<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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
------------ -------------
Commission file number 1-12844 .
------------------------
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)
359 East Paces Ferry Road, NE, Suite 400, Atlanta, GA 30305
------------------------------------------------------------
(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 24, 1998, 20,652,233 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Page No.
--------
Condensed Consolidated Balance Sheets March 31, 1998 and December 31, 1997 2
Condensed Consolidated Statements of Income - Three Months Ended March 31,
1998 and 1997 3
Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31,
1998 and 1997 4
Notes to Condensed Consolidated Financial Statements 5
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1998 1997
-------------- --------------
(Unaudited)
(In thousands)
ASSETS
Shopping center properties, at cost:
Land $ 102,019 $ 85,837
Buildings and improvements 477,434 397,110
Property under development 67,216 52,356
-------------- --------------
646,669 535,303
Less: accumulated depreciation and amortization (41,719) (38,306)
-------------- --------------
Shopping center properties, net 604,950 496,997
Cash and cash equivalents - 11,439
Rents receivable 4,373 2,745
Investments in and advances to unconsolidated entities 113,000 71,221
Deferred costs, net of amortization 4,505 4,189
Other assets 3,734 13,162
-------------- --------------
$ 730,562 $ 599,753
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Unsecured notes payable $ 234,526 $ 159,511
Unsecured line of credit 23,000 43,500
Mortgage notes payable 18,892 13,591
Accounts payable and accrued expenses 4,264 6,719
Other liabilities 8,427 4,844
-------------- --------------
Total Liabilities 289,109 228,165
Third party investors' interest 3,029 -
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 20,652,233 and 18,497,227 shares
in 1998 and 1997, respectively 207 185
Paid-in capital 445,306 378,492
Accumulated deficit (7,089) (7,089)
-------------- --------------
Total Shareholders' Equity 438,424 371,588
-------------- --------------
$ 730,562 $ 599,753
============= =============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<S> <C> <C>
Three Months Ended March 31,
1998 1997
-------------- --------------
(In thousands)
Revenues:
Minimum and percentage rents $ 15,317 $ 9,352
Recoveries from tenants 1,668 895
Other revenue 61 32
-------------- --------------
Total revenues 17,046 10,279
Operating expenses:
Operating and maintenance 1,161 677
Real estate taxes 924 485
General and administrative 1,526 953
Depreciation and amortization 3,499 2,220
-------------- --------------
Total operating expenses 7,110 4,335
-------------- --------------
Income from operations 9,936 5,944
Other income (expense):
Interest expense, net (1,812) (1,393)
Other income, net 161 284
Equity in net income of unconsolidated entities 856 668
-------------- --------------
Income before minority interest in net income
of consolidated subsidiary 9,141 5,503
Minority interest in net income of consolidated subsidiary (29) -
-------------- --------------
Net income $ 9,112 $ 5,503
============= =============
Net Income per share:
Basic $ 0.47 $ 0.40
============= =============
Diluted $ 0.46 $ 0.40
============= =============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
</TABLE>
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
--------- --------
(In thousands)
<S> <C> <C>
Net cash provided by operating activities $ 8,633 $ 7,653
Cash flows from investing activities:
Development of shopping center properties (28,615) (10,975)
Improvements to shopping center properties (634) (247)
Purchase of shopping center properties (62,785) (5,203)
Investments in and advances to unconsolidated entities (41,779) (4,856)
Other - (184)
--------- --------
Net cash used in investing activities (133,813) (21,465)
Cash flows from financing activities:
Proceeds from unsecured line of credit 105,500 -
Proceeds from mortgages and notes payable 16,424
Proceeds from issuance of notes payable 76,548 -
Principal payments on unsecured line of credit (126,000)
Principal payments on mortgage notes payable (68) (64,250)
Proceeds from issuance of common shares, net of
underwriting commissions and offering expenses 67,827 65,787
Dividends paid (10,104) (7,311)
Other - 1,150
--------- --------
Net cash provided by financing activities 113,703 11,800
--------- --------
Decrease in cash and cash equivalents (11,477) (2,012)
Cash and cash equivalents, beginning of period 11,477 2,709
--------- --------
Cash and cash equivalents, end of period $ - $ 697
========= ========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
JDN REALTY CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1998
1. THE COMPANY
JDN Realty Corporation (the "Company") is a real estate development company
which specializes in the development and asset management of retail shopping
centers anchored by value-oriented retailers. As of March 31, 1998, the Company
owned and operated, either directly or through affiliated entities or a joint
venture, a total of 79 shopping center properties and had 36 projects under
construction. The Company has elected to be treated 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. As of March 31, 1998, the
Company had invested $8.7 million in Development Company in the form of equity
capital, $75.5 million in the form of secured notes receivable and $28.8 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, 1997 has been
derived from the audited consolidated financial statements at that date.
Operating results for the three month period ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998 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, 1997.
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, as amended (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. In 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings Per Share ("Statement 128"). Statement 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is similar to the previously
reported fully diluted earnings per share. Earnings per share amounts have been
presented and, where appropriate, restated to conform to the Statement 128
requirements.
Reclassifications. Certain amounts as previously reported have been
reclassified to conform to the current period's presentation.
4. DISTRIBUTION
On February 27, 1998, the Company's Board of Directors declared a cash
distribution of $0.50 to shareholders of record on March 20, 1998. This
distribution was paid on March 31, 1998.
5. OFFERINGS OF COMMON STOCK
During the quarter ended March 31, 1998, the Company issued 2,076,754
shares of its common stock in three public offerings, which netted proceeds to
the Company of approximately $66.2 million.
6. MEDIUM-TERM NOTES PROGRAM
In February 1998, the Company entered into a Distribution Agreement with a
group of agents led by Merrill Lynch, Pierce, Fenner & Smith, Incorporated
("Merrill Lynch") relating to the proposed issue and sale from time to time of
up to $505.5 million of the Company's Medium-Term Notes Due Nine Months or More
From the Date of Issue (the "Medium-Term Notes Program"). The aggregate
offering under the Medium-Term Notes Program is subject to reduction as a result
of the sale by the Company of other securities described in its Prospectus dated
October 30, 1997. As of March 31, 1998, the Company had $362.4 million
registered and available for issue under the Medium-Term Notes Program.
7. MANDATORY PAR PUT REMARKED SECURITIES OFFERING
On March 31, 1998, the Company issued $75.0 million of 6.918% MandatOry Par
Put Remarketed Securities (the "MOPPRS"). The net proceeds from the MOPPRS were
used to reduce amounts outstanding under the Company's unsecured line of credit.
In connection with this issuance, Merrill Lynch purchased an option to remarket
the MOPPRS on March 31, 2003. The Company's effective borrowing rate on the
MOPPRS is 6.51%.
6
<PAGE>
8. ACQUISITIONS
During the quarter ended March 31, 1998, the Company acquired eight
shopping center properties from three third-party sellers who's the prices of
which aggregated $79.3 million. Information on these acquisitions is as
follows:
<TABLE>
<CAPTION>
Leasable
Acquisition Square Purchase
Location Date Feet Price
-------- ----------- -------- ---------
<S> <C> <C> <C>
Milwaukee, WI 02/04/98 383,967 $13,262,000
Milwaukee, WI 02/04/98 190,142 10,706,000
Milwaukee, WI 02/04/98 143,454 11,937,000
Milwaukee, WI 02/04/98 217,093 16,527,000
Milwaukee, WI 02/04/98 160,533 6,081,000
Fayetteville, NC 02/23/98 204,291 12,870,000
Antioch, TN 03/31/98 51,533 3,538,000
Franklin, TN 03/31/98 54,411 4,412,000
--------- -----------
1,405,424 $79,333,000
========= ===========
</TABLE>
In conjunction with the purchase of the five Milwaukee, Wisconsin
properties noted above, the Company assumed indebtedness of $5.4 million and
sponsored a limited partnership that issued limited partnership units valued at
$3.0 million in a limited partnership formed to own and operate one of the
shopping center properties. Subject to certain conditions, the limited
partnership units are exchangeable for cash or 93,023 shares of the Company's
common stock beginning in February 1999.
9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands except per share data):
<TABLE>
<CAPTION>
<S> <C> <C>
Three months ended March 31,
1998 1997
- -----------------------------------------------------------------------------------------------
Numerator:
Net income $ 9,112 $ 5,503
==========================================
Denominator:
Weighted-average shares outstanding 19,259 13,617
Unvested Restricted stock outstanding (10) -
------------------------------------------
Denominator for basic earnings per share 19,249 13,617
Dilutive effect of stock options and
restricted stock 365 205
------------------------------------------
Denominator for diluted earnings per share 19,614 13,822
==========================================
Net income per share:
Basic $ 0.47 $ 0.40
==========================================
Diluted $ 0.46 $ 0.40
==========================================
</TABLE>
As stated in Note 8 above, the Company has sponsored a limited partnership
that issued limited partnership units convertible into 93,023 shares of the
Company's common stock. Using the "if-converted"
7
<PAGE>
method, the effect of these units is antidilutive; therefore, they have been
excluded from the computation of earnings per share.
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 development
company, which specializes in the development and asset management of retail
shopping centers anchored by value-oriented retailers. As of March 31, 1998,
the Company owned and operated, either directly or through affiliated entities
or a joint venture, a total of 79 shopping center properties and had 36 projects
under construction. The Company has elected to be treated 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 or the purchase, redevelopment
and sale of an existing real estate property. As of March 31, 1998, the Company
had invested $8.7 million in Development Company in the form of equity capital,
$75.5 million in the form of secured notes receivable and $28.8 million in the
form of unsecured advances.
Results of Operations
Comparison of the Three Months Ended March 31, 1998 to the Three Months Ended
March 31, 1997
Minimum and percentage rents increased $6.0 million or 63.8% to $15.3
million for the three months ended March 31, 1998 from $9.3 million for the same
period in 1997. During 1998 and 1997, the Company began operations of 1.7
million square feet from 20 properties which it developed (the "Development
Properties"). Minimum and percentage rents increased $2.8 million for the three
months ended March 31, 1998 over the same period in 1997 due to Development
Properties. During 1998 and 1997, the Company acquired 16 shopping center
properties from unrelated third parties totaling 2.2 million square feet of
gross leasable area. In addition, during 1997, the Company acquired
unaffiliated joint venture partners interests in the limited liability companies
which owned the Asheville, North Carolina and Loganville, Georgia properties and
changed its accounting for these two properties from the equity method to the
consolidated method. Minimum and percentage rents increased $2.9 million for
the three months ended March 31, 1998 over the same period in 1997 due to the
operations of the 18 properties noted above (collectively, the "Acquisition
Properties"). The remaining increase relates to higher rental revenues at
existing properties.
Recoveries from tenants increased $773,000 or 86.4% to $1.7 million for the
three months ended March 31, 1998 from $895,000 for the same period in 1997. Of
this increase, $122,000 relates to the Development Properties and $621,000
relates to the Acquisition Properties. The remaining increase relates to an
increase in recoverable expenses at existing properties.
9
<PAGE>
Other revenue increased $29,000 or 90.6% to $61,000 for the three months
ended March 31, 1998 from $32,000 for the same period in 1997. This increase is
the result of an increase in leasing commissions associated with properties
managed for third-party owners.
Operating and maintenance expenses increased $484,000 or 71.5% to $1.2
million for the three months ended March 31, 1998 from $677,000 for the same
period in 1997. Of this increase, $31,000 relates to the Development Properties
and $400,000 relates to the Acquisition Properties. The remaining increase
relates to increased expenses at the existing properties.
Real estate taxes increased $439,000 or 90.5% to $924,000 for the three
months ended March 31, 1998 from $485,000 for the same period in 1997. Of this
increase, $93,000 relates to the Development Properties and $290,000 relates to
the Acquisition Properties. The remaining increase relates to increased taxes
at the existing properties.
General and administrative expenses increased $573,000 or 60.1% to $1.5
million for the three months ended March 31, 1998 from $953,000 for the same
period in 1997. General and administrative expenses as a percent of minimum and
percentage rents decreased to 10.0% for the three months ended March 31, 1998
from 10.2% for the same period in 1997. The increase in absolute dollars
primarily reflects the cost of additional employees and other expenses
associated with the increased number of properties owned and operated by the
Company.
Depreciation and amortization expense increased $1.3 million or 57.6% to
$3.5 million for the three months ended March 31, 1998 from $2.2 million for the
same period in 1997. Of this increase, $610,000 relates to the Development
Properties and $628,000 relates to the Acquisition Properties. The remaining
increase relates primarily to the amortization of tenant improvements, tenant
allowances and leasing commissions for new tenants at the existing properties
and to the amortization of leasehold improvements and depreciation of furniture
and fixtures at the Company's corporate offices.
Interest expense, net of capitalized amounts, increased $419,000 or 30.1%
to $1.8 million for the three months ended March 31, 1998 from $1.4 million for
the same period in 1997. This increase is due primarily to an increase in
average debt balances between 1998 and 1997.
Other income decreased $123,000 or 43.3% to $161,000 for the three months
ended March 31, 1998 from $284,000 for the same period in 1997. The decrease is
primarily attributable to the decreased interest income associated with the
cancellation of a $10.5 million mortgage note receivable in February 1998.
Equity in net income of unconsolidated entities increased $188,000 or 28.1%
to $856,000 for the three months ended March 31, 1998 from $668,000 for the same
period in 1997. This increase is due primarily to the operations of recently
developed properties operated by Development Company and an affiliated entity,
third party development fees earned by Development Company and land sales by the
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 principles ("GAAP"), 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
10
<PAGE>
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 provided by
operating activities as defined by GAAP should not be considered an alternative
to net income (determined in accordance with GAAP) as an indication of operating
performance and is not indicative of cash available to fund all cash flow needs,
including the Company's ability to make cash distributions. The Company has
presented below the calculation of FFO for the periods indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
(Dollars in thousands) Three Months Ended March 31,
1998 1997
---------- -----------
Net income $ 9,112 $ 5,503
Depreciation of real estate assets 3,320 2,082
Amortization of tenant allowances and tenant improvements 40 32
Amortization of deferred leasing commissions 54 64
Adjustments related to activities in unconsolidated entities 165 194
---------- -----------
FFO $ 12,691 $ 7,875
========= ==========
</TABLE>
Leasing and Property Information
As of March 31, 1998, Wal-Mart, Lowe's and Kroger represented 16.2%, 13.6%
and 5.2%, respectively, of the combined annualized base rent of the Company,
Development Company and an affiliated entity. In addition, at that date, anchor
tenants represented 70.4% of combined annualized base rent and national and
regional tenants represented 85.5% of combined annualized base rent. As of March
31, 1998, properties owned and operated by the Company, Development Company, and
an affiliated entity were 97.3% leased.
On a same property basis, net operating income increased 1.0% between the
three months ended March 31, 1998 and 1997. Net operating income represents
property revenues less property expenses excluding interest expense,
depreciation and amortization.
As of March 31, 1998, the Company, Development Company and an affiliated
entity operated in 13 states, and 42.6%, 17.4%, and 9.6% of combined annualized
base rent was represented by shopping center properties located in Georgia,
North Carolina and Tennessee, respectively.
Forward-Looking Statements
Management has included herein 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
11
<PAGE>
are the following: business conditions and the general economy, especially as
they affect interest rates and 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
Historically, the Company's primary sources of funds are cash provided by
operating activities and proceeds from lines of credit, debt offerings and
equity offerings. The Company's primary uses of funds have been 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 has used cash
provided by operating activities to fund its distributions to shareholders,
capital improvements to existing properties and scheduled debt amortization.
The Company has used proceeds from its lines of credit to finance its
development, redevelopment and acquisition activities. The Company has used
proceeds from debt and equity offerings to repay outstanding indebtedness and to
fund its ongoing development, redevelopment and acquisition activities.
In the first quarter of 1998, the Company acquired eight shopping center
properties from three third-party sellers will purchase prices of which
aggregated $79.3 million. The Company funded these acquisitions with advances
on its $150.0 million unsecured line of credit with a bank (the "Unsecured Line
of Credit") in the amount of approximately $60.4 million, assumption of
indebtedness of $5.4 million, issuance of limited partnership units valued at
$3.0 million in a limited partnership formed to own and operate one of the
shopping center properties and cancellation of a $10.5 million mortgage loan
receivable from the seller of one of the shopping center properties.
As a result of the acquisition activity and continued development activity
in the first quarter of 1998, the Company closed four public capital markets
transactions in the first quarter of 1998. In February and March 1998, the
Company issued an aggregate of 2,076,754 shares of its common stock in three
public offerings, which netted proceeds to the Company of approximately $66.2
million. The net proceeds from these offerings were used to reduce amounts
outstanding on the Unsecured Line of Credit. On March 31, 1998, the Company
issued $75.0 million of 6.918% MandatOry Par Put Remarketed Securitiessm (the
"MOPPRS"). The net proceeds from the MOPPRS were used to reduce amounts
outstanding under the Unsecured Line of Credit. In connection with this
issuance, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
purchased an option to remarket the MOPPRS on March 31, 2003. The Company's
effective borrowing rate on the MOPPRS is 6.51%.
In addition, in February 1998, the Company entered into a Distribution
Agreement with a group of agents led by Merrill Lynch relating to the proposed
issue and sale from time to time of up to $505.5 million of the Company's
Medium-Term Notes Due Nine Months or More From the Date of Issue (the "Medium-
Term Notes Program"). The aggregate offering under the Medium-Term Notes
Program is subject to reduction as a result of the sale by the Company of other
securities described in its Prospectus dated October 30, 1997. The Medium-
Term Notes Program provides an additional facility for funding
12
<PAGE>
the Company's acquisition and development activities. As of March 31, 1998, the
Company had $362.4 million registered and available for issue under the Medium
Term Notes Program.
In April 1998, the Company closed an $8.0 million mortgage note receivable
from Duck Creek, LLC ("Duck Creek") which bears interest at 11.0% and matures in
May 2002. The mortgage note is secured by all the property owned by Duck Creek
which intends to redevelop the property. The Company expects Duck Creek to repay
this mortgage loan upon sale or refinancing of the property. Development Company
is a 50% owner of Duck Creek.
The Company's total indebtedness as of March 31, 1998, consisted of the
following:
<TABLE>
<CAPTION>
Effective Percent
Principal Interest Maturity of Total Months to
Balance Rate Date Indebtedness Maturity
------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Fixed Rate
- ----------
Seven Year Notes $ 74,776 7.09%/1/ 01-Aug-04 27.1% 76
Ten Year Notes 84,750 7.22%/1/ 01-Aug-07 30.7% 112
MandatOry Par Put Remarketed Securities /2/ 75,000 6.51%/1/ 31-Mar-03 27.1% 60
Mortgage note payable - Richmond, Kentucky 6,395 7.00%/3/ 01-Dec-03 2.3% 68
Mortgage note payable - Jackson, Mississippi 7,128 9.25% 01-Mar-17 2.6% 227
Mortgage note payable - Milwaukee, Wisconsin 5,369 7.75% 01-Aug-09 1.9% 136
-------- ----- ----- ---
253,418 7.03% 91.7% 89
Floating Rate
- -------------
Unsecured Line of Credit 23,000 7.98%/4/ 22-May-00 8.3% 26
-------- ---- -----
23,000 7.98% 8.3% 26
-------- ---- -----
$276,418 7.11% 100.0% 83
======== ==== =====
/1/ Represents stated rate plus amortization of deferred loan costs.
/2/ Represents notes payable with a stated rate of 6.918% and a stated maturity date of March 31, 2013. These notes
are subject to mandatory tender on March 31, 2003.
/3/ The interest rate on this note is adjusted on December 1 of each year.
/4/ Stated rate of LIBOR plus 1.25% plus amortization of deferred loan costs.
</TABLE>
As of March 31, 1998, the Company had $127.0 million available under the
Unsecured Credit Facility.
As of March 31, 1998, the Company, Development Company and affiliated
entities had 36 projects under construction which are expected to add
approximately 2.7 million square feet of gross leasable area which the Company
expects to own. The Company expects to place approximately 2.0 million square
feet into operations during the remainder of 1998. Of these projects under
construction, 14 are located in Georgia, five in North Carolina, three each in
Florida and Tennessee, and two each in Kentucky, Pennsylvania and Virginia. Of
the total square feet under construction, 75.1% is either leased or committed by
retailers. Additional funding to complete the construction of these projects is
estimated to be $188.7 million.
Management expects to fund the remaining costs of these projects and the
cost of any future projects undertaken by the Company, Development Company or
any affiliated joint ventures with additional advances under the Unsecured Line
of Credit and with proceeds from issuances under the Medium-Term Notes Program,
proceeds from public preferred or common stock offerings, proceeds from
issuances of additional debt securities, or issuances of limited partnership
units in DownREIT structures. However, there can be no assurance that these
sources will be available and the inability to
13
<PAGE>
obtain this capital could have an adverse effect on the Company's ability to
fund its development, redevelopment and acquisition activities.
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 1998 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
1998.
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, 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 but $7.1
million of the Company's debt requires balloon payments in the future. The
Unsecured Line of Credit matures in 2000; the MOPPRS are subject to mandatory
tender in 2003; a note payable of $6.4 million matures in 2003; the Seven Year
Notes mature in 2004; the Ten Year Notes mature in 2007; and a note payable of
$5.4 million matures in 2009. Management intends to refinance or repay these
maturing debt instruments with proceeds from other sources of capital at or
prior to their respective maturities. Management anticipates that it 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. There can be no assurance
that debt or 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.
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.
14
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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
12 Statement re: Computation of Ratio of Earnings to Fixed
Charges
27 Financial Data Schedule
(b) Reports on Form 8-K
During the three months ended March 31, 1998, the Company filed
the following reports on Form 8-K:
(i) Form 8-K dated January 26, 1998 related to cautionary statements
for purposes of the Private Securities Litigation Reform Act of
1995 and related to Federal income tax and ERISA considerations.
(ii) Form 8-K dated January 26, 1998 containing the combined statements
of revenue and certain expenses of four shopping centers filed
pursuant to Rule 3-14 of Regulation S-X.
(iii) Form 8-K dated February 4, 1998 containing additional operational
information of the Company and the properties owned or managed by
it as of December 31, 1997 and for the three months then ended.
(iv) Form 8-K dated February 10, 1998 containing restated earnings per
share information pursuant to Financial Accounting Standards Board
Statement No. 128, Earnings per Share.
(v) Form 8-K dated February 13, 1998 containing a Distribution
Agreement with Merrill Lynch & Company, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, BT Alex. Brown Incorporated, Morgan
Stanley & Company Incorporated and
15
<PAGE>
Solomon Brothers Inc. (collectively the "Agents") relating to the
sale by the Company from time to time of its Medium-Term Notes Due
Nine Months or More From Date of Issue in an aggregate principal
amount of $505,500,000 and containing certain information related
to the purchase by the Company of a five property portfolio of
shopping center properties in Milwaukee, Wisconsin.
(vi) Form 8-K dated February 20, 1998 containing a Terms Agreement with
SunTrust Equitable Securities Corporation ("SunTrust Equitable")
relating to the sale by the Company to SunTrust Equitable of
1,035,000 shares of its common stock.
(vii) Form 8-K dated March 2, 1998 containing a Terms Agreement with
A.G. Edwards & Sons, Inc. ("A.G. Edwards") relating to the sale by
the Company to A.G. Edwards of 598,131 shares of its common stock.
(viii) Form 8-K dated March 30, 1998 containing a Terms Agreement with
J.C. Bradford & Co., L.L.C. ("J.C. Bradford") relating to the sale
by the Company to J.C. Bradford of 443,623 shares of the Company's
common stock.
16
<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.
May 11, 1998 /s/ J. Donald Nichols
- --------------------- -----------------------------
(Date) J. Donald Nichols
Chief Executive Officer
May 11, 1998 /s/ William J. Kerley
- --------------------- -----------------------------
(Date) William J. Kerley
Chief Financial Officer
17
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- -------- -------
12 Statement re: Computation of Ratio of Earnings to Fixed
Charges
27 Financial Data Schedule
18
<PAGE>
JDN REALTY CORPORATION
Computation of Ratio of Earnings to Fixed Charges
Three months ended March 31
1998 1997
----------- ----------
FIXED CHARGES:
Interest Expense (including
amortization of deferred debt cost) $ 3,355 $ 2,213
Interest Capitalized 1,304 658
----------- ----------
Total Fixed Charges $ 4,659 $ 2,871
=========== ==========
EARNINGS:
Net (loss) before income tax benefit,
net gain (loss) on real estate sales
extraordinary items and
cumulative effect of change in
accounting principle $ 9,112 $ 5,503
Fixed Charges 4,659 2,871
Capitalized Interest (1,304) (658)
----------- -----------
Total Earnings $12,467 $ 7,716
=========== ===========
Ratio of Earnings to Fixed Charges 2.68 2.69
<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-01-1996 DEC-31-1995
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0 0
0 0
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<FN>
<F1> Basic is equal to primary
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<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
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0 0 0
0 0 0
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<INCOME-CONTINUING> 9,112 5,503 3,618
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<CHANGES> 0 0 0
<NET-INCOME> 9,112 5,530 3,618
<EPS-PRIMARY> 0.47 0.40 0.35<F1>
<EPS-DILUTED> 0.46 0.40 0.35
<FN>
<F1> Basic is equal to primary
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
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<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
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<PP&E> 420,697 289,747
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<TOTAL-ASSETS> 477,744 332,464
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 155 110
<OTHER-SE> 289,057 179,181
<TOTAL-LIABILITY-AND-EQUITY> 477,744 332,464
<SALES> 0 0
<TOTAL-REVENUES> 21,194 17,598
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 8,905 7,520
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,137 2,905
<INCOME-PRETAX> 12,229 7,773
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 12,229 7,773
<DISCONTINUED> 0 0
<EXTRAORDINARY> 401 0
<CHANGES> 0 0
<NET-INCOME> 11,828 7,773
<EPS-PRIMARY> 0.81 0.73<F1>
<EPS-DILUTED> 0.80 0.73
<FN>
<F1> Basic is equal to primary
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-30-1997 SEP-30-1996
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<INVENTORY> 0 0
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0 0
0 0
<COMMON> 155 110
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<TOTAL-COSTS> 0 0
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<INCOME-CONTINUING> 19,659 12,084
<DISCONTINUED> 0 0
<EXTRAORDINARY> 5,940 0
<CHANGES> 0 0
<NET-INCOME> 14,854 12,084
<EPS-PRIMARY> 0.90 1.12<F1>
<EPS-DILUTED> 0.88 1.12
<FN>
<F1> Basic is equal to primary
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
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0 0
0 0
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<TOTAL-LIABILITY-AND-EQUITY> 599,753 371,986
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<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 20,136 15,556
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<EXTRAORDINARY> 5,940 0
<CHANGES> 0 0
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<EPS-PRIMARY> 1.38 1.50<F1>
<EPS-DILUTED> 1.36 1.50
<FN>
<F1> Basic is equal to primary
</FN>
</TABLE>
