<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Condensed Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 2
Condensed Consolidated Statements of Income - Three Months Ended September 30,
1996 and 1995 3
Condensed Consolidated Statements of Income - Nine Months Ended September 30,
1996 and 1995 4
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30,
1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
</TABLE>
1
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
Shopping center properties, at cost:
Land $ 44,168 $ 40,576
Buildings and improvements 241,870 223,649
Property under development 14,731 12,593
------------- ------------
300,769 276,818
Less: accumulated depreciation and amortization (25,933) (20,312)
------------- ------------
Shopping center properties, net 274,836 256,506
Cash and cash equivalents 8,158 3,109
Restricted cash - escrow 2,631 3,060
Rents receivable 2,087 2,628
Investments in and advances to unconsolidated entities 52,725 22,564
Deferred costs, net of amortization 6,434 7,459
Other assets 706 542
------------- ------------
$ 347,577 $ 295,868
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage notes payable $160,285 $ 128,839
Accounts payable and accrued expenses 7,672 5,720
Other liabilities 1,359 1,323
------------- ------------
Total Liabilities 169,316 135,882
Shareholders' Equity
Preferred stock, par value $.01 per share-
authorized 20,000,000 shares, none outstanding - -
Common stock, par value $.01 per share-
authorized 150,000,000 shares, issued and
outstanding 11,012,054 and 10,012,054 shares
in 1996 and 1995, respectively 110 100
Paid-in capital 185,240 166,975
Accumulated deficit (7,089) (7,089)
------------- ------------
Total Shareholders' Equity 178,261 159,986
------------- ------------
$ 347,577 $ 295,868
============= ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1996 1995
------------------ ------------------
(In thousands)
<S> <C> <C>
Revenues:
Minimum and percentage rents $ 8,266 $ 6,740
Recoveries from tenants 848 859
Other revenue 45 240
------------------ ------------------
Total revenues 9,159 7,839
Operating expenses:
Operating and maintenance 665 600
Real estate taxes 401 496
General and administrative 837 635
Depreciation and amortization 1,955 1,634
------------------ ------------------
Total operating expenses 3,858 3,365
------------------ ------------------
Income from operations 5,301 4,474
Other income (expense):
Interest expense, net (1,349) (1,131)
Other expense, net (54) (55)
Equity in net income of unconsolidated entities 413 -
------------------ ------------------
Income before extraordinary items 4,311 3,288
Extraordinary items - (531)
------------------ ------------------
Net income $ 4,311 $ 2,757
================== ==================
Net income per share $ 0.39 $ 0.28
================== ==================
Weighted average shares outstanding 11,012 9,962
================== ==================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
-------------- -------------
(In thousands)
<S> <C> <C>
Revenues:
Minimum and percentage rents $ 24,012 $ 19,915
Recoveries from tenants 2,578 2,462
Other revenue 167 505
------------ -----------
Total revenues 26,757 22,882
Operating expenses:
Operating and maintenance 1,872 1,692
Real estate taxes 1,366 1,506
General and administrative 2,435 2,035
Depreciation and amortization 5,705 4,815
------------ -----------
Total operating expenses 11,378 10,048
------------ -----------
Income from operations 15,379 12,834
Other income (expense):
Interest expense, net (4,133) (5,452)
Other expense, net (118) (61)
Equity in net income of unconsolidated entities 971 -
------------ -----------
Income before net loss on real estate sales and
extraordinary items 12,099 7,321
Net loss on real estate sales (15) (55)
------------ -----------
Income before extraordinary items 12,084 7,266
Extraordinary items - (531)
------------ -----------
Net income $ 12,084 $ 6,735
============ ===========
Net income per share $ 1.12 $ 0.80
============ ===========
Weighted average shares outstanding 10,804 8,417
============ ===========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
--------------- ---------------
(In thousands)
<S> <C> <C>
Net cash provided by operating activities $ 20,762 $ 14,188
Cash flows from investing activities:
Development of shopping center properties (23,400) (31,283)
Improvements to shopping center properties (550) (745)
Investments in and advances to
unconsolidated entities (24,694) (18,564)
Other (5,700) 3,123
--------------- ---------------
Net cash used in investing activities (54,344) (47,469)
Cash flows from financing activities:
Proceeds from mortgages and notes payable 54,056 38,394
Principal payments on mortgages and
notes payable (22,609) (38,590)
Proceeds from issuance of common shares,
net of underwriting commissions and
offering expenses 21,662 48,109
Dividends paid (14,797) (11,197)
Other 319 (1,039)
--------------- ---------------
Net cash provided by financing activities 38,631 35,677
--------------- ---------------
Increase in cash and cash equivalents 5,049 2,396
Cash and cash equivalents, beginning of period 3,109 437
--------------- ---------------
Cash and cash equivalents, end of period $ 8,158 $ 2,833
=============== ===============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
JDN REALTY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1996
1. THE COMPANY
JDN Realty Corporation (the "Company") is a real estate company which
specializes in the development and asset management of retail shopping centers
which are located primarily in the Southeast and are anchored by value-oriented
retailers. As of September 30, 1996, the Company owned and operated, either
directly or through affiliated entities or joint ventures, a total of 46
shopping center properties and had eight shopping centers under construction.
The Company is operating as a real estate investment trust ("REIT") for federal
income tax purposes.
The Company was incorporated in the State of Maryland on December 2, 1993,
by the shareholders of JDN Enterprises, Inc. (the "Principals") and merged with
JDN Enterprises, Inc. ("Enterprises") on December 29, 1993 in order to continue
and expand the real estate businesses of the Principals and Enterprises. On
March 29, 1994, the Company completed an initial public offering of 6,785,000
shares of common stock at $22.00 per share (the "1994 Offering"). On July 26,
1995, the Company completed an offering of 2,479,600 shares of common stock at
$20.25 per share (the "1995 Offering"), and on February 27, 1996, the Company
completed an offering of 1,000,000 shares of common stock at $23.00 per share
(the "1996 Offering"). The net cash proceeds from the 1994 Offering along with
proceeds from a $75 million, seven year, 6.75% fixed-rate term loan (the "Term
Debt") were used primarily to purchase third party or the Principals' interests
in certain shopping centers and to repay all outstanding Company debt. Upon
completion of the 1994 Offering, the Company owned 33 shopping center
properties. The net proceeds from the 1995 Offering and the 1996 Offering were
used primarily to repay interim financing incurred in connection with the
Company's development, redevelopment, expansion and acquisition activities.
In December 1994, the Company participated in the organization of JDN
Development Company, Inc. ("Development Company") in order to enhance its
development flexibility. Development Company is structured such that the Company
owns 99% of the economic interest while J. Donald Nichols, the Company's
Chairman and Chief Executive Officer, owns the remaining 1% and controls
Development Company's operations and activities through his voting common stock
ownership. Current tax laws restrict the ability of REITs to engage in certain
activities, such as the sale of certain properties and third party fee
development; because it is not a REIT, Development Company may engage in real
estate development activities such as the sale of all or a portion of a
development project. As of September 30, 1996, the Company had invested $5.1
million in Development Company in the form of equity capital, $24.7 million in
the form of secured notes receivable and $12.9 million in the form of unsecured
advances.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial
6
<PAGE>
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The consolidated balance sheet at December 31, 1995 has been derived
from the audited consolidated financial statements at that date. Operating
results for the three and nine month periods ended September 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996 or any other interim period. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income Taxes. The Company has elected to be taxed as a REIT under the
Internal Revenue Code of 1986 (the "Code") and has operated as such since March
27, 1994. As a result, the Company will not be subject to federal income taxes
to the extent that it distributes annually at least 95% of its taxable income to
its shareholders and satisfies certain other requirements defined in the Code.
Accordingly, no provision has been made for federal income taxes in the
accompanying condensed consolidated financial statements for the periods
presented.
Earnings Per Share. Net income per share for the three and nine months
ended September 30, 1996 and 1995 is based on the weighted average number of
common shares outstanding during the respective periods.
Reclassifications. Certain amounts as previously reported have been
reclassified to conform to the current period's presentation.
4. DISTRIBUTION
On September 9, 1996, the Company's Board of Directors declared a cash
distribution of $.475 per share payable October 16, 1996 to shareholders of
record on September 30, 1996.
5. BANK CREDIT FACILITY AMENDMENT
On June 21, 1996, the Company executed an amendment to the Company's $40 million
line of credit with a bank group (the "Bank Credit Facility") which reduced the
interest rate on the Bank Credit Facility by 50 basis points to 150 basis points
over the rate for 30-day Eurodollar deposits.
6. SWAP TRANSACTION
On July 10, 1996, the Company and Morgan Guaranty Trust Company of New York
("Morgan") entered into a swap transaction as a hedge against increasing
interest rates on its floating rate debt. Under the terms of the agreement, the
Company will pay a fixed rate of 6.44% and will receive a variable rate equal to
the rate for the one-month LIBOR rate based on the following notional amounts:
7
<PAGE>
Notional Amount Period
--------------- ------
$50 million September 3, 1996 to September 30, 1996
$70 million October 1, 1996 to December 31, 1996
$80 million January 1, 1997 to January 2, 1998
The Company is accounting for this transaction as a hedge and accordingly
adjusts interest expense each quarter for any net amounts received from or paid
to Morgan.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE COMPANY
JDN Realty Corporation (the "Company") is a real estate company which
specializes in the development and asset management of retail shopping centers
which are located primarily in the Southeast and are anchored by value-oriented
retailers. As of September 30, 1996, the Company owned and operated, either
directly or through affiliated entities or joint ventures, a total of 46
shopping center properties and had eight shopping centers under construction.
The Company is operating as a real estate investment trust ("REIT") for federal
income tax purposes.
The Company was incorporated in the State of Maryland on December 2, 1993,
by the shareholders of JDN Enterprises, Inc. (the "Principals") and merged with
JDN Enterprises, Inc. ("Enterprises") on December 29, 1993 in order to continue
and expand the real estate businesses of the Principals and Enterprises. On
March 29, 1994, the Company completed an initial public offering of 6,785,000
shares of common stock at $22.00 per share (the "1994 Offering"). On July 26,
1995, the Company completed an offering of 2,479,600 shares of common stock at
$20.25 per share (the "1995 Offering"), and on February 27, 1996, the Company
completed an offering of 1,000,000 shares of common stock at $23.00 per share
(the "1996 Offering"). The net cash proceeds from the 1994 Offering along with
proceeds from a $75 million, seven year, 6.75% fixed-rate term loan (the "Term
Debt") were used primarily to purchase third party or the Principals' interests
in certain shopping centers and to repay all outstanding Company debt. Upon
completion of the 1994 Offering, the Company owned 33 shopping center
properties. The net proceeds from the 1995 Offering and the 1996 Offering were
used primarily to repay interim financing incurred in connection with the
Company's development, redevelopment, expansion and acquisition activities.
In December 1994, the Company participated in the organization of JDN
Development Company, Inc. ("Development Company") in order to enhance its
development flexibility. Development Company is structured such that the
Company owns 99% of the economic interest while J. Donald Nichols, the Company's
Chairman and Chief Executive Officer, owns the remaining 1% and controls
Development Company's operations and activities through his voting common stock
ownership. Current tax laws restrict the ability of REITs to engage in certain
activities, such as the sale of certain properties and third party fee
development; because it is not a REIT, Development Company may engage in real
estate development activities such as the sale of all or a portion of a
development project. As of September 30, 1996, the Company had invested $5.1
million in Development Company in the form of equity capital, $24.7 million in
the form of secured notes receivable and $12.9 million in the form of unsecured
advances.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended September 30, 1996 to the Three Months
Ended September 30, 1995
Minimum and percentage rents increased $1.5 million or 23% to $8.3 million
for the three months ended September 30, 1996 as compared to the same period in
1995. Of this increase, $1.4 million relates to newly developed and redeveloped
properties and $166,000 relates to the Goodlettsville, Tennessee acquisition in
December 1995.
9
<PAGE>
Recoveries from tenants decreased $11,000 or 1% to $848,000 between
periods. The decrease is due to a reduction in recoverable expenses at the
existing properties offset by an increase associated with the newly developed
and redeveloped properties and the Goodlettsville, Tennessee acquisition.
Other revenue decreased $195,000 or 81% between periods. This decrease is
the result of a reduction in revenues associated with managing and leasing fewer
third party properties.
Operating and maintenance expenses increased $65,000 or 11% between
periods. Of this increase, $39,000 relates to newly developed and redeveloped
properties and $13,000 relates to the Goodlettsville, Tennessee acquisition. The
remaining increase is the result of higher repair and maintenance costs at the
existing properties.
Real estate taxes decreased $95,000 or 19% to $401,000 for the three months
ended September 30, 1996 from $496,000 for the same period in 1995. This
decrease results from a decrease in property taxes at the existing properties,
due primarily to the separate tax platting of an anchor tenant tract, offset by
an increase in property taxes associated with newly developed and redeveloped
properties and the Goodlettsville, Tennessee acquisition.
General and administrative expenses increased $202,000 or 32% between
periods. This increase primarily reflects the cost of additional employees and
other expenses associated with the increase in the number of properties managed
and leased by the Company.
Depreciation and amortization expense increased $321,000 or 20% between
periods. Of this increase, $281,000 relates to newly developed and redeveloped
properties and $35,000 relates to the Goodlettsville, Tennessee acquisition. The
remaining increase relates primarily to amortization of tenant improvements,
tenant allowances and leasing commissions for new tenants.
Interest expense increased $218,000 or 19% between periods due primarily to
increased debt associated with the increase in the number of operating
properties net of a decrease resulting from the pay-down of debt with proceeds
from the 1996 Offering.
Equity in net income of unconsolidated entities represents the Company's
share of the net income of Development Company and two joint ventures formed for
the purpose of developing shopping center properties. These entities were either
not formed or had no significant activity in the three-month period ended
September 30, 1995.
There were no extraordinary items for the three months ended September 30,
1996. Extraordinary items for the three months ended September 30, 1995
represent charges to earnings of unamortized deferred financing costs of
$403,000 associated with the early extinguishment of a secured line of credit
with a bank and $128,000 in unamortized deferred financing costs related to an
unscheduled principal payment on the Term Debt.
Comparison of the Nine Months Ended September 30, 1996 to the Nine Months Ended
September 30, 1995
Minimum and percentage rents increased $4.1 million or 21% to $24.0 million
for the nine months ended September 30, 1996 as compared to the same period in
1995. Of this increase, $3.6 million relates to newly developed and redeveloped
properties and $494,000 relates to the Goodlettsville, Tennessee acquisition.
10
<PAGE>
Recoveries from tenants increased $116,000 or 5% between periods. Of this
increase, $84,000 relates to newly developed and redeveloped properties and
$85,000 relates to the Goodlettsville, Tennessee acquisition. The increases are
offset by a decrease in recoveries at the remaining properties due to a decrease
in recoverable expenses.
Other revenue decreased $338,000 or 67% between periods. This decrease is
the result of a reduction in revenues associated with managing and leasing fewer
third party properties and a decrease in development fees earned by the Company.
Operating and maintenance expenses increased $180,000 or 11% between
periods. Of this increase, $117,000 relates to the operations of the newly
developed and redeveloped properties and $56,000 relates to the Goodlettsville,
Tennessee acquisition. The remaining increase is primarily the result of higher
non-recoverable repair and maintenance costs at the existing properties.
Real estate taxes decreased $140,000 or 9% for the nine months ended
September 30, 1996 as compared to September 30, 1995. This decrease results from
a decrease in property taxes on the existing properties, due primarily to the
separate tax platting of an anchor tenant tract, offset by a $51,000 increase in
property taxes associated with newly developed and redeveloped properties and a
$43,000 increase in property taxes associated with the Goodlettsville, Tennessee
acquisition.
General and administrative expenses increased $400,000 or 20% between
periods. The increase primarily reflects the cost of additional empoyees and
other expenses associated with an increase in the number of properties managed
and leased by the Company and higher costs of producing the annual report to
shareholders and conducting the annual meeting of shareholders.
Depreciation and amortization expense increased $890,000 or 18% between
periods. Of this increase, $777,000 relates to the newly developed and
redeveloped properties and $104,000 relates to the Goodlettsville, Tennessee
acquisition. The remaining increase relates primarily to amortization of tenant
improvements, tenant allowances and leasing commissions for new tenants.
Interest expense decreased $1.3 million or 24% to $4.1 million between
periods. This decrease is primarily attributable to the repayment of interim
financing with the proceeds from the 1996 Offering and the 1995 Offering.
Equity in net income of unconsolidated entities represents the Company's
share of the net income of Development Company and two joint ventures formed for
the purpose of developing shopping center properties. These entities were either
not formed or had no significant in the nine-month period ended September 30,
1995.
Net loss on real estate sales was $15,000 for the nine months ended
September 30, 1996 compared to a net loss of $55,000 for the same period in
1995. The 1996 loss resulted from additional expenses associated with the fourth
quarter 1995 sale of a shopping center located in Hickory, North Carolina. The
1995 loss represents additional costs incurred in conjunction with shopping
centers sold in previous periods.
There were no extraordinary items for the nine months ended September 30,
1996 compared to $531,000 for the same period in 1995. Extraordinary items for
the nine months ended September 30, 1995 represent charges to earnings of
unamortized deferred financing costs of $403,000 associated with
11
<PAGE>
the extinguishment of a secured line of credit with a bank and $128,000 in
unamortized deferred financing costs related to an unscheduled principal
payment on the Term Debt.
Funds From Operations
Funds from operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts, Inc. ("NAREIT") to mean net income, computed in
accordance with generally accepted accounting principles, excluding gains (or
losses) from debt restructuring and sales of property, plus despreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. The table below sets forth the calculation of FFO for the periods
indicated.
<TABLE>
<CAPTION>
(Dollars in thousands except per share data) Three Months Ended September 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Net income $ 4,311 $ 2,757
Depreciation of real estate assets 1,832 1,523
Amortization of tenant allowances and tenant improvements 22 27
Amortization of deferred leasing commissions 67 53
Net loss on real estate sales - -
Extraordinary items - 531
Depreciation of real estate assets held in unconsolidated entities 23 -
--------------- ---------------
FFO $ 6,255 $ 4,891
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands except per share data) Nine Months Ended September 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Net income $ 12,084 $ 6,735
Depreciation of real estate assets 5,353 4,506
Amortization of tenant allowances and tenant improvements 81 78
Amortization of deferred leasing commissions 187 140
Net loss on real estate sales 15 55
Extraordinary items - 531
Depreciation of real estate assets held in unconsolidated entities 55 -
--------------- ---------------
FFO $ 17,775 $ 12,045
=============== ===============
</TABLE>
12
<PAGE>
Occupancy
The Company's properties were 98.7% leased as of September 30, 1996 and
98.9% leased as of September 30, 1995.
FORWARD-LOOKING STATEMENTS
Management has included below certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities and Exchange Act of 1934, as amended. When used, the words
"anticipate," "estimate," "should," "expect," "believe," "intend" and similar
expressions are intended to identify forward-looking statements. Such statements
are, by their nature, subject to certain risks and uncertainties. Among the
factors that could cause actual results to differ materially from those
projected are the following: business conditions and the general economy,
especially as they affect interest rates; business conditions, especially as
they affect value-oriented retailers in the Southeast; the federal, state and
local regulatory environment; availability of debt and equity capital with
favorable terms and conditions; availability of new development and acquisition
opportunities; changes in the financial condition or corporate strategy of the
Company's primary retail tenants and in particular Wal-Mart Stores, Inc. and
Lowe's Companies, Inc.; ability to complete and lease existing development
projects on schedule and within budget; and inability of the Company to maintain
its qualification as a REIT.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are cash generated from operating
activities and proceeds from construction loans, a secured line of credit (the
"Bank Credit Facility") and equity offerings. The Company's primary uses of
funds are development, redevelopment, expansion and acquisition of shopping
center properties, distributions to shareholders, scheduled debt amortization,
and capital improvements to its existing shopping center properties. The Company
generally uses funds provided by operations to fund its distributions to
shareholders, capital improvements to existing properties and scheduled
amortization of its indebtedness. The Company uses proceeds from its
construction loans, the Bank Credit Facility, and equity offerings to fund its
development, redevelopment, expansion and acquisition activities.
13
<PAGE>
The Company's total indebtedness as of September 30, 1996 consisted of the
following:
<TABLE>
<CAPTION>
Effective Percent
Principal Interest Maturity of Total
Balance Rate (1) Date Indebtedness
--------------- ------------- ------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Fixed Rate
- ----------
Term Debt $ 71,996 8.63% 29-Mar-01 44.9%
Mortgage note payable 6,585 6.88% 01-Dec-03 4.1%
--------------- ------------- ---------------
78,581 8.48% 49.0%
Floating Rate
- -------------
Bank Credit Facility 26,900 7.59% (2) 30-Jun-98 16.8%
Construction loan - Woodstock, Georgia 2,676 7.24% (3) 02-Aug-97 1.7%
Construction loan - Opelika, Alabama 1,552 7.23% (3) 05-Dec-97 1.0%
Construction loan - Greenville, North Carolina 13,957 6.98% (4) 23-Jan-99 8.7%
Construction loan - Cartersville, Georgia 17,562 6.94% (4) 28-Feb-98 10.9%
Construction loan - Newnan, Georgia 19,057 6.97% (4) 21-Aug-98 11.9%
--------------- ------------- ---------------
81,704 7.18% 51.0%
--------------- ------------- ---------------
$ 160,285 7.82% 100.0%
=============== ============= ===============
</TABLE>
Weighted average interest rates at September 30, 1996:
<TABLE>
<CAPTION>
Weighted
Average Weighted
Principal Effective Average
Balance Interest Rate Interest Rate (5)
--------------- ----------------- ---------------------
<S> <C> <C> <C>
Fixed rate debt $ 78,581 8.48% 6.76%
Hedged floating rate debt 50,000 7.94% 7.94%
Floating rate debt 31,704 7.53% 6.97%
--------------- ----------------- --------------------
Total debt $ 160,285 8.12% 7.17%
===============
</TABLE>
(1) Represents stated rate plus amortization of deferred loan costs. Excludes
effect of swap transaction.
(2) Stated rate of 30-day Eurodollar plus 1.50%
(3) Stated rate of LIBOR plus 1.75%
(4) Stated rate of LIBOR plus 1.50%
(5) Excludes the amortization of deferred loan costs
As of September 30, 1996, the Company had $4.2 million available under the
Bank Credit Facility and $3.9 million available under its construction loans. On
October 11, 1996, the Company added two properties to the Bank Credit Facility's
borrowing base which increased the amount available thereunder to $13.1 million.
During the second quarter of 1996, the Company negotiated a 50 basis point
reduction in the interest rate under its Bank Credit Facility. The new interest
rate is 150 basis points over the rate 30-day Eurodollar deposits, and the
Company may borrow under the Facility through June 30, 1998.
On July 10, 1996, the Company and Morgan Guaranty Trust Company of New York
("Morgan") entered into a swap transaction as hedge against increasing interest
rates on its floating rate debt. Under the terms of the agreement, the Company
pays a fixed interest rate of 6.44% and receives a variable interest rate equal
to the rate for the one-month LIBOR based on the following notional amounts.
14
<PAGE>
Notional Amount Period
--------------- ------
$50 million September 3, 1996 to September 30, 1996
$70 million October 1, 1996 to December 31, 1996
$80 million January 1, 1997 to January 2, 1998
The swap transaction effectively converts the base rate on a portion of the
Company's construction loans and Bank Credit Facility from a floating LIBOR rate
to a fixed rate of 6.44%. The Company intends to continuously monitor and
actively manage interest costs on its variable rate debt portfolio and may
increase or decrease its swap position based on market fluctuations.
Accordingly, the cost of obtaining such protection in relation to the Company's
access to capital markets will continue to be evaluated.
As of September 30, 1996, the Company had development activities underway
totaling approximately 1.3 million square feet of gross leasable area which the
Company expects to own. This development activity includes projects undertaken
by the Company directly, through Development Company, or through joint ventures
in which either the Company or Development Company participates directly or
indirectly (the "Joint Ventures"). Management expects completion of these
projects to have a positive effect on cash generated by operating activities.
Additional funding required for these projects is estimated to be $42.9 million.
As of September 30, 1996, the Company, Development Company and the Joint
Ventures had construction loans in place which are expected to fund $9.4 million
of these costs, and in October 1996, closed two construction loans which should
fund an additional $21.3 million of these costs. Management has a commitment
from a financial institution which should fund an additional $9.0 million of
these costs. Management expects to fund the remaining costs and the cost of any
future projects undertaken by the Company or Development Company with
construction loans from financial institutions and advances on its Bank Credit
Facility. If the Company is unable to fund future projects with construction
lending arrangements or advances on its Bank Credit Facility, it expects to seek
other sources of funding which may include, for example, joint ventures, public
or private placements of equity, or public or private placements of debt.
However, there can be no assurance that these sources will be available.
In order for the Company to continue to qualify as a REIT, it must annually
distribute to shareholders at least 95% of its taxable income. Management
believes that the Company will meet this requirement in 1996 with cash generated
by operating activities. In addition, management believes that cash generated by
operating activities will be adequate to fund improvements to the Company's
shopping center properties, leasing costs and scheduled debt amortization in
1996.
In order to meet the Company's long term liquidity requirements, management
anticipates that the Company's cash from operating activities will continue to
increase as a result of new developments, redevelopments, expansions,
acquisitions and improved operations at existing centers. These activities
should enable the Company to make its distribution payments to shareholders,
maintain and improve its properties, make scheduled debt payments, and obtain
debt or equity financing for its development, redevelopment and acquisition
projects. All of the Company's debt requires balloon payments in the future. The
Bank Credit Facility matures in 1998; the Term Debt matures in 2001;
construction loans totaling $54.8 million mature in 1997, 1998 and 1999; and a
note payable of $6.6 million matures in 2003. Management intends to refinance or
repay these loans with proceeds from other sources of capital at or prior to
their respective maturities. Management will evaluate various alternatives and
select the best options based on market conditions at the time. Management
expects to seek additional equity financing when market conditions are favorable
in order to maintain its debt-to-total-market-capitalization ratio within
acceptable limits. However, there can be no assurance that debt and equity
15
<PAGE>
markets will be favorable in the future, and unfavorable markets could limit the
Company's ability to grow its business or repay or refinance maturing debt.
INFLATION
The Company's leases generally contain provisions designed to mitigate the
adverse impact of inflation on net income. These provisions include clauses
enabling the Company to pass through to tenants certain operating costs,
including real estate taxes, common area maintenance, utilities and insurance,
thereby reducing the Company's exposure to increases in costs and operating
expenses resulting from inflation. Certain of the Company's leases contain
clauses enabling the Company to receive percentage rents based on tenants' gross
sales, which generally increase as prices rise, and, in certain cases,
escalation clauses, which generally increase rental rates during the terms of
the leases. In addition, many of the Company's non-anchor leases are for terms
of less than ten years, which permits the Company to seek increased rents upon
re-leasing at higher market rates.
16
<PAGE>
PART II
OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C>
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Swap Transaction between Morgan Guaranty Trust Company of
New York and JDN Realty Corporation dated July 10, 1996
27 Financial Data Schedule
(b) Reports on Form 8-K
None
</TABLE>
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
October 31, 1996 /s/ J. Donald Nichols
- ------------------------------------- -----------------------------------
(Date) J. Donald Nichols
Chief Executive Officer
October 31, 1996 /s/ William J. Kerley
- ------------------------------------- -----------------------------------
(Date) William J. Kerley
Chief Financial Officer
18
<PAGE>
EXHIBIT 10.1
SWAP TRANSACTION
Date: 10 July 1996
The purpose of this letter agreement is to confirm the terms and conditions of
the Swap Transaction entered into between:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
and
JDN REALTY CORPORATION
on the Trade Date and identified by the Morgan Deal Number specified below (the
"Swap Transaction"). This letter agreement constitutes a "Confirmation" as
referred to in the agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swap Dealers Association, Inc.) are incorporated
into this Confirmation. In the event of any inconsistency between those
definitions and provisions and this Confirmation, this Confirmation will govern.
Morgan Guaranty Trust Company of New York is, together with other Untied Kingdom
listed institutions, subject to the Bank of England's Code of Conduct. In
connection therewith, this and certain future wholesale money market
transactions will be outside the Financial Services Act but you will have the
benefit of the Code of Conduct.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement currently under negotiations, as amended and supplemented from
time to time (the "Agreement"), between Morgan Guaranty Trust Company of New
York ("Morgan") and JDN REALTY CORPORATION (the "Counterparty") All provisions
contained in the Agreement govern this Confirmation except as expressly modified
below.
2. The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:
Morgan Deal Number: 161215
Trade Date: 8 July 1996
Effective Date: 3 September 1996
1
<PAGE>
Termination Date: 2 January 1998
FIXED AMOUNTS:
Fixed Rate Payer: Counterparty
Notional Amount: SEE OUTSTANDING PRINCIPAL BALANCE SCHEDULE
Fixed Rate Payer Payment Dates: Monthly on day 1 starting with 1 October
1996 up to, and including, the Termination
Date, subject to adjustment in accordance
with the Modified Following Business Day
Convention and there will be an adjustment
to the Calculation Period .
Fixed Rate: 6.44000 percent
Fixed Rate Day Count Fraction: Actual/360
INITIAL STUB PERIOD:
From: 3 September 1996 To: 1 October 1996 (subject to adjustment in
accordance with the Modified Following
Business Day Convention)
Counterparty Fixed Rate: 6.44000 percent
FINAL STUB PAYMENT:
From: 1 December 1997 To: 2 January 1998
Counterparty Fixed Rate: 6.44000 percent
FLOATING AMOUNTS:
Floating Rate Payer: Morgan
Notional Amount: SEE OUTSTANDING PRINCIPAL BALANCE SCHEDULE
Floating Rate Payer Payment Dates: Monthly on day 1 starting with 1 October
1996 up to, and I including, the Termination
Date, subject to adjustment in accordance
with the Modified Following Business Day
Convention and there will be an adjustment
to the Calculation Period.
2
<PAGE>
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 1 Month
Floating Rate Day Count Fraction: Actual/360
Reset Dates: The first day of each Calculation Period.
Compounding: Inapplicable
INITIAL STUB PERIOD:
From: 3 September 1996 To: 1 October 1996 (subject to adjustment in
accordance with the Modified Following
Business Day Convention)
Morgan Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 1 Month
FINAL STUB PAYMENT:
From: 1 December 1997 To: 2 January 1998
Morgan Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 1 Month
Business Day Locations for
Counterparty: London, New York
Business Day Locations for Morgan: London, New York
Payments will be: Net
OUTSTANDING PRINCIPAL BALANCE SCHEDULE:
<TABLE>
<CAPTION>
Accrual Start Date: MORGAN PAYS ON COUNTERPARTY PAYS ON
OUTSTANDING NOTIONAL: OUTSTANDING NOTIONAL:
<S> <C> <C>
03-SEP-1996 50,000,000.00 USD 50,000,000.00 USD
01-OCT-1996 70,000,000.00 USD 70,000,000.00 USD
01-JAN-1997 80,000,000.00 USD 80,000,000.00 USD
</TABLE>
3
<PAGE>
3. Account Details
PAYMENTS TO MORGAN:
Account for payments in USD: Morgan Guaranty Trust Co. of New York
23 Wall Street
New York
Favour: Morgan Guaranty Trust Co. of New York -
London Office
ABA/Bank No.: 021000238
Account No.: 670 07 054
Reference: Further Credit to Swaps Group Account:
10005035
Please send MT100 cover cable to MGT
London
PAYMENTS TO COUNTERPARTY:
Account for payments in USD:
Favour: JDN REALTY CORPORATION
ABA/Bank No.:
Account No.:
Reference:
4. Offices
(a) The Office of Morgan for the Swap Transaction is LONDON; and
(b) The Office of the Counterparty for the Swap Transaction is ATLANTA.
ALL ENQUIRIES REGARDING PAYMENTS AND/OR RATE RESETTINGS ONLY SHOULD BE SENT TO:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
60 VICTORIA EMBANKMENT
LONDON, EC4Y 0JP
ATTENTION: JOANNE CASE
TELEPHONE: 44 1 71 325 3783
FACSIMILE: 44 1 71 325 3862/3863
TELEX: 896631 MGT G
CABLE: MORGANBANK
PLEASE QUOTE THE MORGAN DEAL NUMBER INDICATED ABOVE.
4
<PAGE>
ALL ENQUIRIES REGARDING CONFIRMATIONS SHOULD BE SENT TO:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
60 WALL STREET
NEW YORK, NEW YORK 10260
ATTENTION: WENDY WEBBE
DOCUMENTATION CONTROL GROUP
TELEPHONE: 1-212-648-6493
FACSIMILE: 1-212-648-5117
PLEASE QUOTE THE MORGAN DEAL NUMBER INDICATED ABOVE.
J P MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and will
have no obligations under Swap Transaction.
Each party represents that (i) it is entering into the transaction evidenced
hereby a principal (and not as agent or any other capacity); (ii) the other
party is not acting as a fiduciary for it; (iii) it is not relying upon any
representations except those expressly set forth in the Agreement or this
Confirmation; (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial, and accounting advisors to the extent it has
deemed necessary, and it has made its own investment, hedging, and trading
decisions based upon its own judgment and upon any advice from such advisors as
it has deemed necessary and not upon any view expressed by the other party; and
(v) it is entering into this transaction with a full understanding of the terms,
conditions, and risks thereof and it is capable of and willing to assume those
risks.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter, telex or facsimile substantially similar to this letter,
which letter, telex or facsimile sets forth the material terms of the Swap
Transaction to which this Confirmation relates and indicates agreement to those
terms. When referring to this Confirmation, please indicate: Morgan Deal
Number 161215.
Yours sincerely,
JP MORGAN SECURITIES INCORPORATED,
as Agent for and signing on behalf of:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By:
___________________________________
Name: Jason P. Manske
5
<PAGE>
Title: VP
Confirmed as of the
date first above written:
JDN REALTY CORPORATION
By:____________________________
Name: William J. Kerley
Title: Chief Financial Officer
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 8,158 8,158
<SECURITIES> 0 0
<RECEIVABLES> 2,087 2,087
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 300,769 300,769
<DEPRECIATION> 25,933 25,933
<TOTAL-ASSETS> 347,577 347,577
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 110 110
<OTHER-SE> 178,151 178,151
<TOTAL-LIABILITY-AND-EQUITY> 347,577 347,577
<SALES> 0 0
<TOTAL-REVENUES> 9,159 26,757
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 3,858 11,378
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,349 4,133
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,311 12,084
<EPS-PRIMARY> .39 1.12
<EPS-DILUTED> 0 0
</TABLE>
