<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________.
Commission file number 1-12844
--------------
JDN REALTY CORPORATION
----------------------
(Exact name of registrant as specified in its charter)
Maryland 58-1468053
- --------------------------- ------------------------------------
(State of Jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3340 Peachtree Road, NE, Suite 1530, Atlanta, GA 30326
-------------------------------------------------------
(Address of principal executive offices - zip code)
(404) 262-3252
--------------
(Registrant's telephone number, including area code)
Not applicable
--------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- --------
As of April 25, 1997, 15,457,886 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Page No.
--------
Condensed Consolidated Balance Sheets - March 31, 1997 and
December 31, 1996 2
Condensed Consolidated Statements of Income - Three Months Ended
March 31, 1997 and 1996 3
Condensed Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5
1
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
<S> <C> <C>
(Unaudited)
(In thousands)
ASSETS
Shopping center properties, at cost:
Land $ 52,321 $ 50,455
Buildings and improvements 273,916 262,568
Property under development 30,117 19,646
-------------- --------------
356,354 332,669
Less: accumulated depreciation and amortization (30,151) (27,973)
-------------- --------------
Shopping center properties, net 326,203 304,696
Cash and cash equivalents 697 2,709
Restricted cash - escrow 2,456 3,659
Rents receivable 1,809 2,208
Investments in and advances to unconsolidated entities 46,109 41,253
Deferred costs, net of amortization 5,839 6,181
Other assets 11,428 11,280
-------------- --------------
$ 394,541 $ 371,986
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage notes payable $ 101,316 $ 141,882
Accounts payable and accrued expenses 1,424 1,264
Other liabilities 1,282 2,301
-------------- --------------
Total Liabilities 104,022 145,447
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 15,457,886 and 13,056,054 shares
in 1997 and 1996, respectively 155 131
Paid-in capital 297,453 233,497
Accumulated deficit (7,089) (7,089)
-------------- --------------
Total Shareholders' Equity 290,519 226,539
-------------- --------------
$ 394,541 $ 371,986
============= =============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
------------ -----------
(In thousands)
<S> <C> <C>
Revenues:
Minimum and percentage rents $ 9,352 $ 7,799
Recoveries from tenants 895 842
Other revenue 32 47
---------- ----------
Total revenues 10,279 8,688
Operating expenses:
Operating and maintenance 677 607
Real estate taxes 485 464
General and administrative 953 737
Depreciation and amortization 2,220 1,857
---------- ----------
Total operating expenses 4,335 3,665
---------- ----------
Income from operations 5,944 5,023
Other income (expense):
Interest expense (1,446) (1,553)
Other income, net 284 28
Equity in net income of unconsolidated entities 721 120
---------- ----------
Net income $ 5,503 $ 3,618
========== ==========
Net income per share $ 0.40 $ 0.35
========== ==========
Weighted average shares outstanding 13,617 10,386
========== ==========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
--------------- ---------------
(In thousands)
<S> <C> <C>
Net cash provided by operating activities $ 7,653 $ 7,017
Cash flows from investing activities:
Development of shopping center properties (10,975) (6,541)
Improvements to shopping center properties (247) (231)
Purchase of shopping center properties (5,203) -
Investments in and advances to unconsolidated entities (4,856) (7,783)
Other (184) (239)
---------- ----------
Net cash used in investing activities (21,465) (14,794)
Cash flows from financing activities:
Proceeds from mortgages and notes payable 16,424 13,226
Principal payments on mortgages and notes payable (64,250) (22,094)
Deferred financing costs (53) (23)
Increase (decrease) in restricted cash for debt escrow 1,203 (580)
Proceeds from issuance of common shares, net of
underwriting commissions and offering expenses 65,787 21,780
Dividends paid (7,311) (4,555)
---------- ----------
Net cash provided by financing activities 11,800 7,754
---------- ----------
Decrease in cash and cash equivalents (2,012) (23)
Cash and cash equivalents, beginning of period 2,709 3,109
---------- ----------
Cash and cash equivalents, end of period $ 697 $ 3,086
========== ==========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
JDN REALTY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997
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 March 31, 1997, the Company owned and operated, either
directly or through affiliated entities or joint ventures, a total of 53
shopping center properties and had 12 projects under construction. The Company
is operating as a real estate investment trust ("REIT") for federal income tax
purposes.
The Company owns an interest in JDN Development Company, Inc. ("Development
Company"), which 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 March 31, 1997, the
Company had invested $6.1 million in Development Company in the form of equity
capital, $25.2 million in the form of secured notes receivable and $9.9 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 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, 1996 has been
derived from the audited consolidated financial statements at that date.
Operating results for the three month period ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997 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, 1996.
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"). 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.
5
<PAGE>
Earnings Per Share. Net income per share for the three months ended March
31, 1997 and 1996 is based on the weighted average number of common shares
outstanding during the respective periods.
New Accounting Standard. In April 1997, the Financial Accounting Standards
Board issued Statement No. 128, Earnings Per Share and Disclosure of Information
About Capital Structure (the "New Standard"). The New Standard replaces APB
Opinion No. 15, Earnings Per Share, and among other things eliminates "primary"
earnings per share and requires the presentation of "basic" earnings per share,
which excludes from consideration common stock equivalents. The Company will
adopt the New Standard in the first quarter of 1998, and based on current
circumstances, does not believe the effect of adoption will be material.
Reclassifications. Certain amounts as previously reported have been
reclassified to conform to the current period's presentation.
4. DISTRIBUTION
On February 27, 1997, the Company's Board of Directors declared a cash
distribution of $.475 per share payable March 31, 1997 to shareholders of record
on March 21, 1997.
5. SWAP TRANSACTION
During 1996, the Company and Morgan Guaranty Trust Company of New York
("Morgan") entered into a swap transaction as a hedge against increasing rates
on floating rate debt. Under the initial terms of the agreement, the Company
paid a fixed rate of 6.44% and received a variable rate equal to the rate for
the one-month LIBOR rate based on the notional amount in the contract. As of
December 31, 1996, the notional amount was $70 million; on January 1, 1997, the
notional amount increased to $80 million. On February 12, 1997, the Company
amended the terms of the swap transaction by reducing the notional amount to $50
million, increasing the fixed rate the Company pays to 6.48% and extending the
maturity date to January 1, 2001. The Company records net amounts received or
paid under this contract as adjustments to interest expense.
6. COMMON STOCK OFFERING
On March 11, 1997, the Company completed a public offering of 2,400,000
shares of common stock which netted proceeds of approximately $65.8 million to
the Company. The Company used the proceeds from this offering to repay
construction loans and amounts outstanding under its secured line of credit.
7. ACQUISITIONS
On February 26, 1997, the Company acquired a shopping center in Jackson,
Mississippi containing 108,043 square feet of gross leasable area for
approximately $9.1 million, $7.3 million of which represents the assumption of
indebtedness. On March 25, 1997, the Company acquired a shopping center in South
Boston, Virginia containing 77,530 square feet of gross leasable area for
approximately $3.4 million.
6
<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 March 31, 1997, the Company owned and operated, either
directly or through affiliated entities or joint ventures, a total of 53
shopping center properties and had 12 projects under construction. The Company
is operating as a real estate investment trust ("REIT") for federal income tax
purposes.
The Company owns an interest in JDN Development Company, Inc. ("Development
Company"), which 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 March 31, 1997, the
Company had invested $6.1 million in Development Company in the form of equity
capital, $25.2 million in the form of secured notes receivable and $9.9 million
in the form of unsecured advances.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 1997 to the Three Months Ended
March 31, 1996
Minimum and percentage rents increased $1.6 million or 20% to $9.4 million
for the three months ended March 31, 1997 as compared to the same period in
1996. Of this increase, $1.2 million relates to newly developed and redeveloped
properties and $318,000 relates to three properties acquired in Decatur, Alabama
in December 1996, Jackson, Mississippi in February 1997, and South Boston,
Virginia in March 1997 (the "Acquisition Properties"). The remaining increase
relates to higher rental revenues at existing properties.
Recoveries from tenants increased $53,000 or 6% to $895,000 between
periods. Of this increase, $57,000 relates to newly developed and redeveloped
properties and $26,000 relates to the Acquisition Properties. These increases
are offset by a $30,000 reduction due to a decrease in recoverable expenses at
existing properties.
Other revenue decreased $15,000 or 32% between periods. This decrease is
the result of a reduction in revenues associated with managing and leasing fewer
properties for third party owners.
Operating and maintenance expenses increased $70,000 or 12% between
periods. Of this increase, $53,000 relates to newly developed and redeveloped
properties and $28,000 relates to the Acquisition Properties, offset by an
$11,000 decrease related to existing properties.
Real estate taxes increased $21,000 or 5% to $485,000 for the three months
ended March 31, 1997 from $464,000 for the same period in 1996. Of this
7
<PAGE>
increase, $17,000 relates to the property taxes associated with newly developed
and redeveloped properties and $22,000 relates to the Acquisition Properties.
These increases are offset by a decrease in property taxes at the existing
properties due primarily to the separate tax platting of an anchor tenant tract.
General and administrative expenses increased $216,000 or 29% 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 and higher public company costs.
Depreciation and amortization expense increased $363,000 or 20% between
periods. Of this increase, $253,000 relates to newly developed and redeveloped
properties and $67,000 relates to the Acquisition Properties. The remaining
increase relates primarily to amortization of tenant improvements, tenant
allowances and leasing commissions for new tenants and to amortization of
leasehold improvements and depreciation of furniture and fixtures at the
Company's corporate offices.
Interest expense decreased $107,000 or 7% between periods due primarily to
a decrease in average debt balances resulting from equity offerings in 1996 and
1997.
Other income increased $256,000 between periods due primarily to interest
income earned on a $10.5 million mortgage note receivable purchased in December
1996.
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. The increase of $601,000
between periods is due primarily to the operations of newly developed properties
in Asheville, North Carolina; Loganville, Georgia; Steubenville, Ohio; Conyers,
Georgia; and Warner Robins, Georgia and to increased land sales activity by
Development Company.
Funds From Operations
Funds from operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts, Inc. to mean net income, computed in accordance
with generally accepted accounting principles, excluding gains or losses from
debt restructuring and sales of property, plus depreciation and amortization of
real estate assets, and after adjustments for unconsolidated partnerships and
joint ventures. The Company generally considers FFO a widely used and
appropriate measure of performance for an equity REIT which provides a relevant
basis for comparison among REITs. The Company's method of calculating FFO may
be different from methods used by other REITs and, accordingly, may not be
comparable to such other REITs. FFO does not represent cash flows from
operations as defined by generally accepted accounting principles, should not be
considered an alternative to net income as an indicator of operating performance
and is not indicative of cash available to fund all cash flow needs. The
Company has presented below the calculation of FFO for the periods indicated:
8
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands except per share data) Three Months Ended March 31,
1997 1996
------------ ------------
<S> <C> <C>
Net income $ 5,503 $ 3,618
Depreciation of real estate assets 2,082 1,747
Amortization of tenant allowances and tenant improvements 32 29
Amortization of deferred leasing commissions 64 59
Net loss on real estate sales - 15
Extraordinary items - -
Depreciation of real estate assets held in
unconsolidated entities 194 16
----------- -----------
FFO $ 7,875 $ 5,484
=========== ===========
</TABLE>
Occupancy
The Company's properties were 98.0% leased as of March 31, 1997.
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,
statements which are not historical in nature including 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; 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 and Lowe's ability to complete and lease
existing development and redevelopment projects on schedule and within budget;
and inability of the Company to maintain its qualification as a REIT. Other
risks, uncertainties and factors that could cause actual results to differ
materially than those projected are detailed from time to time in reports filed
by the Company with the Securities and Exchange Commission, including Forms 8-K,
10-Q and 10-K.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are cash generated from operating
activities and proceeds from construction loans, lines of credit and equity
offerings. The Company's primary uses of funds are development, redevelopment
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 cash 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 and its line of credit to finance its
development, redevelopment and acquisition activities. The Company uses
proceeds from equity offerings to repay construction loans, amounts outstanding
under its line of credit and to fund its ongoing development, redevelopment and
acquisition activities.
9
<PAGE>
In March 1997, the Company completed a public offering of 2,400,000 shares
of common stock which netted proceeds of approximately $65.8 million to the
Company. The Company used the proceeds from this offering to repay construction
loans and amounts outstanding under its $40 million secured line of credit (the
"Bank Credit Facility"). As a result of this offering, the Company's debt to
total market capitalization ratio declined from 28.2% as of December 31, 1996 to
19.5% as of March 31, 1997. Management believes that this lower leverage
enables the Company to borrow more competitively and increases its flexibility
in the financing of its development, redevelopment and acquisition activities
with debt and equity securities.
The Company's total indebtedness as of March 31, 1997 consisted of the
following:
<TABLE>
<CAPTION>
Percent
Principal Interest Maturity of Total
Balance Rate Date Indebtedness
------------ ---------- ----------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Fixed Rate
Term Debt $ 71,543 8.64%(1) 29-Mar-01 70.6%
Mortgage note payable - Richmond, Kentucky 6,523 7.38% 01-Dec-03 6.4%
Mortgage note payable - Jackson, Mississippi 7,250 9.25% 01-Mar-17 7.2%
---------- --------- ----------
85,316 8.59% 84.2%
Floating Rate
Bank Credit Facility 16,000 7.55%(2) 30-Jun-98 15.8%
---------- --------- ----------
16,000 7.55% 15.8%
---------- --------- ----------
$ 101,316 8.43% 100.0%
========== ========= =========
</TABLE>
WEIGHTED AVERAGE INTEREST RATES:
<TABLE>
<CAPTION>
Weighted Weighted
Principal Average Average
Balance Interest Rate (3) Interest Rate (4)
---------------- --------------- -----------------
<S> <C> <C> <C>
Fixed Rate Debt $ 85,316 8.59% 7.01%
Hedged Floating Rate Debt 16,000 9.50% 7.98%
---------------- --------------- -----------------
Total Debt $ 101,316 8.74% 7.16%
================ =============== =================
</TABLE>
(1) Represents stated rate plus amortization of deferred loan costs.
(2) Stated rate of 30-day Eurodollar plus 1.50%.
(3) Interest when the amortization of deferred loan costs is included.
(4) Interest when the amortization of deferred loan costs is excluded.
As of March 31, 1997, the Company had $24.0 million available under the
Bank Credit Facility.
In March 1997, the Company entered into a commitment letter with a bank for
a $150 million unsecured line of credit (the "Unsecured Line") which is intended
to replace the Bank Credit Facility. Borrowings under the Unsecured Line are
currently expected to initially bear interest at LIBOR plus 1.40%. The interest
rate under the Unsecured Line is currently expected to decrease if the Company
receives an investment grade rating from Moody's and Standard & Poor's rating
agencies. The Company expects to close the Unsecured Line by May 15, 1997;
however, there can be no assurance that the Unsecured Line will close and the
inability to close or a delay in closing could have an adverse effect on the
Company's ability to fund its development and acquisition activities.
10
<PAGE>
During 1996, the Company and Morgan Guaranty Trust Company of New York
("Morgan") entered into a swap transaction as a hedge against increasing rates
on its floating rate debt. Under the initial terms of the agreement, the
Company paid a fixed rate of 6.44% and received a variable rate equal to the
rate for the one-month LIBOR rate based on the notional amount in the contract.
As of December 31, 1996, the notional amount was $70 million; on January 1,
1997, the notional amount increased to $80 million. On February 12, 1997, the
Company amended the terms of the swap transaction by reducing the notional
amount to $50 million, increasing the fixed rate the Company pays to 6.48% and
extending the maturity date to January 1, 2001.
As of March 31, 1997, the Company had development activities underway
totaling approximately 1.8 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 $57.5 million.
As of March 31, 1997, the Company, Development Company and the Joint Ventures
had construction loans in place which are expected to fund $12.5 million of
these costs. Management has a commitment from a financial institution which
should fund an additional $21.0 million on these projects. 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 or the Unsecured Line. If
the Company is unable to fund future projects with construction lending
arrangements, advances on its Bank Credit Facility or the Unsecured Line, 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 1997 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
1997.
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; a note
payable of $6.5 million matures in 2003; and a note payable of $7.3 million
matures in 2017. 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.
Management also expects to seek debt financing in the next 12 months if market
conditions are favorable in order to repay the Term Debt. However, there can be
no assurance that debt and equity 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.
11
<PAGE>
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.
12
<PAGE>
PART II
OTHER INFORMATION
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
27 Financial Data Schedule
(b) Reports on Form 8-K
During the three months ended March 31, 1997, the Company filed
the following reports on Form 8-K:
(i) Form 8-K dated March 3, 1997 containing the following:
(1) Supplemental Information package as of December 31,
1996 and for the three months and year then ended
relating to financial and operational data of the
Company.
(2) Press Release announcing the declaration of cash
dividend for the quarter ended March 31, 1997.
(ii) Form 8-K dated March 12, 1997, related to the Company's
execution of an Underwriting Agreement dated March 5, 1997
with Merrill Lynch and Co. and A.G. Edwards & Sons, Inc.
(the "Underwriter") in connection with the sale by the
Company to the Underwriters of 2,400,000 shares of the
Company's common stock at a price of $29.00 per share, which
closed March 11, 1997.
(iii) Form 8-K dated March 25, 1997 containing cautionary
statements for purposes of the Private Securities Litigation
Reform Act of 1995 and certain Federal income tax and ERISA
considerations.
13
<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.
April 28, 1997 /s/ J. Donald Nichols
- ----------------------------------- -----------------------------------
(Date) J. Donald Nichols
Chief Executive Officer
April 28, 1997 /s/ William J. Kerley
- ----------------------------------- -----------------------------------
(Date) William J. Kerley
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 MAR-31-1996
<CASH> 697 2,709
<SECURITIES> 0 0
<RECEIVABLES> 1,809 2,208
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 356,354 332,669
<DEPRECIATION> 30,151 27,973
<TOTAL-ASSETS> 394,541 371,986
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 155 131
<OTHER-SE> 290,364 226,408
<TOTAL-LIABILITY-AND-EQUITY> 394,541 371,986
<SALES> 0 0
<TOTAL-REVENUES> 10,279 8,688
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 4,335 3,665
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,446 1,553
<INCOME-PRETAX> 5,503 3,618
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 5,503 3,618
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,503 3,618
<EPS-PRIMARY> 0.40 0.35
<EPS-DILUTED> 0 0
</TABLE>
