and
administrative expenses (including an appropriate allocation
for marketing and other expenses incurred in connection with
such property). Additionally, for purposes of determining Net
Operating Income, receipts from new tenants shall be
annualized for new tenants which are in occupancy and paying
rent for the applicable period. If a new tenant occupies and
is paying rent with respect to a space which was previously
occupied (a "REPLACEMENT TENANT"), by a former tenant (a
"FORMER TENANT") for a portion of an applicable period, Lender
shall include the annualized receipts from the Replacement
Tenant in the calculation of Net Operating Income for such
applicable period and shall exclude the annualized receipts of
the Former Tenant in such calculation. If a space is vacated
by a Former Tenant and no Replacement Tenant is in occupancy
and paying rent for such space, receipts relating to such
space will be excluded from the calculation of Net Operating
Income until a Replacement Tenant is in occupancy and paying
rent. With respect to Real Property Assets owned less than one
year by the Company, Parent or any Consolidated Subsidiary of
Parent, Net Operating Income shall be calculated by reference
to the trailing twelve month period as set forth above, if
reasonably possible, or, if not reasonably possible, by
annualizing such amounts based upon the actual amounts
generated during the previous fiscal quarter of the Company's,
Parent's or such Consolidated Subsidiary's ownership of such
Real Property Asset.
NOTE means the amended and restated promissory note of Company
and Parent, substantially in the form of EXHIBIT A hereto,
evidencing the joint and several obligation of Company and
Parent to repay the Loans.
ORIGINAL COLLATERAL PROPERTY means the parcels of real
property set forth on SCHEDULE 1 attached hereto and by this
reference made a part hereof, including, without limitation,
the Modification Collateral Properties, together with all
Improvements therein, now owned or leased by Company upon
which a Lien has been or is purported to be granted to Lender
under the Mortgage, as modified by the Modification.
REVOLVER TERMINATION DATE means November 24, 2001, or if the
Revolver Termination Date is extended by Lender pursuant to
SECTION 7.6 hereof, the date established by Lender; provided,
however, that if any such date is not a Euro-
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Dollar Business Day, the next succeeding Euro-Dollar Business
Day, unless such Euro-Dollar Business Day falls in another
calendar month, in which case the Revolver Termination Date
shall be the next preceding Euro-Dollar Business Day.
(B) In SECTION 1.1 of the Credit Agreement, the following new
definitions are added:
EXTENSION FEE has the meaning set forth in SECTION 2.8(F).
MODIFICATION means that certain First Modification of
Revolving Loan Agreement, Note, Indenture of Mortgage, Deed of
Trust, Deed to Secure Debt, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Rents and Leases,
and Other Loan Documents, Partial Release and Spreader
Agreement dated as of December 21, 1999, but effective as of
November 24, 1999 by and between Borrower and Lender.
MODIFICATION COLLATERAL PROPERTY means the parcels of real
property identified as Lincoln, IL and Arkansas City, KS, set
forth on SCHEDULE 1 attached hereto and by this reference made
a part hereof, together with all Improvements therein, now
owned or leased by Company upon which the Lien of the
Mortgage, as modified by the Modification, has been spread.
MODIFICATION EFFECTIVE DATE means November 24, 1999.
SECONDARY MARKET TRANSACTION means any of (i) the sale,
assignment, or other transfer of all or any portion of the
Loan or the Loan Documents or any interest therein to one or
more investors, (ii) the sale, assignment, or other transfer
of one or more participation interests in the Loan or Loan
Documents to one or more investors, or (iii) the transfer or
deposit of all or any portion of the Loans or Loan Documents
to or with one or more trusts or other entities which may sell
certificates or other instruments to investors evidencing an
ownership interest in the assets of such trust or the right to
receive income or proceeds therefrom.
2. Effective as of the Modification Date, SECTION 2.1 (B) of the Credit
Agreement is hereby deleted in its entirety and the following is substituted in
its place and stead:
(B) BORROWING BASE. As of the Modification Date, the
Borrowing Base shall be the sum of the Allocated Loan Amounts
of the Original Collateral Properties; provided, however, that
in the case of the lease-up of the Original Collateral
Property commonly known as Garden City, KS, and Arkansas City,
KS, and the redevelopment and lease-up of the Original
Collateral Property commonly known as New Lenox, IL, the
Allocated Loan Amounts for each of such Original Collateral
Properties may be increased by Lender, in its sole discretion,
upon the delivery by Borrower of such written evidence of the
successful leasing and/or
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redevelopment and leasing of such Original Collateral
Properties as Lender may request, including, without
limitation, delivery of fully executed tenant leases,
pro-forma financial statements and other evidence relating to
the net cash flow generated by such Original Collateral
Properties (the "BORROWING BASE DELIVERIES"). Within thirty
(30) days following Lender's receipt of the Borrowing Base
Deliveries, Lender shall notify Borrower of the revised
Allocated Loan Amount for such Original Collateral Property
(determined by Lender in its sole and absolute discretion), or
of Lender's disapproval of the Borrowing Base Deliveries.
Borrower may increase the amount of the Borrowing Base, up to
the maximum amount of Twenty-Five Million and No/100ths
Dollars ($25,000,000.00), by providing Lender with Additional
Collateral Properties in accordance with and subject to the
terms and conditions of SECTION 3.2 and SECTION 3.3 hereof.
The Borrowing Base shall be reduced in connection with any
Property Release by an amount equal to one hundred twenty-five
percent (125%) of the Allocated Loan Amount for the related
Release Property.
3. Effective as of the Modification Date, SECTION 2.1(C) of the Credit
Agreement "Extension of Revolver Termination Date" is hereby deleted in its
entirety and inserted in its place and stead is the following:
Intentionally Omitted.
4. Effective as of the Modification Date, the definition of
"EURO-DOLLAR MARGIN" set forth in SECTION 2.7(B) of the Credit Agreement is
hereby deleted in its entirety and inserted in its place and stead is the
following:
Euro-Dollar Margin means two and one-half percent (2.50%).
5. Effective as of the Modification Date, SECTION 2.8(C) of the Credit
Agreement "Exit Fee" is hereby deleted in its entirety and inserted in its place
and stead is the following:
(C) EXIT FEE. In connection with any prepayment of the entire
amount of the Loans then outstanding and a related termination
of the Facility occurring at any time during the six (6) month
period prior to the Revolver Termination Date, Borrower shall
pay to Lender a non-refundable Exit Fee (the "EXIT FEE") equal
to one percent (1.00%) of the quotient obtained by dividing
(X) the sum of the average principal amount of the Loans
outstanding each month during the Revolving Period, as
determined each month by Lender, by (Y) the number of full
calendar months comprising the Revolving Period, after giving
effect to the early termination thereof by Borrower, but in no
event less than One Hundred Twenty-Five Thousand and No/100ths
Dollars ($125,000). The Exit Fee shall not be payable in
connection with any prepayment made by Borrower after the
Conversion Date.
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6. Effective as of the Modification Date, SECTION 2.8(D) of the Credit
Agreement "Additional Collateral Fee" is hereby deleted in its entirety and
inserted in its place and stead is the following:
(D) ADDITIONAL COLLATERAL FEE. On each Property Closing Date
(other than a Closing Date relating to a Substitute Property),
Borrower shall pay to Lender a non-refundable additional
Collateral Property fee (the "ADDITIONAL COLLATERAL FEE") in
the amount of one percent (1.00%) of the Allocated Loan Amount
for such Additional Collateral Property.
7. Effective as of the Modification Date, the following new SECTION
2.8(F) is hereby added following SECTION 2.8(E) of the Credit Agreement:
(F) EXTENSION FEE. In connection with the execution of the
Modification, Borrower shall pay to Lender an extension fee
equal to one percent (1.00%) of the Maximum Commitment, (i.e.,
Two Hundred Fifty-Thousand and No/100ths Dollars
($250,000.00)) (the "EXTENSION FEE").
8. Effective as of the Modification Date, the following new SECTION
3.1(B) is hereby added following SECTION 3.1(A) of the Credit Agreement:
(B) CONDITIONS PRECEDENT TO EFFECTIVENESS OF MODIFICATION. The
closing of the Modification shall occur upon receipt by Lender
of the following documents, each dated as of the Modification
Date (or dated as otherwise provided below), or a date
otherwise satisfactory to Lender, but effective as of the
Modification Date, and in each case satisfactory in form and
substance to Lender in its reasonable judgment:
(I) a duly executed Note for the account of Lender,
complying with the provisions of SECTION 2.5;
(II) duly executed and acknowledged counterparts of
the Modification;
(III) UCC-1 Financing Statements executed by Company,
as debtor, naming Lender as secured party, in form appropriate
for filing in the appropriate jurisdictions as is necessary to
create perfected security interests in all of the Collateral
with respect to the Modification Collateral Properties, with
respect to which security interests are governed by the UCC;
(IV) satisfactory reports of UCC filing, tax lien and
judgment searches conducted by a search firm acceptable to
Lender with respect to each Original Collateral Property,
Company and Parent, such searches to be conducted in each of
the locations specified by Lender;
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(V) certificates of insurance with respect to each
Original Collateral Property demonstrating the coverages
required by the Mortgage and issued by insurance companies
meeting Rating Agency Requirements;
(VI) with respect to each Modification Collateral
Property, a Survey;
(VII) with respect to each Modification Collateral
Property, a market study in form and substance acceptable to
Lender, and with respect to each other Original Collateral
Property, a market comparison/study prepared by Lender in form
and substance satisfactory to Lender;
(VIII) with respect to each Modification Collateral
Property, a "Phase I" environmental report in form and
substance satisfactory to Lender in all respects, and with
respect to each other Original Collateral Property, such
database and other searches and reports in form and substance
satisfactory to Lender in all respects;
(IX) with respect to each Modification Collateral
Property, Compliance Evidence;
(X) with respect to each Original Collateral
Property, (A) property level operating statements and
historical cash flows for 1998 through September, 1999,
certified by an authorized officer of Borrower, (B) a
certified current rent roll, (C) a budget for Capital
Expenditures for calendar years 2000 and 2001, and (D) cash
flow projections for a two (2) year period;
(XI) the certificate to be provided by Borrower
pursuant to SECTION 5.1(c);
(XII) an opinion of Miro, Weiner & Kramer, counsel
for Company and Parent, with respect to such matters as Lender
shall require, including, without limitation, opinions with
respect to the due formation and authority of Company and
Parent, the due and valid execution and delivery of the
Modification and all documents and instruments delivered in
connection therewith, and the enforceability of the
Modification and all documents and instruments delivered in
connection therewith;
(XIII) an updated opinion or opinions of Miro, Weiner
& Kramer, counsel for Company and Parent, (A) to the effect
that if Company or its sole shareholder were a debtor under
the bankruptcy laws of the United States, a court would not
have valid legal grounds to cause Company or its sole
shareholder to be substantively consolidated with any other
Person, and (B) covering such additional matters as Lender may
<PAGE> 11
reasonably require;
(XIV) an opinion of local counsel in each
jurisdiction in which each Original Collateral Property is
located as to the enforceability of the Modification and all
documents and instruments delivered in connection therewith,
and such other matters as Lender may request, all in form and
substance satisfactory to Lender;
(XV) all documents that Lender may reasonably request
relating to the existence and qualification to do business of
Company and Parent, the corporate authority for and the
validity of the Modification and the continuing validity of
the Credit Agreement, the Note and the other Loan Documents,
or relating to any Collateral, and any other matters relevant
in connection with any Loan Document, all in form and
substance satisfactory to Lender;
(XVI) copies of all Leases with respect to the
Modification Collateral Property and copies of all Leases with
respect to the other Original Collateral Property to the
extent that the same were not delivered or in existence as of
the Initial Closing Date, all accompanied by an Officer's
Certificate that such Leases are true, correct and complete in
all material respects;
(XVII) estoppel certificates in form and substance
satisfactory to Lender from (A) each Major Tenant at each of
the Modification Collateral Properties and each new Major
Tenant at each of the other Original Collateral Properties
requested by Lender, each in the form attached to the Credit
Agreement as EXHIBIT F, (B) each ground lessor at any
Collateral Property which is held pursuant to a Ground Lease,
and (C) each party to any reciprocal easement agreement or
similar property operating agreement with respect to any
Modification Collateral Property, provided that, to the extent
that Borrower, using its best efforts, shall be unable to
obtain any such reciprocal easement agreement estoppel
certificate, Borrower shall (Y) furnish Lender with such
representations, warranties and indemnifications as Lender may
determine to be appropriate in its sole discretion in light of
the absence of such estoppel certificate, and (Z) continue to
use its best efforts to obtain and deliver promptly to Lender
an estoppel certificate in form and substance reasonably
satisfactory to Lender covering the matters for which an
estoppel certificate was unavailable at the Modification Date,
and in the event that Borrower shall so deliver such an
estoppel certificate, Borrower shall be released from the
representations, warranties and/or indemnifications given at
the Modification Date with respect to the matters covered
thereby;
(XVIII) a subordination, non-disturbance and
attornment agreement substantially in the form of EXHIBIT G to
the Credit Agreement from each
<PAGE> 12
Major Tenant at the Modification Collateral Properties and
each new Major Tenant at each of the other Original Collateral
Properties;
(XIX) the payment by Borrower to Lender of (A) the
Extension Fee, and (B) all out-of-pocket expenses of Lender,
including, without limitation, the fees and expenses of
Lender's counsel;
(XX) the payment by Borrower of any title insurance
premiums, escrow charges, mortgage recording taxes and
recording fees;
(XI) written instructions to the Title Company
authorizing the recordation of the Modification, the Financing
Statements and other recorded documents;
(XXII) an Undertaking; and
(XXIII) amendments, modifications, supplements and/or
date-down or other additional endorsements to the Title
Policies requested by Lender for each of the Original
Collateral Properties, reflecting the addition of the
Modification Collateral Property.
9. Effective as of the Modification Date, the following new SECTION
5.1(L) is hereby added following SECTION 5.1(K) of the Credit Agreement:
(k) within ten (10) Business Days after any executive officer
of the Company or Parent (including, without limitation, any
president, vice president or chief financial officer) receives
any notice or notification, whether written or oral, from any
Major Tenant required or permitted under its lease of any of
the Collateral Properties, including, without limitation, any
notice of default, termination, cancellation, intent to vacate
or surrender, an Officer's Certificate setting forth the
details thereof, and a copy of such notice or notification in
the event such notice or notification is in writing.
10. Effective as of the Modification Date, the following new SECTION
9.15 is hereby added following SECTION 9.14 of the Credit Agreement:
9.15. STATUTORY NOTICES. The following notices are hereby
provided in accordance with applicable local law:
a. MISSOURI. The following notice is included in
compliance with R.S. Mo. ss.432.045;
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND
CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A
DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE
<PAGE> 13
NOT ENFORCEABLE. TO PROTECT YOU (BORROWER) AND US
(LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS WE REACH COVERING SUCH MATTERS ARE
CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US,
EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
b. KANSAS. The following provisions are included in
compliance with K.S.A. Sections 16-117 and 16-118.
THIS WRITTEN AGREEMENT IS THE FINAL EXPRESSION OF THE
LOAN AGREEMENT BETWEEN BORROWER AND LENDER AND MAY
NOT BE CONTRADICTED BY EVIDENCE OR ANY PRIOR OR
CONTEMPORANEOUS ORAL AGREEMENT BETWEEN BORROWER AND
LENDER. THE FOLLOWING SPACE (WHICH BORROWER AND
LENDER AGREE IS SUFFICIENT SPACE) IS PROVIDED FOR THE
PLACEMENT OF NONSTANDARD TERMS, IF ANY (IF THERE ARE
NO NONSTANDARD TERMS TO BE ADDED, STATE "NONE"): NONE
BORROWER AND LENDER HEREBY AFFIRM THAT THERE IS NO
UNWRITTEN ORAL AGREEMENT BETWEEN BORROWER AND LENDER
WITH RESPECT TO THE SUBJECT MATTER OF THIS WRITTEN
AGREEMENT.
11. Effective as of the Modification Date, the following new SECTION
9.16 is hereby added following SECTION 9.15 of the Credit Agreement:
9.16 SECONDARY MARKET TRANSACTIONS/SECURITIZATIONS.
(A) SECONDARY MARKET TRANSACTIONS GENERALLY. Lender
shall have the right to engage in one or more Secondary Market
Transactions, and to structure and restructure all or any part
of the Loans, including without limitation in multiple
tranches, as a wraparound loan, or for inclusion in a REMIC or
other Securitization. Without limitation, Lender shall have
the right to cause the Note and the Loan Documents to be split
into a first and a second priority loan, or split into
separate borrower pools in whatever proportion Lender
determines, and thereafter to engage in Secondary Market
Transactions with respect to all or any part of the Loans and
Loan Documents. Borrower acknowledges that it is the intention
of the parties that all or a portion of the Loans may be
securitized and that all or a portion of the Loans (either
itself, or in combination with other loans) will be rated by
one or more Rating Agencies. Borrower further acknowledges
that additional structural
<PAGE> 14
modifications may be required to satisfy issues raised by any
Rating Agencies.
(B) COOPERATION; LIMITATIONS. Borrower shall use all
reasonable efforts and cooperate reasonably and in good faith
with Lender in effecting any such restructuring or Secondary
Market Transaction. Such cooperation shall include without
limitation, executing and delivering such reasonable
amendments to the Loan Documents as Lender may request,
provided, however that no such amendment shall modify (I) the
interest rate payable under the Loans; (II) the stated
maturity date of the Loans, or (III) any other economic or
other material terms of the Loans, including, without
limitation, terms and provisions relating to Borrower's
ability to request advances, repay, prepay and re-borrow sums
under this Agreement as if no Secondary Market Transaction or
any other transaction contemplated by or alluded to in this
SECTION 9.16 had occurred. Furthermore, in connection with any
Secondary Market Transaction or other transaction contemplated
by or alluded to in this SECTION 9.16, Lender and Borrower
acknowledge and agree that it is the full intent of the
parties hereto that Borrower shall not incur any additional
costs in borrowing funds under this Agreement and obtaining
the benefits of the revolving credit facility provided for in
this Agreement following a Securitization or other Secondary
Market Transaction, except as expressly provided by this
Agreement (i.e., the payment of the Additional Collateral Fee
and the Exit Fee, as provided herein). Such cooperation also
shall include using best efforts to obtain such certificates
and assurances from governmental entities and others as Lender
may reasonably request. Further, in the event that, in
connection with a Secondary Market Transaction, a Rating
Agency informs Lender that Borrower's organizational structure
as it presently exists would adversely affect the rating of
the Loans or applicable loan pool, Borrower shall use all
reasonable efforts to restructure to the extent necessary to
avert such adverse affect, including, if applicable, the
addition of an outside director to Borrower. Notwithstanding
any other provision of this Agreement, Lender agrees and
acknowledges that under no circumstances shall the Parent or
the Company be required to take any action or subject itself
to any structural modification or other restructuring
requested or demanded by Lender, a Rating Agency, or any other
Person which, in the reasonable judgment of the Parent, could
in any way adversely affect, jeopardize, or alter the Parent's
status as a `Real Estate Investment Trust' under the Internal
Revenue Code of 1986, as amended' or the Company's status as a
`Qualified REIT Subsidiary' thereunder. Borrower shall not be
required to provide additional collateral that was not
initially contemplated by the parties to effect any such
restructuring or Secondary Market Transaction. Borrower shall
not bear the cost of any third parties hired by Lender,
including any Rating Agencies, in connection with a Secondary
Market Transaction. Notwithstanding any other provision of
this Agreement, Lender shall bear, and promptly pay as if
Lender were the primary obligor with respect
<PAGE> 15
to, any of the following costs which may be incurred by
Borrower in connection with any Secondary Market Transaction
or any other transaction contemplated by or alluded to in this
SECTION 9.16: (I) title insurance-related costs or premiums,
to the extent that there has been no material change to the
status of title since the Closing Date; (II) due diligence
search costs (including, by way of example and not of
limitation, litigation, UCC, tax lien, and other similar
searches); and (III) filing fees, recording fees, or taxes.
(C) INFORMATION. Borrower shall provide such
information and documents relating to the Borrower, the
manager of the Collateral Property, the Collateral Property
and the business and operations of any of the foregoing as
Lender may reasonably request in connection with any such
Secondary Market Transaction. Lender shall be permitted to
share all such information with the investment banking firms,
Rating Agencies, accounting firms, law firms, other third
party advisory firms, potential investors, and other parties
involved in any proposed Secondary Market Transaction. Any
such information may be incorporated into offering documents
for the Secondary Market Transactions. Lender and all of the
aforesaid third-party advisors and professional firms and
investors shall be entitled to rely upon such information, and
Borrower shall indemnify, defend, and hold harmless Lender
from and against any losses, claims, damages and liabilities
that arise out of or are based upon any actual or alleged
untrue or misleading statement of material fact contained in
such information or the actual or alleged omission of any
material fact without which such information is materially
misleading. Lender may publicize the existence of the Loans in
connection with Lender's Secondary Market Transaction
activities or otherwise.
(D) ADDITIONAL PROVISIONS. In any Secondary Market
Transaction, Lender may transfer its obligations under the
Loan Documents (or may transfer the portion thereof
corresponding to the transferred portion of the obligations of
Borrower), and thereafter Lender shall be relieved of any
obligations under the Loan Documents arising after the date of
said transfer with respect to the transferred interest. Each
transferee investor shall be deemed to be a "Lender" under the
applicable Loan Documents.
12. Effective as of the Modification Date, SCHEDULES 1, 4.14, 5.16 and
5.20 to the Credit Agreement are hereby deleted in their entirety, and inserted
in lieu thereof are SCHEDULES 1, 4.14, 5.16 and 5.20 attached hereto.
13. Effective as of the Modification Date, the promissory note attached
to the Credit Agreement as EXHIBIT A is hereby deleted in its entirety, and
inserted in lieu thereof is EXHIBIT A attached hereto.
14. Company and Parent hereby jointly and severally remake, adopt and
<PAGE> 16
ratify each and every representation and warranty set forth in the Credit
Agreement, as modified and amended herein as of the Modification Date, with the
same force and effect as on the Initial Closing Date.
15. In all other respects, the Credit Agreement, as modified and
amended herein, shall remain in full force and effect in accordance with the
terms thereof and each and every term, covenant and agreement contained therein
is hereby adopted, ratified, confirmed and affirmed by each of Company and
Parent.
C. MODIFICATION OF MORTGAGE, PARTIAL RELEASE AND SPREADER
Effective as of the Modification Date, the Mortgage is modified as
follows:
1. Lender hereby remises and releases the Original Collateral
Properties identified in MORTGAGE EXHIBITS A-2 and A-4 attached hereto (the
"RELEASED PROPERTY") from the Lien of the Mortgage as evidenced by the
counterparts thereof recorded in Winnebago County, Illinois as Document No.
9760094, and in Porter County, Indiana as Document No. 97-28979, Book 795, Page
425, and the Lien of the other Loan Documents. On the Modification Date, Lender,
at Borrower's sole cost and expense, shall deliver such further documents and
instruments as may be reasonably requested to effectuate the foregoing release
of the Released Property from the Lien of the Mortgage and the other Loan
Documents.
2. Effective as of the Modification Date, the Mortgage is hereby
amended to add the following after the Habendum Clauses on Page 6 thereof:
The Lien of the Mortgage is hereby spread to encumber the Modification
Collateral Properties identified on MORTGAGE EXHIBIT A-17 and A-18
attached hereto and made a part hereof, and in connection therewith,
and subject to the terms and conditions of the Mortgage, as modified
hereby, and as the same may be modified or amended, extended, renewed,
replaced, supplemented or restated, Grantor does hereby MORTGAGE, GIVE,
GRANT, BARGAIN, SELL, WARRANT, ALIENATE, REMISE, RELEASE, CONVEY,
ASSIGN, GRANT A SECURITY INTEREST IN, TRANSFER, HYPOTHECATE, DEPOSIT,
PLEDGE, SET OVER and CONFIRM unto to Beneficiary (as to the
Modification Collateral Properties located in any of the Mortgage
States ), or Trustee (as to the Modification Collateral Properties
located in any of the Indenture States ), for the benefit of
Beneficiary, as beneficiary, all of Grantor's estate, right, title and
interest in and to the following property (collectively, the
"MODIFICATION TRUST ESTATE"):
(I) the Modification Collateral Properties (for purposes of
this Modification and the terms and provisions of the Mortgage, as
modified hereby, hereinafter referred to as the "MODIFICATION LAND
PARCELS");
(II) any and all buildings, structures, open or closed parking
areas, and all other structures and improvements of every kind
whatsoever, and any and all
<PAGE> 17
additions, alterations, replacements or appurtenances thereto, now or
at any time hereafter situated on, over or under the Modification Land
Parcels or any part thereof (collectively, the "MODIFICATION
BUILDINGS");
(III) all Modification Equipment (as hereinafter defined) now
owned or hereafter acquired by Grantor which is so related to the
Modification Land Parcels and the Modification Buildings that it is
deemed fixtures or real property under the law of the State in which
such Modification Equipment is located, including, without limitation,
all building or construction materials intended for construction,
reconstruction, alteration or repair of or installation on or in the
Modification Land Parcels and the Modification Buildings, construction
equipment, appliances, machinery, plant equipment, fittings, apparatus,
and other items now or hereafter attached to, installed or used in
connection with (temporarily or permanently) any of the Modification
Land Parcels or the Modification Buildings (but excluding any
underground storage tanks), together with all accessions,
appurtenances, additions, replacements and substitutions for any of the
foregoing and the proceeds thereof (collectively, "MODIFICATION
FIXTURES");
(IV) to the extent the same does not constitute Modification
Fixtures, all "equipment", as such term is defined in Article 9 of the
Uniform Commercial Code as in effect from time to time in the State in
which any of the Modification Land Parcels and the Modification
Buildings are located (the "COMMERCIAL CODE"), now owned, or hereafter
acquired and owned by Grantor, which is used at or in connection with
the Modification Buildings or the Modification Land Parcels and is
located thereon or therein (including, but not limited to, all
machinery, furnishings, electronic data-processing and other office
equipment and any and all additions, substitutions and replacements of
any of the foregoing, to the extent located on or in the Modification
Land Parcels or the Modification Buildings), together with all
attachments, components, parts, equipment and accessories installed
thereon or affixed thereto (collectively, "MODIFICATION EQUIPMENT")
(provided, however, that the term "Modification Equipment" shall
specifically exclude (A) all of any Modification Net Tenant's
equipment, (B) all of any Modification Net Tenant's inventory and (C)
all equipment and personal property of subtenants or other occupants of
the Modification Land Parcels or the Modification Improvements, or any
part thereof other than Grantor);
(V) all goods, general intangibles, accounts, chattel paper,
instruments and documents (each as defined in the Commercial Code),
furniture, franchises, contract rights, furnishings, objects of art,
machinery, tools, supplies, appliances, and all other personal property
of any kind or character whatsoever other than Modification Fixtures,
which are now or hereafter owned by Grantor, and which are used at or
in connection with the Modification Buildings or the Modification Land
Parcels, together with all accessories, replacements and substitutions
thereto or therefor (collectively, "MODIFICATION PERSONAL PROPERTY",
and collectively with the Modification Buildings, Modification Fixtures
and
<PAGE> 18
Modification Equipment, the "MODIFICATION IMPROVEMENTS");
(VI) any and all leases, including, without limitation,
"MODIFICATION NET LEASES", and, to the extent of the interest therein
of Grantor, subleases or sub-subleases, licenses, concessions or other
agreements (whether written or oral and whether now or hereafter in
effect) pursuant to which any Person is granted a possessory interest
in, or right to use or occupy all or any portion of, the Modification
Land Parcels or the Modification Improvements, and all modifications,
amendments or other agreements relating to such leases, subleases,
sub-subleases or other agreements, and every guarantee of the
performance and observance of the covenants, conditions and agreements
to be performed and observed by the other party thereto (collectively,
"MODIFICATION LEASES") and in and to all cash or securities deposited
thereunder to secure performance by the lessees of their obligations
under the Modification Leases and the right, subject to the provisions
of SECTION 13 of the Mortgage as modified hereby, to receive and
collect all the rents, additional rents, increases in rents, advance
rents, issues, revenues, income, proceeds, profits, royalties, security
deposits and other types of deposits, and other benefits paid or
payable and to become due or payable to Grantor in respect of the use,
occupancy, license or possession of any portion or portions of the
Modification Land Parcels or the Modification Improvements pursuant to
the Leases, and the rights to enforce, whether at law or in equity or
by any other means, all provisions thereof (collectively, "MODIFICATION
RENTS"). As used herein, the term "MODIFICATION NET LEASE" shall refer
to any lease of a Mortgaged Property whereby the tenant thereunder
(each, a "MODIFICATION NET TENANT") is required to pay all real estate
taxes, insurance, utilities and costs of maintenance with respect to
such leased property;
(VII) all permits, licenses and rights, whether now owned or
hereafter acquired, relating to the ownership, use, occupation and
operation of the Modification Land Parcels and the Modification
Improvements;
(VIII) all rights of way or use, air rights, water rights,
utility rights, privileges, franchises, servitudes, easements,
tenements, hereditaments and appurtenances now or hereafter belonging
or appertaining to any of the foregoing; all of Grantor's rights as a
member of any association of owners pursuant to any declarations of use
or restrictive covenants or similar instruments and all of Grantor's
rights pursuant to any restrictive covenants; and all of Grantor's
right, title and interest in and to any streets, ways, alleys,
roadbeds, inclines, tunnels, culverts, strips or gores of land
adjoining or serving the Modification Land Parcels or any part thereof,
whether now owned or hereafter acquired by Grantor;
(IX) all proceeds, if any, accruing to Grantor upon the
conversion, voluntary or involuntary, of any of the foregoing into cash
or liquidated claims, including, without limitation, proceeds of
insurance and condemnation awards and judgments related thereto,
subject to the provisions of SECTIONS 10 and 11 of the Mortgage as
modified hereby;
<PAGE> 19
(X) all deposits made by Grantor with Beneficiary pursuant to
SECTIONS 4.A(E) and 9 of the Mortgage as modified hereby;
(XI) (A) all contracts, including the property management
agreement for the Mortgaged Property (the "MODIFICATION PROPERTY
MANAGEMENT AGREEMENT"), and agreements relating to each Mortgaged
Property, and other documents, books and records related to the
operation of each Mortgaged Property; (B) all consents, licenses,
warranties, guaranties and building and other permits required or
useful for the construction, completion and operation of each Mortgaged
Property; (C) all of the Grantor's rights under any contracts or the
sale of any portion of any Mortgaged Property; and (D) all plans and
specifications used or to be used in connection with the construction,
operation or maintenance of each Mortgaged Property, together with all
amendments and modifications thereof;
(XII) those certain ground leases, as more particularly
described in EXHIBIT D attached hereto and made a part hereof
(collectively, the "MODIFICATION GROUND LEASES"), which Ground Leases
encumber those premises described in EXHIBIT D (collectively, the
"MODIFICATION GROUND LEASED PREMISES"); and
(XIII) the Modification Ground Leases, together with all
amendments, supplements, consolidations, replacements, extensions
renewals and other modifications of the Modification Ground Leases now
or hereafter entered into in accordance with the provisions thereof,
together with all right, title or interest of Grantor in, to, under or
derived from the Modification Ground Leased Premises and the
Modification Improvements now or hereafter located thereon which may at
any time be acquired by Grantor by the terms of the Modification Ground
Leases, including the right of Grantor to possession under Section 365
of the Title 11 of the United States Code (11 U.S.C. ss.ss. 101 et
seq.), as amended from time to time, or any successor statute (the
"BANKRUPTCY CODE") in the event of the rejection of any of the
Modification Ground Leases by the landlord thereunder or its trustee
pursuant to said Section, and together with all rights and benefits of
whatsoever nature derived or to be derived by Grantor under the
Modification Ground Leases, including (subject to the terms of the
Mortgage, as modified hereby) the rights to exercise options, to
modify, extend or terminate any of the Modification Ground Leases, to
surrender any of the Modification Ground Leases and to elect to treat
any of the Modification Ground Leases as rejected or to remain in
possession under Section 365(h) of the Bankruptcy Code;
(XIV) all proceeds and products arising from any of the
foregoing; and
(XV) all other security and collateral of any nature
whatsoever, now or hereafter given by Grantor, to secure the payment
and performance of the Obligations.
<PAGE> 20
For purposes of the Mortgage, as modified by the Modification,
the "MODIFICATION TRUST ESTATE", including each component thereof,
shall be expressly interpreted as meaning all or any portion of the
items listed above, and of the interest of Grantor therein. The term
"MORTGAGED PROPERTY" means that portion of the Modification Trust
Estate located at or otherwise pertaining to each of the locations
described in MORTGAGE EXHIBIT B hereto.
UNTO Beneficiary, as mortgagee, its successors and assigns to
its use, benefit and behoof, for so long as any of the Obligations
shall remain outstanding, the Modification Trust Estate, to the extent
located in one of the Mortgage States.
WITH MORTGAGE COVENANTS and, if and to the extent permitted by
applicable law, with all POWERS OF SALE, STATUTORY POWERS OF SALE and
other STATUTORY RIGHTS AND COVENANTS and upon the STATUTORY CONDITIONS
in the subject Mortgage State.
TO HAVE AND TO HOLD the Modification Trust Estate, whether now
owned or held or hereafter acquired, with all the privileges and
appurtenances to the same belonging, and with the possession and right
of possession thereof, unto Beneficiary and its successors and assigns
for so long as any of the Obligations shall remain outstanding, subject
to the terms hereof;
OR
UNTO the Trustee, as trustee for the benefit of Beneficiary,
to the successors of said trustee in the trust created by this
Mortgage, and to its or their respective successors and assigns for so
long as any of the Obligations shall remain outstanding, in trust, with
power of sale, the Modification Trust Estate, to the extent located in
one of the Indenture States;
TO HAVE AND TO HOLD the Modification Trust Estate, whether now
owned or held or hereafter acquired, with all the privileges and
appurtenances to the same belonging, and with the possession and right
of possession thereof, unto the Trustee for the benefit of Beneficiary,
to its and their successors in the trust created by this Mortgage, and
to its and their respective assigns for so long as any of the
Obligations shall remain outstanding, in trust, however, upon the terms
and conditions set forth herein.
Grantor hereby binds itself, and it successors and assigns, to
warrant and forever defend the title to the Modification Trust Estate
against the claim or claims of all parties claiming or to claim the
same, or any part thereof for so long as any of the Obligations shall
remain outstanding.
To the extent the Modification Trust Estate is located in a
Mortgage State (A) this instrument shall be deemed to be and shall be
enforceable as a
<PAGE> 21
mortgage and as a security agreement, fixture filing, assignment of
leases and rents and financing statement, and (B) the Trustee shall
have no rights, powers or obligations.
To the extent the Modification Trust Estate is located in an
Indenture State (A) this instrument shall be deemed to be and shall be
enforceable as a deed of trust and as a security agreement, fixture
filing, assignment of leases and rents and financing statement, and (B)
the word "Beneficiary" shall be deemed to refer to Beneficiary as
beneficiary.
3. Company warrants that it has good and marketable fee simple absolute
title to the Modification Collateral Properties identified on MORTGAGE EXHIBITS
A-17 and A-18 attached hereto, and has the right to mortgage the same in
accordance with the provisions set forth above and the Mortgage as modified
hereby, and that the Mortgage, as modified hereby, constitutes a valid and
enforceable first Lien on the Modification Collateral Property, subject only to
Permitted Exceptions (as defined in the Mortgage). Company shall (A) preserve
such title and the validity and priority of the Lien of the Mortgage, as
modified hereby, and shall forever warrant and defend the same unto Lender
against the claims of all and every person or persons, corporation or
corporations and parties whomsoever, and (B) make, execute, acknowledge and
deliver all such further or other deeds, documents, instruments or assurances
and cause to be done all such further acts and things as may at any time
hereafter be required by Lender to confirm and fully protect the Lien and
priority of the Mortgage, as modified hereby.
4. Effective as of the Modification Date, the Lien of the Mortgage is
hereby spread and extended to cover, encompass, include and encumber the
Modification Collateral Properties with the same force and effect as if the
Mortgage had for valuable consideration been made, executed, delivered and
recorded including and encumbering the Modification Collateral Properties.
Company and Lender confirm that the Lien of the Mortgage as modified hereby
secures repayment of the Obligations, together with all renewals, modifications,
replacements, consolidations and extensions thereof. Lender acknowledges and
agrees that in connection with the spreading of the Lien of the Mortgage
hereunder to the Modification Collateral Properties, Lender has waived the
Additional Collateral Fee set forth in SECTION 2.8(D) of the Credit Agreement.
5. The Mortgage as modified and spread hereby constitutes a "security
agreement" and creates a "security interest" in favor of Lender as a "secured
party" with respect to all property included in the Modification Collateral
Properties which is covered by the Commercial Code. The Mortgage, as modified
and spread hereby, also constitutes a Commercial Code "financing statement" made
by Company as "debtor" in favor of Lender as "secured party" with respect to all
such property included in the Modification Collateral Properties which is or may
become fixtures or any other type of collateral as to which a security interest
can be perfected by the filing of a financing statement in the appropriate
jurisdiction. This provision shall be self-operative, but Company will
nevertheless execute and deliver to Lender on demand such additional
<PAGE> 22
financing statements and other instruments as Lender may reasonably require to
impose or perfect the Lien and security of the Mortgage as modified and spread
hereby upon the Modification Collateral Properties.
6. In order to induce Lender to enter into this Agreement, Company
hereby remakes all representations, warranties and covenants contained in the
Mortgage with respect to the Additional Mortgaged Property as if the same had
been more fully set forth herein. Any misrepresentation or default by Company
hereunder shall constitute a default under the Mortgage, as modified hereby, and
upon the expiration of all applicable grace periods (if any) set forth in the
Mortgage, as modified hereby, or any other Loan Document, Lender may at its
option pursue any and all remedies available to Lender with respect to any
collateral for the Obligations successively or concurrently.
7. Effective as of the Modification Date, the Mortgage is hereby
modified in the following general respects:
(A) all references in the Mortgage or the other Loan Documents to the
"BUILDINGS" shall be deemed to include the Modification Buildings;
(B) all references in the Mortgage or the other Loan Documents to the
"EQUIPMENT" shall be deemed to include the Modification Equipment;
(C) all references in the Mortgage or the other Loan Documents to the
"FIXTURES" shall be deemed to include the Modification Fixtures;
(D) all references in the Mortgage or the other Loan Documents to the
"GROUND LEASES" or the "GROUND LEASED PREMISES" shall be deemed to include the
Modification Ground Leases and the Modification Ground Leased Premises, as the
case may be;
(E) all references in the Mortgage or the other Loan Documents to the
"IMPROVEMENTS" shall be deemed to include the Modification Improvements;
(F) all references in the Mortgage or the other Loan Documents to the
"LAND PARCELS" shall be deemed to include the Modification Land Parcels;
(G) all references in the Mortgage or the other Loan Documents to the
"LEASES" shall include the Modification Leases;
(H) all references in the Mortgage or the other Loan Documents to the
"MORTGAGED PROPERTY" or "MORTGAGED PROPERTIES" shall include the Modification
Collateral Properties and the other Original Collateral Properties;
(I) all references in the Mortgage or the other Loan Documents to a
"NET LEASE" shall be deemed to include a Modification Net Lease;
(J) all references in the Mortgage or the other Loan Documents to a
"NET
<PAGE> 23
TENANT" and "NET TENANTS" shall be deemed to include a Modification Net Tenant
and the Modification Net Tenants;
(K) all references in the Mortgage or the other Loan Documents to the
"PERSONAL PROPERTY" shall be deemed to include the Modification Personal
Property;
(L) all references in the Mortgage or the other Loan Documents to the
"PROPERTY MANAGEMENT AGREEMENT" shall be deemed to include the Modification
Property Management Agreement;
(M) all references in the Mortgage or the other Loan Documents to the
"RENTS" shall be deemed to include the Modification Rents; and
(N) all references in the Mortgage or the other Loan Documents to the
"TRUST ESTATE" shall be deemed to include the Modification Trust Estate.
8. To the extent that any term of the Mortgage is inconsistent with any
provision of the Credit Agreement or the other Loan Documents (whether or not
such provision of this Modification specifically modifies one or more of the
Loan Documents), such inconsistent term is hereby modified to the extent
necessary to make it consistent with the provisions of the Credit Agreement or
the other Loan Documents as modified hereby. All references in any Loan Document
to the Mortgage shall mean the Mortgage as modified hereby.
9. Effective as of the Modification Date, EXHIBITS A, B and D to the
Mortgage are hereby deleted in their entirety, and inserted in lieu thereof are
Mortgage EXHIBITS A-1, A-3 and A-5 through A-18, MORTGAGE EXHIBIT B and MORTGAGE
EXHIBIT D attached hereto.
10. The following new subparagraph (k) to Annex III (IL) to the
Mortgage is hereby added following subparagraph (j):
(K) LIMITATION ON INDEBTEDNESS. It is expressly understood and
agreed that the Indebtedness secured by this Mortgage will in no event
exceed two hundred percent (200%) of (i) the total face amount of the
Note, plus (ii) the total interest which may hereafter accrue under the
Note on such face amount.
11. Company and Parent hereby jointly and severally remake, adopt and
ratify each and every representation and warranty set forth in the Mortgage, as
modified and amended herein as of the Modification Date, with the same force and
effect as on the Initial Closing Date.
12. In all other respects, the Mortgage, as modified and amended
herein, shall remain in full force and effect in accordance with the terms
thereof and each and every term, covenant and agreement contained therein is
hereby adopted, ratified, confirmed and affirmed by each of Company and Parent.
<PAGE> 24
D. MODIFICATION OF ASSIGNMENT OF RENTS AND LEASES
1. Lender hereby remises and releases the Original Collateral
Properties identified in MORTGAGE EXHIBITS A-2 and A-4 attached hereto (the
"RELEASED PROPERTY") from the Lien of the Assignment of Rents and Leases as
evidenced by the counterparts thereof recorded in Winnebago County, Illinois as
Document No. 9760095, and in Porter County, Indiana as Document No. 97-28980,
Book 795, Page 426, and the Lien of the other Loan Documents. On the
Modification Date, Lender, at Borrower's sole cost and expense, shall deliver
such further documents and instruments as may be reasonably requested to
effectuate the foregoing release of the Released Property from the Lien of the
Assignment of Rents and Leases and the other Loan Documents.
2. Effective as of the Modification Date, the Assignment of Rents and
Leases is modified to delete in its entirety EXHIBIT A to the Assignment of
Rents and Leases, and inserted in lieu thereof are MORTGAGE EXHIBITS A-1, A-3
and A-5 through A-18 attached hereto. From and after the Modification Date, all
references in the Assignment of Rents and Leases to the Mortgaged Property shall
be deemed to include the Modification Collateral Property.
3. Effective as of the Modification Date, all references in the Credit
Agreement and the other Loan Documents to the Assignment of Rents and Leases
shall mean the Assignment of Rents and Leases as modified by this Modification.
4. In all other respects, the Assignment of Rents and Leases, as
modified and amended herein, shall remain in full force and effect in accordance
with the terms thereof and each and every term, covenant and agreement contained
therein is hereby adopted, ratified, confirmed and affirmed by each of Company
and Parent.
5. Company and Parent hereby jointly and severally remake, adopt and
ratify each and every representation and warranty set forth in the Assignment of
Rents and Leases, as modified and amended herein as of the Modification Date,
with the same force and effect as on the Initial Closing Date.
E. MODIFICATION OF ENVIRONMENTAL INDEMNITY
1. Effective as of the Modification Date, the Environmental Indemnity
is modified to delete in its entirety EXHIBIT A to the Environmental Indemnity,
and inserted in lieu thereof are MORTGAGE EXHIBITS A-1 through A-18 attached
hereto. From and after the Modification Date, all references in the
Environmental Indemnity to the Mortgaged Property shall be deemed to include the
Original Collateral Property, Modification Collateral Property and the Released
Property. Notwithstanding the release of the Released Property from the Lien of
the Mortgage, Company and Parent acknowledge and agree that the indemnification
obligations set forth in the Environmental Indemnity shall survive any such
release, and shall continue in full force and effect. Company and Parent hereby
waive any defense either of them may have based upon the release of the Released
Property.
<PAGE> 25
2. Company and Parent hereby jointly and severally remake, adopt and
ratify each and every representation and warranty set forth in the Environmental
Indemnity, as modified and amended herein as of the Modification Date, with the
same force and effect as on the Initial Closing Date.
3. The obligations of each of Company and Parent under the
Environmental Indemnity, as modified by this Modification, are hereby ratified,
affirmed and confirmed by each of Company and Parent, and such obligations
continue in full force and effect.
4. All references in the Credit Agreement and the other Loan Documents
to the Environmental Indemnity shall mean the Environmental Indemnity as
modified by this Modification.
5. In all other respects, the Environmental Indemnity, as modified and
amended herein, shall remain in full force and effect in accordance with the
terms thereof and each and every term, covenant and agreement contained therein
is hereby adopted, ratified, confirmed and affirmed by each of Company and
Parent.
F. GENERAL PROVISIONS
1. Company and Parent hereby agree to execute and deliver promptly to
Lender, at Lender's request, such other documents as Lender, in its reasonable
discretion, shall deem necessary or appropriate to evidence the transaction
contemplated herein.
2. This Modification may be executed in any number of counterparts,
each of which shall constitute an original, but all of which, taken together,
shall constitute one and the same Agreement.
3. Except as otherwise set forth herein to the contrary, the Loan
Documents remain unmodified and continue in full force and effect. Company and
Parent hereby reaffirms, confirms and ratifies each and every covenant,
condition, obligation and provision set forth in the Credit Agreement and the
other Loan Documents, each as modified hereby.
4. This Modification shall be binding upon, and inure to the benefit
of, the successors and assigns of the parties hereto.
5. This Modification shall be governed by and construed in accordance
with the laws of the State of New York without regard to its conflict of laws
principles.
6. The terms and provisions of this Modification are the result of
negotiations between the parties. This Modification shall not be construed in
favor of or against any party by reason of the extent to which any party or
professionals employed or retained by it participated in the preparation of this
Modification.
<PAGE> 26
IN WITNESS WHEREOF, the undersigned have caused this Modification to be
executed and delivered by their duly authorized representatives as of the day
and year first above written.
PARENT:
WITNESS: MALAN REALTY INVESTORS, INC., a
Michigan corporation
By: /s/ Elliott J. Broderick
Name: Elliott J. Broderick
Title: Chief Accounting Officer
COMPANY:
WITNESS: MALAN REVOLVER, INC., a Michigan
corporation
By: /s/ Elliott J. Broderick
Name: Elliott J. Broderick
Title: Chief Accounting Officer
LENDER:
WITNESS: GREENWICH CAPITAL MARKETS, INC., a
Delaware corporation
By: /s/ David Murdoch
Name: David Murdoch
Title: Senior Vice President
<PAGE> 27
STATE OF ) IL
) ss:
COUNTY OF )
On this ___ day of December, 1999, before me, the undersigned Notary
Public, personally appeared Elliott J. Broderick, personally known by me, who,
being duly sworn, acknowledged himself to be the Chief Accounting Officer of
Malan Realty Investors, Inc., a Michigan corporation, and that as such officer,
being duly authorized to do so pursuant to its bylaws or a resolution of its
board of directors, executed and acknowledged the foregoing instrument for the
purposes therein contained, by signing his name as Chief Accounting Officer on
behalf of said corporation as such officer, as his free and voluntary act and
deed, and the free and voluntary act and deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
[S E A L]
Name:
Notary Public, __________ County,
My Commission Expires:
STATE OF )
) ss:
COUNTY OF )
On this ___ day of December, 1999, before me, the undersigned Notary
Public, personally appeared Elliott J. Broderick, personally known by me, who,
being duly sworn, acknowledged himself to be the Chief Accounting Officer of
Malan Revolver, Inc., a Michigan corporation, and that as such officer, being
duly authorized to do so pursuant to its bylaws or a resolution of its board of
directors, executed and acknowledged the foregoing instrument for the purposes
therein contained, by signing his name as Chief Accounting Officer on behalf of
said corporation as such officer, as his free and voluntary act and deed, and
the free and voluntary act and deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
[S E A L]
Name:
Notary Public, __________ County,
My Commission Expires:
<PAGE> 28
STATE OF ILLINOIS ) IL
) ss:
COUNTY OF C O O K )
On this ___ day of December, 1999, before me, the undersigned Notary
Public, personally appeared David M. Murdoch, personally known by me, who, being
duly sworn, acknowledged himself to be the Senior Vice President of Greenwich
Capital Markets, Inc., a Delaware corporation, and that as such officer, being
duly authorized to do so pursuant to its bylaws or a resolution of its board of
directors, executed and acknowledged the foregoing instrument for the purposes
therein contained, by signing his name as Senior Vice President on behalf of
said corporation as such officer, as his free and voluntary act and deed, and
the free and voluntary act and deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
[S E A L]
Name: Ferdinand J. Gallo III
Notary Public, Cook County, Illinois
My Commission Expires: March 21, 2001
<PAGE> 29
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C> <C>
Exhibit A - Amended and Restated Note
Schedule 1 - Property Location/Allocated Loan Amounts
Schedule 4.14 - - List of Material Contracts
Schedule 5.16 - - Environmental Work
Schedule 5.20 - - Capital Expenditure Schedule
Schedule A - Recording Information - Mortgage Counterparts
Schedule B - Recording Information - Assignment of Rents and Leases
Counterparts
Schedule C - Recording Information - Financing Statements
Mortgage Exhibit A-1 - Legal Description of Ft. Atkinson, WI
Mortgage Exhibit A-2 - Legal Description of Loves Park, IL
Mortgage Exhibit A-3 - Legal Description of New Lenox, IL
Mortgage Exhibit A-4 - Legal Description of Valparaiso, IN
Mortgage Exhibit A-5 - Legal Description of Garden City, KS
Mortgage Exhibit A-6 - Legal Description of Hays, KS
Mortgage Exhibit A-7 - Legal Description of Independence, KS
Mortgage Exhibit A-8 - Legal Description of Emporia, KS
Mortgage Exhibit A-9 - Legal Description of Liberal, KS
Mortgage Exhibit A-10 - Legal Description of Cape Girardeau, MO
Mortgage Exhibit A-11 - Legal Description of Green Bay, WI
Mortgage Exhibit A-12 - Legal Description of Janesville, WI
Mortgage Exhibit A-13 - Legal Description of Madison, WI
Mortgage Exhibit A-14 - Legal Description of Milwaukee, WI
Mortgage Exhibit A-15 - Legal Description of Oshkosh, WI
Mortgage Exhibit A-16 - Legal Description of Stevens Point, WI
Mortgage Exhibit A-17 - Legal Description of Lincoln, IL
Mortgage Exhibit A-18 - Legal Description of Arkansas City, KS
Mortgage Exhibit B - Street Addresses of Mortgaged Property
Mortgage Exhibit D - Ground Leases
</TABLE>
<PAGE> 30
EXHIBIT A
AMENDED AND RESTATED NOTE
Up to $25,000,000 Chicago, Illinois
Dated as of December 21, 1999
Effective as of November 24, 1999
FOR VALUE RECEIVED, MALAN REVOLVER, INC., a Michigan corporation (the
"COMPANY"), and MALAN REALTY INVESTORS, INC., a Michigan corporation (the
"PARENT," and together with Company, hereinafter referred to together as the
"MAKER"), each jointly and severally, promises to pay to the order of GREENWICH
CAPITAL MARKETS, INC., a Delaware corporation (the "LENDER"), for the account of
its Applicable Lending Office, the unpaid principal amount of each Loan made by
the Lender to the Maker pursuant to the Agreement referred to below on the
Revolver Termination Date provided for in the Agreement. The Maker promises to
pay interest on the unpaid principal amount of each such Loan on the dates and
at the rate or rates provided for in the Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of Lender at 600
Steamboat Road, Greenwich, Connecticut or as Lender may otherwise direct.
All Loans made by the Lender, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Lender and, if the Lender so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Loan then outstanding may be endorsed by the Lender on
the schedule attached hereto, or on a continuation of such schedule attached
hereto and made a part hereof; provided that the failure of the Lender to make
any such recordation or endorsement shall not affect the obligations of the
Maker hereunder, under the Agreement or under the other Loan Documents (as
defined in the Agreement).
It is expressly understood and agreed by the Maker that (I) the
principal balance of this Note includes the liabilities previously evidenced by
that certain Note dated November 24, 1997 (the "EXISTING NOTE"), executed by the
Maker in favor of Lender, and (II) to the extent any of such liabilities are
included in the principal balance of this Note, this Note (A) merely
re-evidences the liabilities evidenced by the Existing Note, (B) is given in
substitution for, and not in payment of, the Existing Note, (C) is in no way
intended to constitute a novation of the Existing Note and (D) is in no way
intended to release, cancel, terminate, or otherwise impair all or any part of
any Lien, mortgage, deed of trust, assignment, security interest, pledge or
other encumbrance heretofore granted to Lender as collateral security for the
obligations of Maker with respect thereto.
This Note is the Note referred to in the Revolving Loan Agreement dated
as of November 24, 1997, as amended by that certain First Modification of
Revolving Loan Agreement, Note, Indenture of Mortgage, Deed of Trust, Deed to
Secure Debt, Security
<PAGE> 31
Agreement, Financing Statement, Fixture Filing and Assignment of Rents and
Leases, and Other Loan Documents dated as of December 21, 1999, but effective as
of November 24, 1999, by and between Maker and Lender (as so amended, and as the
same may be amended, modified, supplemented, extended, replaced or restated from
time to time, the "AGREEMENT"). Terms defined in the Agreement are used herein
with the same meanings. Reference is hereby made to the Agreement for provisions
for the prepayment hereof and the acceleration of the maturity hereof. This Note
is secured by the Mortgage and certain other Loan Documents. The Maker hereby
waives presentment, demand, protest and notice of protest and non-payment of
this Note.
The Note shall be governed by and construed in accordance with, the
laws of the State of New York, without reference to its conflict of laws
principles.
IN WITNESS WHEREOF, the undersigned have caused this Amended and
Restated Note to be executed and delivered by their duly authorized
representatives as of the day and year first above written.
PARENT:
WITNESS: MALAN REALTY INVESTORS, INC., a
Michigan corporation
By: /s/ Elliott J. Broderick
Name: Elliott J. Broderick
Title: Chief Accounting Officer
COMPANY:
WITNESS: MALAN REVOLVER, INC., a
Michigan corporation
By: /s/ Elliott J. Broderick
Name: Elliott J. Broderick
Title: Chief Accounting Officer
<PAGE> 32
AMENDED AND RESTATED NOTE
(continued)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
Date Amount of Type of Loan Amount of Maturity Date Notation Made
Loan Principal By
Repaid
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
- --------------------- ------------------ ------------------ ------------------ ------------------ ------------------
</TABLE>
<PAGE> 33
SCHEDULE 1
SCHEDULE OF ALLOCATED LOAN AMOUNTS
<TABLE>
<CAPTION>
----------------------------------------- --------------------------------------
Property Allocated Loan Amount
----------------------------------------- --------------------------------------
<S> <C>
Ft. Atkinson, WI $1,121,000.00
----------------------------------------- --------------------------------------
New Lenox, IL $2,539,000.00
----------------------------------------- --------------------------------------
Garden City, KS $0.00
----------------------------------------- --------------------------------------
Hays, KS $795,000.00
----------------------------------------- --------------------------------------
Independence, KS $739,000.00
----------------------------------------- --------------------------------------
Emporia, KS $454,000.00
----------------------------------------- --------------------------------------
Liberal, KS $530,000.00
----------------------------------------- --------------------------------------
Cape Girardeau, MO $1,431,000.00
----------------------------------------- --------------------------------------
Green Bay, WI $2,149,000.00
----------------------------------------- --------------------------------------
Janesville, WI $706,000.00
----------------------------------------- --------------------------------------
Madison, WI $1,439,000.00
----------------------------------------- --------------------------------------
Oshkosh, WI $1,259,000.00
----------------------------------------- --------------------------------------
Stevens Point, WI $919,000.00
----------------------------------------- --------------------------------------
Milwaukee, WI $1,825,000.00
----------------------------------------- --------------------------------------
Lincoln, IL $1,429,000.00
----------------------------------------- --------------------------------------
Arkansas City, KS $156,000.00
----------------------------------------- --------------------------------------
TOTAL $17,491,000.00
----------------------------------------- --------------------------------------
</TABLE>
<PAGE> 34
MORTGAGE EXHIBIT B
PROPERTY LIST
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------ -------------------------------------
Property Address Title
- ---------------------------------------- ------------------------------------ -------------------------------------
<S> <C> <C>
Ft. Atkinson, WI 1309 N. High Street Fee Simple
1317 N. High Street
1321 N. High Street
1351 N. High Street
- ---------------------------------------- ------------------------------------ -------------------------------------
New Lenox, IL 1500 W. Lincoln Highway Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Garden City, KS 1210 Fleming Street Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Hays, KS 2900 Broadway Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Independence, KS 2505 W. Main Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Emporia, KS 2727 W. Highway 50 Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Liberal, KS 1030 S. Kansas Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Cape Girardeau, MO 11 S. Kings Highway Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Green Bay, WI 2201 E. Main Street Fee Simple
2151 E. Main Street
- ---------------------------------------- ------------------------------------ -------------------------------------
Janesville, WI 2233 Highway 14 Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Madison, WI 3801 E. Washington Avenue Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Oshkosh, WI 900 Koehler Street Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Stevens Point, WI 111 N. Division Street Fee Simple
119 N. Division Street
- ---------------------------------------- ------------------------------------ -------------------------------------
Milwaukee, WI 2701 S. Chase Ave. Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
Lincoln, IL 1308 Woodlawn Road Fee Simple
1310 Woodlawn Road
- ---------------------------------------- ------------------------------------ -------------------------------------
Arkansas City, KS 2013 Summit Street Fee Simple
- ---------------------------------------- ------------------------------------ -------------------------------------
</TABLE>
<PAGE> 35
MORTGAGE EXHIBIT D
GROUND LEASES
None
<PAGE> 36
SCHEDULE A
RECORDING INFORMATION FOR MORTGAGES
<TABLE>
<CAPTION>
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
COLLATERAL PROPERTY JURISDICTION INSTRUMENT RECORDING DATE RECORDING NUMBER
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
<S> <C> <C> <C> <C>
Fort Atkinson, WI Jefferson County, WI Indenture of Mortgage, Deed 12/02/97 Doc # 983744
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Loves Park, IL Winnebago County, IL Indenture of Mortgage, Deed 12/04/97 Doc # 9760094
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
New Lenox, IL Will County, IL Indenture of Mortgage, Deed 11/26/97 Doc # R97-105168
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Valparaiso, IN Porter County, IN Indenture of Mortgage, Deed 12/02/97 Doc # 97-28979, Book 795,
of Trust, Deed to Secure Page 425
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Garden City, KS Finney County, KS Indenture of Mortgage, Deed 12/02/97 Book 215, Page 472
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C> <C> <C>
Hays, KS Ellis County, KS Indenture of Mortgage, Deed 12/03/97 Book 439, Page 376
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Independence, KS Montgomery County, KS Indenture of Mortgage, Deed 12/02/97 Book 465, Page 74
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Emporia, KS Lyon County, KS Indenture of Mortgage, Deed 12/02/97 Book 282, Page 425
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Liberal, KS Seward County, KS Indenture of Mortgage, Deed 12/04/97 Book 487, Page 770
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Cape Girardeau, MO Cape Girardeau County, MO Indenture of Mortgage, Deed 12/02/97 Book 902, Page 127
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Green Bay, WI Brown County, WI Indenture of Mortgage, Deed 12/03/97 Doc # 1583335
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C>
Janesville, WI Rock County, WI Indenture of Mortgage, Deed 12/01/97 Doc # 1351026
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Madison, WI Dane County, WI Indenture of Mortgage, Deed 12/02/97 Doc # 2911586
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Milwaukee, WI Milwaukee County, WI Indenture of Mortgage, Deed 12/01/97 Doc # 7455564
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Oshkosh, WI Winnebago County, WI Indenture of Mortgage, Deed 12/02/97 Doc # 990627
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
Stevens Point, WI Portage County, WI Indenture of Mortgage, Deed 12/02/97 Doc # 532188
of Trust, Deed to Secure
Debt, Security Agreement,
Financing Statement, Fixture
Filing and Assignment of
Rents and Leases
- ------------------------ ------------------------- ------------------------------ --------------------- ------------------------
</TABLE>
<PAGE> 39
SCHEDULE B
RECORDING INFORMATION FOR ASSIGNMENT OF RENTS AND LEASES
<TABLE>
<CAPTION>
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
COLLATERAL PROPERTY JURISDICTION INSTRUMENT RECORDING DATE RECORDING NUMBER
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
<S> <C> <C> <C> <C>
Fort Atkinson, WI Jefferson County, WI Assignment of Leases, Rents 12/02/97 Doc # 983745
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Loves Park, IL Winnebago County, IL Assignment of Leases, Rents 12/04/97 Doc # 9760095
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
New Lenox, IL Will County, IL Assignment of Leases, Rents 11/26/97 Doc # R97-105169
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Valparaiso, IN Porter County, IN Assignment of Leases, Rents 12/02/97 Doc # 97-28980, Book 795,
and Security Deposits Page 426
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Garden City, KS Finney County, KS Assignment of Leases, Rents 12/02/97 Book 215, Page 473
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Hays, KS Ellis County, KS Assignment of Leases, Rents 12/03/97 Book 439, Page 479
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Independence, KS Montgomery County, KS Assignment of Leases, Rents 12/02/97 Book 465, Page 75
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Emporia, KS Lyon County, KS Assignment of Leases, Rents 12/02/97 Book 511, Page 371
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Liberal, KS Seward County, KS Assignment of Leases, Rents 12/04/97 Book 487, Page 874
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Cape Girardeau, MO Cape Girardeau County, MO Assignment of Leases, Rents 12/02/97 Book 902, Page 231
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Green Bay, WI Brown County, WI Assignment of Leases, Rents 12/03/97 Doc # 1583334
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Janesville, WI Rock County, WI Assignment of Leases, Rents 12/01/97 Doc # 1351027
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
</TABLE>
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C>
Madison, WI Dane County, WI Assignment of Leases, Rents 12/02/97 Doc # 2911587
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Milwaukee, WI Milwaukee County, WI Assignment of Leases, Rents 12/01/97 Doc # 7455565
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Oshkosh, WI Winnebago County, WI Assignment of Leases, Rents 12/02/97 Doc # 990628
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
Stevens Point, WI Portage County, WI Assignment of Leases, Rents 12/02/97 Doc # 532189
and Security Deposits
- ------------------------- ---------------------------- ------------------------------ -------------------- -------------------------
</TABLE>
<PAGE> 41
SCHEDULE C
RECORDING INFORMATION FOR FINANCING STATEMENTS
<TABLE>
- --------------------------------- -------------------------------- ----------------------- ----------------------------------------
COLLATERAL PROPERTY JURISDICTION RECORDING DATE RECORDING NUMBER
================================= ================================ ======================= ========================================
<S> <C> <C> <C>
Fort Atkinson, WI Jefferson County, WI 12/2/97 Doc # 183532, Volume 1015, Page 556
-------------------------------- ----------------------- ----------------------------------------
Wisconsin Secretary of State 12/9/97 Doc # 1720685
================================= ================================ ======================= ========================================
Loves Park, IL Winnebago County, IL 12/04/97 Doc #304642
-------------------------------- ----------------------- ----------------------------------------
Illinois Secretary of State 12/10/97 Doc # 3773237
================================= ================================ ======================= ========================================
New Lenox, IL Will County, IL 11/26/97 Doc # R97-105170, File # U97002112
-------------------------------- ----------------------- ----------------------------------------
Illinois Secretary of State 12/10/97 Doc # 3773236
================================= ================================ ======================= ========================================
Valparaiso, IN Porter County, IN 12/02/97 Doc # 46680
-------------------------------- ----------------------- ----------------------------------------
Indiana Secretary of State 12/08/97 Doc #2161081
================================= ================================ ======================= ========================================
Garden City, KS Finney County, KS 12/2/97 Doc # 97-704, File # 7455
-------------------------------- ----------------------- ----------------------------------------
Kansas Secretary of State 12/9/97 Doc # 2409988
================================= ================================ ======================= ========================================
Hays, KS Ellis County, KS 12/3/97 Doc # 613
-------------------------------- ----------------------- ----------------------------------------
Kansas Secretary of State 12/9/97 Doc # 2409989
================================= ================================ ======================= ========================================
Independence, KS Montgomery County, KS 12/2/97 Doc # 095405
-------------------------------- ----------------------- ----------------------------------------
Kansas Secretary of State 12/9/97 Doc # 2409990
================================= ================================ ======================= ========================================
</TABLE>
<PAGE> 42
<TABLE>
================================= ================================ ======================= ========================================
<S> <C> <C> <C>
Emporia, KS Lyon County, KS 12/2/97 Doc # 400
-------------------------------- ----------------------- ----------------------------------------
Kansas Secretary of State 12/9/97 Doc # 2409987
================================= ================================ ======================= ========================================
Liberal, KS Seward County, KS 12/4/97 Doc # 97-6829
-------------------------------- ----------------------- ----------------------------------------
Kansas Secretary of State 12/9/97 Doc # 2409991
================================= ================================ ======================= ========================================
Cape Girardeau, MO Cape Girardeau County, MO 12/2/97 Doc # 087554
-------------------------------- ----------------------- ----------------------------------------
Missouri Secretary of State 12/9/97 Doc # 2857125
================================= ================================ ======================= ========================================
Green Bay, WI Brown County, WI 12/3/97 Doc # 666583
-------------------------------- ----------------------- ----------------------------------------
Wisconsin Secretary of State 12/9/97 Doc # 1720681
================================= ================================ ======================= ========================================
Janesville, WI Rock County, WI 12/1/97 Doc # 937750U
-------------------------------- ----------------------- ----------------------------------------
Wisconsin Secretary of State 12/9/97 Doc # 1720684
================================= ================================ ======================= ========================================
Madison, WI Dane County, WI 12/2/97 Doc # 0867170
-------------------------------- ----------------------- ----------------------------------------
Wisconsin Secretary of State 12/9/97 Doc # 1720683
================================= ================================ ======================= ========================================
Milwaukee, WI Milwaukee County, WI 12/01/97 Doc # 30808537
-------------------------------- ----------------------- ----------------------------------------
Wisconsin Secretary of State 12/9/97 Doc # 1720682
================================= ================================ ======================= ========================================
Oshkosh, WI Winnebago County, WI 12/2/97 Doc # 1003116
-------------------------------- ----------------------- ----------------------------------------
Wisconsin Secretary of State 12/9/97 Doc # 1720679
================================= ================================ ======================= ========================================
Stevens Point, WI Portage County, WI 12/2/97 Doc # 239133
-------------------------------- ----------------------- ----------------------------------------
Wisconsin Secretary of State 12/9/97 Doc # 1720680
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Global Secretary of State, Michigan 12/09/97 Doc # D313499
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</TABLE>
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF MALAN REALTY INVESTORS, INC.
--------------------------------------------
MALAN DEPOSITOR, INC.
MALAN MORTGAGOR, INC.
MALAN MEADOWS, INC.
MALAN REVOLVER, INC.
MALAN MIDWEST, LLC
MALAN AURORA CORP.
<PAGE> 1
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-94124 on Form S-8 and 33-94116 on Form S-3 of Malan Realty Investors, Inc. of
our report dated January 27, 2000, appearing in this Annual Report on Form 10-K
of Malan Realty Investors, Inc. for the year ended December 31, 1999
Deloitte & Touche LLP
Detroit, Michigan
March 24, 2000
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Malan Realty Investors, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Anthony
S. Gramer and Elliott J. Broderick, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on Form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act and
the rules, regulations, and requirements of the Commission. The undersigned
hereby ratifies and confirms as his own act and deed everything that such
attorneys and agents, and each of them, does or causes to be done. Each such
attorney or agent shall have, and may exercise, all of the powers hereby
conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 16th day of March, 2000.
/s/ Robert D. Kemp. Jr.
-------------------------
Robert D. Kemp, Jr.
<PAGE> 2
POWER OF ATTORNEY
The undersigned, a Director of Malan Realty Investors, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Anthony
S. Gramer and Elliott J. Broderick, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on Form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act and
the rules, regulations, and requirements of the Commission. The undersigned
hereby ratifies and confirms as his own act and deed everything that such
attorneys and agents, and each of them, does or causes to be done. Each such
attorney or agent shall have, and may exercise, all of the powers hereby
conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 16th day of March, 2000.
/s/ William McBride III
--------------------------
William McBride III
<PAGE> 3
POWER OF ATTORNEY
The undersigned, a Director of Malan Realty Investors, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Anthony
S. Gramer and Elliott J. Broderick, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on Form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act and
the rules, regulations, and requirements of the Commission. The undersigned
hereby ratifies and confirms as his own act and deed everything that such
attorneys and agents, and each of them, does or causes to be done. Each such
attorney or agent shall have, and may exercise, all of the powers hereby
conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 16th day of March, 2000.
/s/ William F. Pickard
---------------------------
William F. Pickard
<PAGE> 4
POWER OF ATTORNEY
The undersigned, a Director of Malan Realty Investors, Inc., a Michigan
corporation (the "Company"), does hereby constitute and appoint each of Anthony
S. Gramer and Elliott J. Broderick, with full power of substitution, as his true
and lawful attorney and agent to execute in his name and on his behalf, as a
Director of the Company, the Company's Annual Report on Form 10-K, and any and
all amendments thereto to be filed with the Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and any and all instruments that such attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the Act and
the rules, regulations, and requirements of the Commission. The undersigned
hereby ratifies and confirms as his own act and deed everything that such
attorneys and agents, and each of them, does or causes to be done. Each such
attorney or agent shall have, and may exercise, all of the powers hereby
conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his
signature this 16th day of March, 2000.
/s/ Richard T. Walsh
------------------------------
Richard T. Walsh
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,244
<SECURITIES> 0
<RECEIVABLES> 8,703
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,947
<PP&E> 267,117
<DEPRECIATION> 26,584
<TOTAL-ASSETS> 253,480
<CURRENT-LIABILITIES> 9,995
<BONDS> 196,344
0
0
<COMMON> 74,221
<OTHER-SE> (27,080)
<TOTAL-LIABILITY-AND-EQUITY> 253,480
<SALES> 0
<TOTAL-REVENUES> 44,874
<CGS> 0
<TOTAL-COSTS> 13,479
<OTHER-EXPENSES> 8,392
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,550
<INCOME-PRETAX> 5,453
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,453
<DISCONTINUED> 0
<EXTRAORDINARY> (289)
<CHANGES> (522)
<NET-INCOME> 4,642
<EPS-BASIC> 0.90
<EPS-DILUTED> 0.90
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