<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 June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
---------------------- ----------------------
Commission file number 001-12844
---------
JDN REALTY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 58-1468053
- ------------------------------- -----------------------------------
(State or other 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 July 30, 1999, 33,247,659 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Condensed Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 2
Condensed Consolidated Statements of Income - Three Months Ended June 30,
1999 and 1998 3
Condensed Consolidated Statements of Income - Six Months Ended June 30,
1999 and 1998 4
Condensed Consolidated Statements of Cash Flow - Six Months Ended June 30,
1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
</TABLE>
1
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------- -------------
(Unaudited)
(In thousands)
<S> <C> <C>
ASSETS
Shopping center properties held for use in operations, at cost:
Land $ 152,713 $ 153,111
Buildings and improvements 582,358 619,963
----------- ---------
735,071 773,074
Less: accumulated depreciation and amortization (60,782) (56,093)
----------- ---------
Shopping center properties held for use in operations, net 674,289 716,981
Shopping center properties under development 70,874 74,192
Shopping center held for sale 105,006 --
----------- ---------
Total shopping center properties 850,169 791,173
Rents receivable 8,681 7,158
Investments in and advances to unconsolidated entities 178,610 151,040
Deferred costs, net of amortization 5,355 4,424
Other assets 14,087 15,127
----------- ---------
$ 1,056,902 $ 968,922
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Unsecured notes payable $ 334,604 $ 234,573
Unsecured lines of credit 87,956 148,519
Mortgage notes payable 80,849 42,471
Accounts payable and accrued expenses 15,211 11,550
Other liabilities 8,791 10,764
----------- ---------
Total liabilities 527,411 447,877
Third party investors' interest 3,000 3,000
Shareholders' Equity
Preferred stock, par value $.01 per share -
authorized 20,000,000 shares: 9 3/8% Series A
Cumulative Redeemable Preferred Stock,
liquidation preference $25 per share, issued and
outstanding 2,000,000 shares in 1999 and 1998,
respectively 20 20
Common stock, par value $.01 per share -
authorized 150,000,000 shares, issued and
outstanding 33,245,424 and 32,704,408 shares
in 1999 and 1998 respectively 332 327
Paid-in capital 533,228 524,787
Accumulated deficit (7,089) (7,089)
----------- ---------
526,491 518,045
----------- ---------
$ 1,056,902 $ 968,922
=========== =========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1999 1998
----------- -----------
(In thousands)
<S> <C> <C>
Revenues:
Minimum and percentage rents $ 22,805 $ 16,979
Recoveries from tenants 3,133 2,211
Other revenue 2 19
---------- ---------
Total revenues 25,940 19,209
Operating expenses:
Operating and maintenance 1,907 1,573
Real estate taxes 1,741 1,075
General and administrative 1,873 1,917
Depreciation and amortization 5,498 4,089
---------- ----------
Total operating expenses 11,019 8,654
---------- ----------
Income from operations 14,921 10,555
Other income (expense):
Interest expense, net (3,973) (2,014)
Other income, net 348 260
Equity in net income of unconsolidated entities 1,084 1,234
---------- -----------
Income before minority interest in net income of
consolidated subsidiary and net gain on real estate sales 12,380 10,035
Minority interest in net income of consolidated subsidiary (55) (67)
----------- -----------
Income before net gain on real estate sales 12,325 9,968
Net gain on real estate sales -- 85
----------- -----------
Net income 12,325 10,053
Dividends to preferred shareholders (1,172) --
----------- -----------
Net income attributable to common shareholders $ 11,153 $ 10,053
=========== ===========
Net income per common share:
Basic $ 0.34 $ 0.33
=========== ===========
Diluted $ 0.33 $ 0.32
=========== ===========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
------------- --------------
(In thousands)
<S> <C> <C>
Revenues:
Minimum and percentage rents $ 45,273 $ 32,296
Recoveries from tenants 6,345 3,879
Other revenue 12 80
----------- ----------
Total revenues 51,630 36,255
Operating expenses:
Operating and maintenance 4,063 2,734
Real estate taxes 3,378 1,999
General and administrative 4,040 3,443
Depreciation and amortization 10,777 7,588
----------- ----------
Total operating expenses 22,258 15,764
----------- ----------
Income from operations 29,372 20,491
Other income (expense):
Interest expense, net (7,790) (3,826)
Other income, net 768 421
Equity in net income of unconsolidated entities 2,231 2,090
----------- ----------
Income before minority interest in net income of
consolidated subsidiary and net gain on real estate sales 24,581 19,176
Minority interest in net income of consolidated subsidiary (105) (96)
----------- ----------
Income before net gain on real estate sales 24,476 19,080
Net gain on real estate sales -- 85
----------- ----------
Net income 24,476 19,165
Dividends to preferred shareholders (2,344) --
----------- ----------
Net income attributable to common shareholders $ 22,132 $ 19,165
=========== ==========
Net income per common share:
Basic $ 0.67 $ 0.64
Diluted $ 0.66 $ 0.63
=========== ===========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
JDN REALTY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
---------- ---------
(In thousands)
<S> <C> <C>
Net cash provided by operating activities $ 31,800 $ 27,451
Cash flows from investing activities:
Development of shopping center properties (66,938) (62,375)
Improvements to shopping center properties (1,012) (901)
Purchase of shopping center properties -- (92,772)
Investments in and advances to unconsolidated entities (25,340) (50,367)
Other 1,008 (7,614)
--------- ---------
Net cash used in investing activities (92,282) (214,029)
Cash flows from financing activities:
Proceeds from unsecured lines of credit 322,405 181,500
Proceeds from mortgage notes payable 39,454 --
Proceeds from issuance of unsecured notes payable 100,000 76,548
Principal payments on unsecured lines of credit (382,968) (126,000)
Principal payments on mortgage notes payable (587) (212)
Proceeds from issuance of common shares, net of
underwriting commissions and offering expenses 11,165 66,603
Dividends paid to preferred shareholders (2,344) --
Dividends paid to common shareholders (25,094) (21,256)
Other (1,549) (392)
--------- ---------
Net cash provided by financing activities 60,482 176,791
--------- ---------
Decrease in cash and cash equivalents -- (9,787)
Cash and cash equivalents, beginning of period -- 11,439
--------- ---------
Cash and cash equivalents, end of period $ -- $ 1,652
========= =========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
JDN REALTY CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1999
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
anchored by value-oriented retailers. As of June 30, 1999 the Company owned and
operated, either directly or through affiliated entities, a total of 101
shopping center properties and had 48 projects under construction. The Company
has elected to be taxed 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 June 30, 1999, the
Company had invested $9.6 million in Development Company in the form of equity
capital, $122.3 million in the form of secured notes receivable and $29.8
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, 1998 has been
derived from the audited consolidated financial statements at that date.
Operating results for the three and six month periods ended June 30, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999 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, 1998.
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.
Earnings Per Share. Basic and diluted earnings per share were computed
in accordance with the requirements of Statement of Financial Accounting
Standards No. 128.
Reclassifications. Certain amounts as previously reported have been
reclassified to conform to the current period's presentation.
6
<PAGE>
4. DISTRIBUTIONS
On May 19, 1999, the Company's Board of Directors declared a cash
distribution of $0.395 per share to common shareholders of record on June 10,
1999. This distribution was paid on June 24, 1999.
On May 19, 1999, the Company's Board of Directors declared a cash
distribution of $0.586 per share to holders of record of the Company's 9 3/8%
Series A Cumulative Redeemable Preferred Stock on June 15, 1999. This
distribution was paid on June 30, 1999.
5. UNSECURED LINE OF CREDIT
On June 11, 1999, the Company amended its unsecured line of credit (the
"Unsecured Line of Credit") as follows: (1) decreased maximum borrowings from
$200,000,000 to $185,000,000 (expandable to $200,000,000); (2) extended the
maturity date by one year from May 22, 2001 to May 22, 2002; and (3) increased
the borrowing rate from LIBOR plus 1.00% to LIBOR plus 1.15%.
6. MORTGAGE NOTE PAYABLE
On May 4, 1999, the Company borrowed $13.0 million from New York Life
Insurance Company. The loan is evidenced by a mortgage note which is secured by
real property containing a freestanding Lowe's store located in Lilburn,
Georgia. The note bears a fixed interest rate of 6.70%, requires monthly
payments of principal and interest in the amount of $101,617 and matures on
February 10, 2018. The net proceeds from this loan were used to repay amounts
outstanding under the Company's unsecured lines of credit.
7
<PAGE>
7. 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>
Three months ended June 30, Six Months ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net income $ 12,325 $ 10,053 $ 24,476 $ 19,165
Dividends to preferred shareholders (1,172) -- (2,344) --
----------- ----------- ----------- ----------
Net income attributable to
common shareholders $ 11,153 $ 10,053 $ 22,132 $ 19,165
=========== =========== =========== ==========
Denominator:
Weighted-average shares outstanding 33,239 30,978 33,199 29,939
Unvested restricted stock outstanding (83) (111) (93) (63)
----------- ----------- ----------- ----------
Denominator for basic earnings
per share 33,156 30,867 33,106 29,876
Dilutive effect of stock options and
unvested restricted stock 523 563 505 555
----------- ----------- ----------- ----------
Denominator for diluted earnings
per share 33,679 31,430 33,611 30,431
=========== =========== =========== ==========
Net income per common share:
Basic $ 0.34 $ 0.33 $ 0.67 $ 0.64
=========== =========== =========== ==========
Diluted $ 0.33 $ 0.32 $ 0.66 $ 0.63
=========== =========== =========== ==========
</TABLE>
Of total options outstanding, options to purchase 93,000 and 18,000 shares
of common stock for the three months ended June 30, 1999 and 1998, respectively,
were outstanding but were not included in the computation of diluted earnings
per share because the options' exercise prices were greater than the average
market price of the common shares and, therefore, the effect would be
antidilutive.
The Company is the general partner in a limited partnership that issued
limited partnership units valued at $3.0 million in a limited partnership formed
to own and operate a shopping center in Milwaukee, Wisconsin. Subject to certain
conditions, the limited partnership units are exchangeable for cash or 139,535
shares of the Company's common stock beginning in February 1999. As of June 30,
1999, none of the limited partnership units have been exchanged for shares.
Using the "if-converted" 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
Overview
JDN Realty Corporation (the "Company") is a real estate company which
specializes in the development and asset management of retail shopping centers
anchored by value-oriented retailers. As of June 30, 1999, the Company owned and
operated, either directly or through affiliated entities, a total of 101
shopping center properties and had 48 projects under construction. The Company
has elected to be taxed 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 June 30, 1999, the Company
had invested $9.6 million in Development Company in the form of equity capital,
$122.3 million in the form of secured notes receivable and $29.8 million in the
form of unsecured advances.
Results of Operations
Comparison of the Three Months Ended June 30, 1999 to the Three Months Ended
June 30, 1998
During 1999 and 1998, the Company began operations at 31 properties which
it developed totaling 3.8 million square feet (the "Development Properties"). In
addition, during 1999 and 1998, the Company acquired 11 shopping center
properties from third parties totaling 2.1 million square feet of gross leasable
area (the "Acquisition Properties"). As indicated below, the Company's results
of operations were affected by the Development Properties and the Acquisition
Properties.
Minimum and percentage rents increased $5.8 million or 34.3% to $22.8
million for the three months ended June 30, 1999 from $17.0 million for the same
period in 1998. Of this increase, $4.1 million relates to the Development
Properties and $1.5 million relates to the Acquisition Properties. The remaining
increase relates to an increase in minimum and percentage rents at existing
properties.
Recoveries from tenants increased $922,000 or 41.8% to $3.1 million for the
three months ended June 30, 1999 from $2.2 million for the same period in 1998.
Of this increase, $309,000 relates to the Development Properties and $553,000
relates to the Acquisition Properties. The remaining increase relates to an
increase in recoverable expenses at existing properties.
Other revenue decreased $17,000 or 91.9% to $2,000 for the three months
ended June 30, 1999 from $19,000 for the same period in 1998. 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 $334,000 or 21.2% to $1.9
million for the three months ended June 30, 1999 from $1.6 million for the same
period in 1998. Of this increase, $191,000 relates to the Development Properties
and $212,000 relates to the Acquisition Properties. These increases are offset
by a decrease in operating and maintenance expenses at existing properties
because the Company incurred painting and parking lot repair expenses for many
of its existing properties in 1998 which it did not incur in 1999.
Real estate taxes increased $666,000 or 62.0% to $1.7 million for the three
months ended June 30, 1999 from $1.1 million for the same period in 1998. Of
this increase, $191,000 relates to the Development Properties and $386,000
relates to the Acquisition Properties. The remaining increase in real estate
taxes at existing properties is due to the fact that the Company is now
responsible for paying
9
<PAGE>
taxes on three anchor tenant tracts which in previous years were paid by the
tenants. The Company will bill these additional expenses back to the tenants and
has recognized this additional revenue in recoveries from tenants.
General and administrative expenses decreased $44,000 or 2.3% for the three
months ended June 30, 1999 over the same period in 1998. General and
administrative expenses as a percent of minimum and percentage rents decreased
to 8.2% for the three months ended June 30, 1999 from 11.3% for the same period
in 1998. This decrease is due to a reduction in the costs associated with the
annual report to shareholders, the annual meeting of shareholders and
miscellaneous costs related to seminars and industry conventions.
Depreciation and amortization expense increased $1.4 million or 34.5% to
$5.5 million for the three months ended June 30, 1999 from $4.1 million for the
same period in 1998. Of this increase, $967,000 relates to the Development
Properties and $401,000 relates to the Acquisition Properties. The remaining
increase primarily relates to furniture and fixtures purchased in connection
with the Company's move to new corporate offices in 1998.
Interest expense, net of capitalized amounts, increased $2.0 million or
97.3% to $4.0 million for the three months ended June 30, 1999 from $2.0 million
for the same period in 1998. This increase results primarily from an increase in
average debt balances between 1999 and 1998.
Other income, net increased $88,000 or 33.6% to $348,000 for the three
months ended June 30, 1999 from $260,000 for the same period in 1998. This
increase results from an increase in interest income from third-party notes
receivable.
Equity in net income of unconsolidated entities decreased $150,000 or 12.2%
to $1.1 million for the three months ended June 30, 1999 from $1.2 million for
the same period in 1998. This decrease results primarily from a decrease in net
gains on land sales by Development Company.
Minority interest in net income of consolidated subsidiary decreased
$12,000 or 18.7% to $55,000 for the three months ended June 30, 1999 from
$68,000 for the same period in 1998. Minority interest in net income of
consolidated subsidiary represents the third-party investors' share of the net
income of a limited partnership, which owns and operates a shopping center
located in Milwaukee, Wisconsin, and the decrease relates to a decrease in
related net income allocated to the third-party investors.
Net gain on real estate sales for the three months ended June 30, 1998 of
$85,000 represents a gain on the sale of an outparcel located in Hickory, North
Carolina. There were no real estate sales during the three months ended June 30,
1999.
Comparison of the Six Months Ended June 30, 1999 to the Six Months Ended June
30, 1998
Minimum and percentage rents increased $13.0 million or 40.2% to $45.3
million for the six months ended June 30, 1999 from $32.3 million for the same
period in 1998. Of this increase, $8.1 million relates to the Development
Properties and $4.1 million relates to the Acquisition Properties. The remaining
increase relates to an increase in minimum and percentage rents at existing
properties.
Recoveries from tenants increased $2.5 million or 63.6% to $6.3 million for
the six months ended June 30, 1999 from $3.9 million for the same period in
1998. Of this increase, $648,000 relates to the Development Properties and $1.6
million relates to the Acquisition Properties. The remaining increase relates to
an increase in recoverable expenses at existing properties.
Other revenue decreased $68,000 or 86.3% to $12,000 for the six months
ended June 30, 1999 from $80,000 for the same period in 1998. 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 $1.3 million or 48.6% to $4.1
million for the six months ended June 30, 1999 from $2.7 million for the same
period in 1998. Of this increase, $391,000 relates to the Development Properties
and $981,000 relates to the Acquisition Properties. These increases are offset
by a decrease in operating and maintenance expenses at existing properties
because
10
<PAGE>
the Company incurred painting and parking lot repair expenses for many of its
existing properties in 1998 which it did not incur in 1999.
Real estate taxes increased $1.4 million or 69.0% to $3.4 million for the
six months ended June 30, 1999 from $2.0 million for the same period in 1998. Of
this increase, $376,000 relates to the Development Properties and $785,000
relates to the Acquisition Properties. The remaining increase in real estate
taxes at existing properties is due to the fact that the Company is now
responsible for paying taxes on three anchor tenant tracts which in previous
years were paid by the tenants due to one redevelopment where the anchor tenant
changed and to an administrative issue from the taxing authority on one of the
Company's shopping centers (containing two anchor tenants).
General and administrative expenses increased $597,000 or 17.3% to $4.0
million for the six months ended June 30, 1999 from $3.4 million for the same
period in 1998. General and administrative expenses as a percent of minimum and
percentage rents decreased to 8.9% for the six months ended June 30, 1999 from
10.7% for the same period in 1998. 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 $3.2 million or 42.0% to
$10.8 million for the six months ended June 30, 1999 from $7.6 million for the
same period in 1998. Of this increase, $1.8 million relates to the Development
Properties and $1.2 million relates to the Acquisition Properties. The remaining
increase primarily relates to furniture and fixtures purchased in connection
with the Company's move to new corporate offices in 1998.
Interest expense, net of capitalized amounts, increased $4.0 million to
$7.8 million for the six months ended June 30, 1999 from $3.8 million for the
same period in 1998. This increase results primarily from an increase in average
debt balances between 1999 and 1998.
Other income, net increased $347,000 or 82.4% to $768,000 for the six
months ended June 30, 1999 from $421,000 for the same period in 1998. This
increase results from a decrease in amounts written off for development and
acquisition projects the Company determined not to pursue and an increase in
interest income received from third-party notes receivable.
Equity in net income of unconsolidated entities increased $141,000 or 6.7%
to $2.2 million for the six months ended June 30, 1999 from $2.1 million for the
same period in 1998. This increase results primarily from an increase in net
gains on land sales by Development Company.
Minority interest in net income of consolidated subsidiary increased $9,000
or 8.9% to $105,000 for the six months ended June 30, 1999 from $96,000 for the
same period in 1998. Minority interest in net income of consolidated subsidiary
represents the third-party investors' share of the net income of a limited
partnership, which owns and operates a shopping center located in Milwaukee,
Wisconsin.
Net gain on real estate sales for the six months ended June 30, 1998 of
$85,000 represents a gain on the sale of an outparcel located in Hickory, North
Carolina. There were no real estate sales during the six months ended June 30,
1999.
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 ("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 ventures. The Company believes that FFO is helpful to
investors as a measure of the performance of an equity REIT because, along with
cash provided by operating activities, investing activities and financing
activities, it provides investors with an indication of the Company's ability to
make capital expenditures, to incur and service debt, and to fund other cash
needs. 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
11
<PAGE>
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>
(Dollars in thousands) Three Months Ended June 30,
1999 1998
---- ----
<S> <C> <C>
Net income attributable to common shareholders $ 11,153 $ 10,053
Depreciation of real estate assets 5,183 3,857
Amortization of tenant allowances and tenant improvements 53 44
Amortization of deferred leasing commissions 127 55
Net (gain) loss on real estate sales -- (85)
Adjustments related to activities in unconsolidated entities 197 169
-------- -------
FFO $ 16,713 $ 14,093
======== ========
Six Months Ended June 30,
1999 1998
---- ----
Net income attributable to common shareholders $ 22,132 $ 19,165
Depreciation of real estate assets 10,156 7,177
Amortization of tenant allowances and tenant improvements 104 84
Amortization of deferred leasing commissions 250 109
Net (gain) loss on real estate sales -- (85)
Adjustments related to activities in unconsolidated entities 436 334
------- --------
FFO $ 33,078 $ 26,784
======= ========
</TABLE>
Leasing and Property Information
As of June 30, 1999, Wal-Mart, Lowe's and Kroger represented 15.5%, 14.9%
and 3.9%, respectively, of the combined annualized base rent of the Company,
Development Company and affiliated entities (collectively, "Combined Annualized
Base Rent"). In addition, at that date, anchor tenants represented 68.9% of
Combined Annualized Base Rent and national and regional tenants represented
86.4% of Combined Annualized Base Rent. As of June 30, 1999, properties owned
and operated by the Company, Development Company and affiliated entities were
96.0% leased.
On a same property basis, net operating income increased 0.5% between the
six months ended June 30, 1999 and the same period in 1998. Net operating income
represents property revenues less property expenses except interest expense,
depreciation and amortization.
As of June 30, 1999, the Company, Development Company and affiliated
entities operated in 15 states, and 41.0%, 15.3%, and 10.6% 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 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 and value-oriented retailers; the federal, state and local
regulatory environment; availability of debt and equity capital with favorable
terms and conditions including, without limitation, the availability of bank
12
<PAGE>
credit facilities to fund development, redevelopment and acquisition activities;
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; the failure of the Company's
significant vendors or customers to accommodate the Year 2000 issue; 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
Sources and Uses of Funds
- -------------------------
Historically, the Company's primary sources of funds have been cash
provided by operating activities and proceeds from lines of credit, secured
mortgage notes payable, 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, repayment of
outstanding indebtedness, 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
secured mortgage notes payable and debt and equity offerings to repay
outstanding indebtedness and to fund its ongoing development, redevelopment and
acquisition activities.
During the first six months of 1999, the Company incurred $66.9 million in
development costs and advanced $25.3 million to Development Company to fund its
development and redevelopment activities.
To fund its development activity in 1999, the Company has completed five
capital markets transactions. On January 13, 1999, the Company issued 500,000
shares of its common stock, which netted proceeds to the Company of
approximately $10.8 million. In February 1999, the Company closed an unsecured
term loan (the "Term Loan") in the amount of $100.0 million with Wachovia Bank,
N. A., as agent. The Term Loan bears interest at LIBOR plus 1.40% and matures in
February 2002. During the first six months of 1999, the Company closed three
secured mortgage notes payable with two institutional investors. The three
secured mortgage notes payable netted aggregate proceeds to the Company of $38.6
million, require aggregate monthly payments of principal and interest in the
amount of approximately $300,000, have a weighted average interest rate of
6.62%, mature in 2018 and 2019, and each of the notes is secured by real
property containing Lowe's stores located in Woodstock, Georgia, Alpharetta,
Georgia and Lilburn, Georgia. The net proceeds from these five transactions were
used to repay amounts outstanding under the Company's unsecured lines of credit.
During 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 the Company's acquisition and development
activities. As of June 30, 1999, other than securities which are subject to
exchange for limited partnership units, the Company had $265.8 million
registered and available for issue under the Medium-Term Notes Program.
13
<PAGE>
Indebtedness
- ------------
The Company's total indebtedness as of June 30, 1999, consisted of the
following:
<TABLE>
<CAPTION>
Effective Percent
Principal Interest Maturity of Total Months to
Balance Rate Date Indebtedness Maturity
---------- --------- --------- ----------- ---------
(in thousands)
Fixed Rate
- ----------
<S> <C> <C> <C> <C> <C>
Mortgage note payable - Denver, Colorado $ 23,743 6.81% 17-Jul-01 4.7% 25
MandatOry Par Put Remarketed Securities ("MOPPRS")(1) 75,000 6.58%(2) 31-Mar-03 14.9% 45
Mortgage note payable - Richmond, Kentucky 6,215 6.88%(3) 01-Dec-03 1.2% 53
Seven Year Notes 74,820 7.10%(2) 01-Aug-04 14.9% 61
Ten Year Notes 84,784 7.23%(2) 01-Aug-07 16.8% 97
Mortgage note payable - Milwaukee, Wisconsin 4,984 7.75% 01-Aug-09 1.0% 121
Mortgage note payable - Jackson, Mississippi 6,945 9.25%(4) 01-Mar-17 1.4% 212
Mortgage note payable - Lilburn, Georgia 12,971 6.70%(2) 10-Feb-18 2.6% 224
Mortgage note payable - Woodstock, Georgia 12,196 6.55%(2) 15-Apr-18 2.4% 226
Mortgage note payable - Alpharetta, Georgia 13,795 6.62%(2) 15-Apr-19 2.7% 238
--------- ---- ---- ---
315,453 7.01% 62.7% 89
Floating Rate
- -------------
Revolving Line of Credit 1,956 7.80%(5) 01-Sep-99 0.4% 2
Term Loan 100,000 6.61%(6) 15-Feb-02 19.9% 32
Unsecured Line of Credit 86,000 6.63%(7) 22-May-02 17.1% 35
--------- ---- ----- ---
187,956 6.63% 37.3% 33
--------- ---- ----- ---
$ 503,409 6.87% 100.0% 68
========= ==== ===== ===
</TABLE>
(1) 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.
(2) Represents stated rate plus amortization of deferred loan costs.
(3) The interest rate on this note is adjusted on December 1 of each year.
(4) The note can be prepaid after March 1, 2002 with 90 days written notice to
the Lender. The Company will not incur any prepayment penalties in
association with the loan prepayment after this date.
(5) Stated rate of LIBOR plus 1.00% plus amortization of deferred loan costs.
(6) Stated rate of LIBOR plus 1.40% plus amortization of deferred loan costs.
(7) Stated rate of LIBOR plus 1.15% plus amortization of deferred loan costs.
As of June 30, 1999, the Company had $99.0 million available under the
Unsecured Line of Credit and approximately $18.0 million available under the
Revolving Line of Credit.
Derivatives and Market Risk
- ---------------------------
The Company is exposed to market risk from changes in interest rates on its
indebtedness, which could impact its financial condition and results of
operations. The Company manages its exposure to these market risks through its
regular operating and financing activities. The Company manages its ratio of
fixed to floating rate debt with the objective of achieving a mix that
management believes is appropriate. The Company has and may from time to time in
the future enter into interest rate swap agreements in which it agrees to
exchange combinations of fixed and/or variable interest rates on agreed upon
notional amounts. Effective as of June 30, 1999, the Company had one interest
rate swap agreement as described below. Management does not foresee or expect
any significant changes in its exposure to interest rate fluctuations or in how
such exposure is managed in the near future. The Company intends to use
derivative financial instruments as risk management tools and not for
speculative or trading purposes. Under the terms of the Company's interest rate
swap agreement, the Company pays a fixed rate of 6.48% and receives a variable
rate equal to the rate for the one-month LIBOR rate based on the notional amount
in the contract of $50.0 million. The maturity date of the swap agreement is
January 1, 2001.
14
<PAGE>
Future Sources and Uses of Funds
- --------------------------------
As of June 30, 1999, the Company, Development Company and affiliated
entities had 48 projects under construction which are expected to add
approximately 3.5 million square feet of gross leasable area which the Company
expects to own. Of this 3.5 million square feet, the Company expects to place
approximately 1.1 million square feet into operations during the remainder of
1999. Of these projects under construction, 16 are located in Georgia, six in
Tennessee, five in North Carolina, four each in Florida and Texas, three in
Pennsylvania, and two in Alabama. Of the total square feet under construction,
76.1% is either leased or committed to be leased or purchased by retailers.
Additional funding needed to complete the construction of these projects is
estimated to be $162.9 million.
Management expects to fund the remaining costs of its current development
projects and the costs of any future development projects or acquisitions with a
combination of one or more of the following:
. advances under its unsecured lines of credit;
. additional issuances of securities under the Medium-Term Notes Program;
. issuances of common or preferred stock;
. issuances of debt securities;
. issuances of limited partnership units in DownREIT structures;
. advances under secured financings;
. advances under term loans with financial institutions;
. proceeds from asset sales or tax deferred exchanges;
. proceeds from the contribution of assets to one or more joint ventures
in which the Company, Development Company or affiliated entities
participate;
. formation of joint ventures with institutional investors.
At June 30, 1999, the Company was negotiating to sell seven properties to
four purchasers with a net book value of approximately $105.0 million for an
estimated aggregate purchase price of $129.4 million. The Company expects to
close the sales of these properties in the third and fourth quarters of 1999.
The Company does not anticipate incurring a loss on any individual property sale
and proceeds from the sale of the properties will be used to reduce amounts
outstanding under the Company's unsecured lines of credit and to fund future
development activity. The seven properties held for sale represent approximately
16.2% of net operating income for the six months ended June 30, 1999. Five of
these properties are not, as yet, subject to definitive agreements and closing
of these transactions is dependent upon, among other things, completion of due
diligence and the ability of the purchasers to successfully obtain financing for
these transactions. Therefore, there can be no assurance that any of these
transactions will close when expected or at all. Failure to close these
transactions could adversely affect the Company's ability to fund its ongoing
development activities.
The Company is currently negotiating a joint venture with an institutional
investor which could provide the Company with additional capital. Under the
proposed terms, Development Company and an institutional investor would
contribute cash in order to develop properties in the joint venture. Upon
completion, the developed properties would be transferred to the Company or a
third party. The Company is in the preliminary stages of structuring one or more
transactions of this nature and there can be no assurance that any such
transactions will be consummated.
In order for the Company to continue to qualify as a REIT, it must annually
distribute to its shareholders at least 95% of its taxable income. Management
believes that the Company will meet this requirement in 1999 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
1999.
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 properties. These activities should
15
<PAGE>
enable the Company to make its distributions to shareholders, maintain and
improve its properties, make scheduled debt payments and obtain debt or equity
financing for its development, redevelopment and acquisition projects. With the
exception of four amortizing mortgage loans totaling $45.9 million, all of the
Company's debt requires balloon payments in the future. The Revolving Line of
Credit matures in 1999; a mortgage note payable of $23.7 million matures in
2001; the Unsecured Line of Credit matures in 2002; the Term Loan matures in
2002; the MOPPRS are subject to mandatory tender in 2003; a mortgage note
payable of $6.2 million matures in 2003; the Seven Year Notes mature in 2004;
the Ten Year Notes mature in 2007; and a mortgage note payable of $5.0 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 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.
Other
- -----
On May 22, 1999, Development Company, through a newly formed wholly-owned
subsidiary, acquired Goldberg Property Associates, Inc. ("Goldberg"), a real
estate development and property management company in Denver, Colorado. This
acquisition provides the Company with additional development opportunities and
regional knowledge of the Intermountain states from the Goldberg organization
and provides the Company with the opportunities to develop for additional
regional retailers. In addition, this acquisition provides the Company with
additional third-party leasing and property management activities.
Certain Federal Income Tax Considerations
The Real Estate Investment Trust Modernization Act of 1999 (the "RMA") was
introduced in the House of Representatives (H.R. 1616) on April 28, 1999, and in
the Senate of the United States (S. 1057) on May 14, 1999. The RMA was
subsequently included, with two exceptions, in H.R. 2488, the Financial Freedom
Act of 1999, which was passed by the House of Representatives on July 22, 1999,
and in S. 1429, the Taxpayer Refund Act of 1999, which was passed by the Senate
of the United States on July 30, 1999. These bills were combined into the
Taxpayer Refund & Relief Act of 1999 and approved by the House of
Representatives and the Senate of the United States on August 5, 1999.
The RMA, as included in the above legislation, contains certain provisions
that, if enacted, would significantly modify the REIT-related provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). In addition to the
provisions that may directly affect the Company (discussed in detail below), the
RMA also contains provisions related to the following: (i) special foreclosure
rules for healthcare REITs; (ii) clarification of the definition of independent
contractors and (iii) modification of the earnings and profits rules.
Taxable REIT Subsidiaries
- -------------------------
Under the RMA, a REIT would be permitted to operate taxable REIT
subsidiaries through which the REIT could provide "non-customary" and other
currently prohibited services with respect to REIT tenants and other customers.
Many REITs, including the Company, currently own interests in subsidiaries,
which conduct such activities. The RMA would prohibit new investments in such
subsidiaries by limiting a REIT's ownership in these subsidiaries to 10% of
voting securities or 10% of the value of the subsidiaries. A REIT would be
allowed to retain its current ownership in such a subsidiary as long as 1.) the
REIT doesn't acquire more of the subsidiary's securities (including debt and
equity) other than through certain binding contracts and reorganizations, 2.)
the subsidiary does not engage in a substantial new line of business, or 3.) the
subsidiary doesn't acquire any substantial asset.
16
<PAGE>
The RMA provides a three year period during which an existing subsidiary may be
converted, tax-free, into a taxable REIT subsidiary. The value of the securities
of all taxable REIT subsidiaries, as well as any grandfathered subsidiaries,
would be limited, along with other non-real estate assets, to 25% of the value
of the REIT's total assets. The RMA would also limit the deductibility of
intercompany interest between a REIT and its taxable REIT subsidiaries (similar
to the "earnings stripping" rules of Code Section 163(j)) and impose a 100% tax
on non-arms length payments (a safe harbor for which is provided in the RMA)
between a taxable REIT subsidiary and its affiliated REIT or that REIT's
tenants.
Distribution Requirements
- -------------------------
Currently, in order to continue to maintain its qualification as a REIT, a
REIT is required to distribute annually 95% of its REIT taxable income. The RMA
would reduce the required distribution from 95% to 90% effective for taxable
years beginning after December 31, 2000.
If Congress enacts the provision related to taxable REIT subsidiaries, the
ownership structure of Development Company would likely be restructured as a
taxable REIT subsidiary. If the ownership structure of Development Company
changes such that the Company owns 100% of Development Company, the Company
would likely change its accounting for Development Company from the equity
method to the consolidated method. Management believes that, if the RMA is
enacted in its current form, the activities conducted by Development Company
would not change materially. Management does not believe, however, that these
changes would modify the way the Company conducts its business, nor would they
have a material effect on the results of operations or financial condition of
the Company.
At this time, it is uncertain whether President Clinton will sign the bill
when he receives it in September 1999.
Year 2000 Readiness Disclosure
Like most businesses, the Company is reliant upon technology to operate and
manage its business. Many computer systems process dates using two digits to
identify the year, and some systems are unable to properly process dates
beginning with the year 2000. As a result of this potential problem, the Company
began to assess its exposure to this issue in 1997. As a result of its ongoing
assessment, the Company believes that it has identified all of its information
technology ("IT") and non-IT systems with exposure to the Year 2000 problem. The
Company's critical IT systems include, but are not limited to, accounting and
reporting applications and all IT hardware, such as desktop computers, laptop
computers and data networking equipment. The Company's critical non-IT systems
include, but are not limited to, telephone systems, fax machines, copy machines
as well as HVAC systems at the Company's properties. All of the Company's
accounting and reporting software has been purchased from third-party vendors.
The Company has requested and received certifications from its third-party
vendors that all of its critical IT software adequately addresses problems
created by the year 2000 such that there will be no significant operational
problems ("Year 2000 Compliant"). The Company is currently in the process of
determining its exposure to any critical non-IT systems that are not Year 2000
Compliant and will develop a contingency plan if one becomes necessary.
The Company is undergoing an IT systems needs assessment unrelated to Year
2000 issues which may result in new accounting and reporting hardware and
software being installed. The Company will ensure that all newly installed
hardware and software are Year 2000 Compliant.
The Company cannot ensure that various third parties with which it deals
will be Year 2000 Compliant. Failure of various third parties such as banks,
significant tenants and vendors to adequately address the Year 2000 problem
could have an adverse impact on the Company's business. This impact could
include the inability of the Company's banks to process receipt or disbursement
of checks for a period of time, the inability to receive payments from its
significant tenants for a period of time and the inability of its vendors to
provide services or materials to complete its development projects on time and
within budget. The Company has reviewed publicly available information on the
Year 2000 readiness of
17
<PAGE>
its banks and significant tenants and, based solely on a review of this
information, has noted nothing indicating their failure to be Year 2000
Compliant in all material respects. The Company is not aware of any other
significant suppliers or vendors with a Year 2000 issue that would materially
impact the Company's results of operations, liquidity or capital resources.
There can be no assurances, however, that the systems of other companies on
which the Company relies will be timely converted and would not have an adverse
effect on the Company's systems. The Company will continue to monitor the state
of Year 2000 readiness of these and other significant third parties, and will
develop a contingency plan if one becomes necessary.
The Company believes it has an effective program in place that will resolve
the Year 2000 issues in a timely manner. Aside from catastrophic failure of
banks, utility companies or governmental agencies, the Company believes that it
could continue its normal business operations even if compliance by the Company
or its vendors, suppliers and customers is delayed. Aside from a catastrophic
failure that would affect most businesses, the Company does not believe that the
Year 2000 issue will materially impact its results of operations, liquidity or
capital resources.
Historic costs of addressing and solving the Company's Year 2000 problems
have not been, and estimated costs are not expected to be, material.
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.
18
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
During the six months ended June 30, 1999, there were no material changes
to the quantitative and qualitative disclosures about market risks presented in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
19
<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
On May 19, 1999, the Company held its annual meeting of shareholders.
The following were the results of the meeting:
(1) The shareholders elected Elizabeth L. Nichols and Haywood D.
Cochrane, Jr. as Class II directors until the annual meeting of
shareholders in 2002 or until their successors are elected and
shall have qualified.
The votes were as follows:
Elizabeth L. Haywood D.
Nichols Cochrane Jr.
------------ ------------
Votes Cast For 27,910,556 27,912,702
Votes Cast Against -0- -0-
Votes Withheld/Broker
Non-Votes 147,691 145,545
(2) The shareholders approved the amendment and restatement of the
JDN Realty Corporation 1993 Non-Employee Director Stock Option
Plan.
Votes Cast For 16,330,669
Votes Cast Against 2,271,479
Votes Withheld/Broker
Non-Votes 345,894
(3) The shareholders approved the amendment and restatement of the
JDN Realty Corporation 1995 Employee Stock Purchase Plan.
Votes Cast For 17,073,151
Votes Cast Against 1,526,258
Votes Withheld/Broker
Non-Votes 348,233
20
<PAGE>
(4) The shareholders adopted the JDN Realty Corporation Long-Term
Incentive Plan.
Votes Cast For 24,561,079
Votes Cast Against 3,227,330
Votes Withheld/Broker
Non-Votes 269,837
(5) The shareholders approved the amendment to increase the number of
shares reserved for issuance under the JDN Realty Corporation
1993 Incentive Stock Option Plan.
Votes Cast For 21,325,365
Votes Cast Against 6,405,461
Votes Withheld/Broker
Non-Votes 327,421
(6) The shareholders ratified the appointment of Ernst & Young LLP as
independent auditors of the Company for the year ending December
31, 1999.
Votes Cast For 27,793,534
Votes Cast Against 46,098
Votes Withheld/Broker
Non-Votes 218,615
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 First Amendment dated as of June 11, 1999 to
the $200,000,000 Amended and Restated Credit
Agreement dated as of September 2, 1998
among JDN Realty Corporation, the Banks
Listed Herein and Wachovia Bank, N.A. as the
Agent
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 June 30, 1999, the Company did
not file any reports on Form 8-K.
21
<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.
August 11, 1999 /s/ J. Donald Nichols
- -------------------- -------------------------------------------------
(Date) J. Donald Nichols
Chief Executive Officer
August 11, 1999 /s/ William J. Kerley
- -------------------- -------------------------------------------------
(Date) William J. Kerley
Senior Vice President and Chief Financial Officer
22
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------ -------
10.1 First Amendment dated as of June 11, 1999 to the $200,000,000 Amended
and Restated Credit Agreement dated as of September 2, 1998 among JDN
Realty Corporation, the Banks Listed Herein and Wachovia Bank, N.A. as
the Agent
12 Statement re: Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
23
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is dated
as of the 11th day of June, 1999 among JDN REALTY CORPORATION (the "Borrower"),
WACHOVIA BANK, N.A., as Agent (the "Agent") and WACHOVIA BANK, N.A., PNC BANK,
NATIONAL ASSOCIATION, BANKERS TRUST COMPANY, COMMERZBANK, A.G., ATLANTA AGENCY,
FOUR WINDS FUNDING CORPORATION, FIRST TENNESSEE BANK NATIONAL ASSOCIATION and
SOUTHTRUST BANK, NATIONAL ASSOCIATION, (collectively, the "Banks");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Agent and the Banks executed and delivered that
certain Amended and Restated Credit Agreement, dated as of September 2, 1998
(the "Credit Agreement");
WHEREAS, the Borrower has requested and the Agent and the Banks have agreed
to certain amendments to the Credit Agreement, subject to the terms and
conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and other
good and valuable consideration, the receipt and sufficiency of which hereby is
acknowledged by the parties hereto, the Borrower, the Agent and the Banks hereby
covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term
-----------
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer to the Credit
Agreement as amended hereby.
2. Amendment to Section 1.01. Section 1.01 of the Credit Agreement
-------------------------
hereby is amended by deleting the definitions of "Eligible Property", "Gross
Asset Value" and "Termination Date"
<PAGE>
and by adding the following definitions in appropriate alphabetical sequence:
"Consolidated Fixed Charges" means, for any period, determined on
a consolidated basis in accordance with GAAP, the sum of (i) Consolidated
Interest Expense for the Fiscal Quarter just ended and the 3 immediately
preceding Fiscal Quarters, plus (ii) all dividends paid or declared but not
yet paid by the Borrower on preferred stock during the Fiscal Quarter just
ended and the 3 immediately preceding Fiscal Quarters, plus (iii) the
aggregate amount of scheduled principal amortization paid in the Fiscal
Quarter just ended and the 3 immediately preceding Fiscal Quarters as
reflected on the Borrower's most recent quarterly financial statement
submitted to the Banks, but excluding any principal payments under this
Agreement or any other agreement pertaining to revolving debt permitted
under Section 5.26, and excluding any balloon payments on other Debt.
"Development SPE" means a special purpose entity approved by the
Required Banks (which approval shall not be unreasonably withheld or
delayed) formed by an unrelated party for the purpose of owning and
developing property which may be purchased by the Borrower, any Guarantor
or an Affiliate thereof and borrowing money for such purpose, which entity
shall be restricted pursuant to its articles of incorporation from engaging
in any business other than owning and developing property, and activities
incidental thereto, and from incurring any Debt, other than Replacement
Property Development Loans and other Debt incidental thereto.
"Eligible Construction in Progress" means any Construction in
Progress which is located at a Property in the continental United States of
America and with respect to which at least 50% of the leasable space in
such Property is pre-leased, including at least one anchor tenant.
"Eligible Property" means any retail Property which is either (i)
listed on Exhibit J, (ii) included in Eligible Construction in Progress or
---------
(iii) which has been approved as an Eligible Property by the Required
Banks, at the request of the Borrower, taking into account the following
information concerning the Property provided to the Agent and the Banks by
the Borrower: a physical description, applicable environmental reports,
information regarding its age, location and occupancy, an operating
statement and rent roll for the most recent Fiscal Quarter, and an
operating budget for the current Fiscal Year.
<PAGE>
"Gross Asset Value" means, on a consolidated basis for the
Borrower and the Guarantors, the sum of (without duplication with respect
to any Property):
(i) an amount equal to the product of (x) 10 (which is the
capitalization rate), times (y) 4 (which is the annualization factor),
times (z) the Net Operating Income for the 3 month period ending on
the last day of the month just ended prior to the date of
determination, from each Property owned by the Borrower or any
Guarantor for at least one Fiscal Quarter; plus
(ii) an amount equal to the book value as of the last day of the
month just ended prior to the date of determination of Property owned
by the Borrower or any Guarantor for less than a Fiscal Quarter; plus
(iii) the book value of Construction in Progress on the last day
of the Fiscal Quarter just ended; plus
(iv) the aggregate amount of all restricted cash held by a
Qualified Intermediary on behalf of the Borrower or any Guarantor,
plus
(v) the aggregate principal amount outstanding of all
Replacement Property Development Loans as to which the development of
the relevant property is controlled by the Borrower, a Guarantor or an
Affiliate thereof.
"Qualified Intermediary" means any Person serving as a "qualified
intermediary" for purposes of a Section 1031 Exchange.
"Relinquished Property" means a Property sold to a Person which
is not the Borrower or an Affiliate thereof, and the proceeds of such sale
are held in an exchange account by a Qualified Intermediary, as part of a
Section 1031 Exchange.
"Replacement Property" means a Property acquired as a replacement
for a Relinquished Property as part of a Section 1031 Exchange.
"Replacement Property Development Loan" means a loan by the
Borrower or any Guarantor to a Development SPE, provided that (i) the
proceeds of such loan are used solely for the development of a retail
Property that may be purchased by the Borrower, any Guarantor or any
Affiliate thereof, or that may be transferred to the Borrower, any
Guarantor or any Affiliate thereof, as part of a Section 1031 Exchange,
(ii) the principal amount of such loan outstanding at any time shall not
exceed 100% of the aggregate costs actually incurred (including hard and
soft costs) for development of such property, (iii) such loan
3
<PAGE>
accrues interest at a rate which is not less than the interest rate in
effect from time to time with respect to Loans under this Agreement, with
such interest being capitalized during construction and then payable from
available cash flow, (iv) such loan is secured by a first priority
mortgage, deed to secure debt, deed of trust or similar instrument on such
Property in favor of the Borrower or such Guarantor, (v) such loan matures
no later than 35 months after the date such loan is made, (vi) 100% of the
net proceeds of sale of portions of such property by the Development SPE
shall be paid and applied as a prepayment on such loan, (vii) such loan is
repayable in full at the earlier of maturity or sale or transfer of all of
the remaining property by the Development SPE, and (viii) such loan remains
a performing loan in all material respects.
"Section 1031 Exchange" means a sale and exchange of a
Relinquished Property for a Replacement Property pursuant to and qualifying
for tax treatment under Section 1031 of the Code.
"Termination Date" means whichever is applicable of (i) May 22,
2002, (ii) the date the Commitments are terminated pursuant to Section 6.01
following the occurrence of an Event of Default, or (iii) the date the
Borrower terminates the Commitments entirely pursuant to Section 2.08.
3. Amendment to Section 2.05(b). Section 2.05(b) of the Credit Agreement
----------------------------
hereby is deleted and the following is substituted therefor:
(b) Notwithstanding the foregoing, the outstanding principal
amount of the Loans, if any, together with all accrued but unpaid interest
thereon, if any, shall be due and payable on the Termination Date.
4. Amendment to Section 2.06(a). Section 2.06(a) of the Credit Agreement
----------------------------
hereby is amended by deleting the table contained therein and by substituting
the following table therefor:
<TABLE>
<CAPTION>
================================================================
Level I Level II Level III Level IV
================================================================
<S> <C> <C> <C> <C>
Debt (greater
Rating than equals
to)BBB+ BBB BBB- (less than)BBB-
and/1/ and/1/ and/1/ and/1/
Baa1 Baa2 Baa3 Baa3
----------------------------------------------------------------
Applicable
================================================================
</TABLE>
____________________________
/1/ if applicable
4
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
----------------------------------------------------------------
Margin 0.90% 1.00% 1.15% 1.50%
================================================================
</TABLE>
5. Amendment to Section 2.14. Section 2.14 of the Credit Agreement
-------------------------
hereby is deleted and the following is substituted therefor:
SECTION 2.14. Additional Banks and Commitments. Upon (i) the
--------------------------------
execution of a signature page to this Agreement by a new bank or financial
institution (a "New Bank") and acceptance thereof by the Agent,(ii)
execution and delivery by the Borrower of a Syndicated Loan Note and a
Money Market Loan Note in favor of the New Bank, and (iii) delivery of
notice to the Banks by the Agent setting forth the effective date of the
addition of the New Bank hereunder and the amount of such New Bank's
Commitment, such New Bank shall be for all purposes a Bank party to this
Agreement to the same extent as if it were an original party hereto with a
Commitment as set forth on the signature page executed by the New Bank;
provided, however, (x) the total Commitments of all Banks shall not exceed
in the aggregate $200,000,000 and (y) the Commitments and obligations of
all Banks party hereto prior to the addition of any New Bank shall not be
affected by the addition of such New Bank.
6. Amendment to Section 5.01(c). Section 5.01(c) of the Credit Agreement
----------------------------
hereby is deleted and the following is substituted therefor:
(c) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate,
substantially in the form of Exhibit F (a "Compliance Certificate"), of the
---------
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections
5.05, 5.15, 5.16, 5.17, 5.20 through 5.25, inclusive, and 5.30 on the date
of such financial statements and (ii) stating whether any Default exists on
the date of such certificate and, if any Default then exists, setting forth
the details thereof and the action which the Borrower is taking or proposes
to take with respect thereto;
7. Amendment to Section 5.05. Section 5.05 of the Credit Agreement
-------------------------
hereby is deleted and the following is substituted therefor:
SECTION 5.05. Consolidations, Mergers and Sales of Assets.
-------------------------------------------
Neither the Borrower nor any of the Guarantors will consolidate or merge
with or into, or acquire all or substantially all of the assets or stock of
any other Person, or sell, lease or otherwise transfer all or any
5
<PAGE>
substantial part of its assets to, any other Person, provided that:
--------
(i) the Borrower may merge with another Person if (x) such
Person was organized under the laws of the United States of America or
one of its states, (y) the Borrower is the corporation surviving such
merger and (z) immediately after giving effect to such merger, no
Default shall have occurred and be continuing;
(ii) Guarantors may merge with one another, and the Guarantors
may sell, lease or otherwise transfer assets to the Borrower;
(iii) any sale for cash only of Property by JDN DCI, pursuant to
reasonable terms which are no less favorable to JDN DCI than would be
obtained in a comparable arm's length transaction with a Person which
is not an Affiliate, for fair market value (as determined in good
faith by the Board of Directors of JDN DCI or the Borrower or an
Executive Committee thereof), provided that the proceeds thereof are
--------
used by JDN DCI, or are distributed by JDN DCI to the Borrower or a
Guarantor to be used by it, for the purchase of comparable property,
to repay Debt or to fund new development, or otherwise to be retained
by it for working capital;
(iv) the sale by the Borrower or a Guarantor of a Relinquished
Property as part of a Section 1031 Exchange; provided that such sale
--------
is pursuant to reasonable terms which are no less favorable to the
Borrower or such Guarantor than would be obtained in a comparable
arm's length transaction with a Person which
6
<PAGE>
is not an Affiliate, for fair market value (as determined in good
faith by the Board of Directors of the Borrower or such Guarantor or
an Executive Committee thereof), provided that the proceeds thereof
--------
are used by the Borrower or such Guarantor for the purchase of
Replacement Property;
(v) the foregoing limitation on the acquisition of all or
substantially all the assets or stock of another Person shall not
prohibit, during any Fiscal Quarter, the acquisition of all or
substantially all of the assets or stock of another Person unless the
aggregate assets or stock acquired in a single acquisition or series
of related acquisitions of all or substantially all of the assets or
stock of another Person by the Borrower and the Guarantors during such
Fiscal Quarter constituted more than 20% of Gross Asset Value at the
end of the most recent Fiscal Quarter immediately preceding such
Fiscal Quarter;
(vi) the foregoing limitation on the sale, lease or other
transfer of assets shall not prohibit, during any Fiscal Quarter, a
transfer of assets (in a single transaction or in a series of related
transactions) unless the aggregate assets to be so transferred, when
combined with all other assets transferred, by the Borrower and the
Guarantors during such Fiscal Quarter and the immediately preceding 3
Fiscal Quarters (but in each case excluding transfers permitted under
clauses (i) through (iv) above), constituted more than 25% of Gross
Asset Value at the end of the most recent Fiscal Quarter immediately
preceding such Fiscal Quarter.
In the case of any Guarantor which transfers substantially all of its
assets pursuant to clause (vi) of the preceding sentence, and in the case
of any Guarantor the stock of which is being sold and with respect to which
clause (vi) would have been satisfied if the transaction had been a sale of
assets of such Guarantor, such Guarantor may dissolve and shall be entitled
to obtain from the Agent a written release from the Guaranty, provided that
--------
it can demonstrate to the reasonable satisfaction of the Agent that (A) it
has repaid in full all Debt owed to the Borrower or any other Guarantor and
(B) such sale was for cash and in the case of an asset transfer, the net
cash proceeds received in connection therewith are being distributed to the
Borrower as part of such dissolution, and upon obtaining such written
release, it shall no longer be a Guarantor for any purpose hereunder.
7
<PAGE>
8. Amendment to Section 5.16. Section 5.16 of the Credit Agreement
-------------------------
hereby is deleted and the following is substituted therefor:
SECTION 5.16. Loans or Advances. Neither the Borrower nor any of
-----------------
the Guarantors shall make loans or advances to any Person except as
permitted by Section 5.17 and except:
(i) loans or advances to employees and directors not exceeding
$10,000,000 in the aggregate principal amount outstanding at any time;
(ii) deposits required by government agencies or public
utilities;
(iii) Replacement Property Development Loans and loans or
advances from the Borrower to a Guarantor or from a Guarantor to the
Borrower or another Guarantor; and/or
(iv) other loans and advances by the Borrower and the Guarantors
to any JDN Venture which (x) are evidenced by notes (and, if requested
by the Agent, acting at the direction of the Required Banks, with such
notes, together with any related mortgage, have been assigned to and
pledged with the Agent, for the benefit of itself and the Banks, as
security for the payment of all obligations of the Borrower to the
Agent and the Banks hereunder) and (y) are in an amount which,
together with Investments permitted by clause (vi) of Section 5.17, do
not exceed 15% of Gross Asset Value as of the end of the most recent
Fiscal Quarter; provided that after giving effect to the making of any
--------
loans, advances or deposits permitted by this Section, and no Default
shall be in existence or be created thereby.
9. New Section 5.30. A new Section 5.30 hereby is added to the Credit
----------------
Agreement, as follows:
SECTION 5.30 Ratio of EBITDA to Consolidated Fixed Charges. The
---------------------------------------------
ratio of EBITDA to Consolidated Fixed Charges for the Fiscal Quarter just
ended and the 3 immediately preceding Fiscal Quarters will not be less than
1.75 to 1.00, calculated at the end of each Fiscal Quarter.
10. Amendment to Section 6.01(b). Section 6.01(b) of the Credit Agreement
----------------------------
hereby is deleted and the following is substituted therefor:
8
<PAGE>
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.01(e), 5.01(i), 5.02(ii), 5.03 through 5.06,
inclusive, or Sections 5.17 through 5.30, inclusive; or
11. Amendment to Exhibit F (Compliance Certificate). Exhibit F to the
-----------------------------------------------
Credit Agreement hereby is deleted and Exhibit F attached hereto is substituted
therefor.
12. Restatement of Representations and Warranties. The Borrower hereby
----------- -- --------------- --- ----------
restates and renews each and every representation and warranty heretofore made
by it in the Credit Agreement and the other Loan Documents as fully as if made
on the date hereof and with specific reference to this First Amendment and all
other loan documents executed and/or delivered in connection herewith.
13. Effect of Amendment. Except as set forth expressly hereinabove, all
------ -- ---------
terms of the Credit Agreement and the other Loan Documents shall be and remain
in full force and effect, and shall constitute the legal, valid, binding and
enforceable obligations of the Borrower. The amendments contained herein shall
be deemed to have prospective application only, unless otherwise specifically
stated herein.
14. Ratification. The Borrower hereby restates, ratifies and reaffirms
------------
each and every term, covenant and condition set forth in the Credit Agreement
and the other Loan Documents effective as of the date hereof.
15. Counterparts. This First Amendment may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
16. Section References. Section titles and references used in this First
------- ----------
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
17. No Default. To induce the Agent and the Banks to enter into this
-- -------
First Amendment and to continue to make advances pursuant to the Credit
Agreement, the Borrower hereby acknowledges and agrees that, as of the date
hereof, and after giving effect to the terms hereof, there exists (i) no Default
or Event of Default and (ii) no right of offset, defense, counterclaim, claim or
objection in favor of the Borrower arising out of or with respect to any of the
Loans or other obligations of the Borrower owed to the Banks under the Credit
Agreement.
9
<PAGE>
18. Further Assurances. The Borrower agrees to take such further actions
------------------
as the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Borrower.
19. Governing Law. This First Amendment shall be governed by and
-------------
construed and interpreted in accordance with, the laws of the State of Georgia.
20. Conditions Precedent. This First Amendment shall become effective
--------------------
only upon (i) execution and delivery of this First Amendment by the Borrower,
the Agent and the Required Banks; (ii) execution and delivery of the Consent and
Reaffirmation of Guarantor at the end hereof by JDN DCI; (iii) receipt by the
Agent of customary closing documents (including such secretary's certificates,
officer's certificates, good standing certificates and opinions of counsel as
the Agent may reasonably require); (iv) payment to the Agent, for the ratable
account of the Banks, of an extension fee in an amount equal to 0.10% of the
aggregate amount of the Commitments; and (v) payment to the Agent, for the
account of Wachovia Securities, Inc., of the arranger's structuring fee payable
pursuant to the letter agreement between the Borrower, the Agent and Wachovia
Securities, Inc. dated April 26, 1999.
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this First Amendment to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.
JDN REALTY CORPORATION, WACHOVIA BANK, N.A.,
as Borrower (SEAL) as Agent and as a Bank (SEAL)
By:______________________ By:_____________________
Title: Title:
PNC BANK, NATIONAL BANKERS TRUST COMPANY,
ASSOCIATION, (SEAL) as a Bank (SEAL)
as a Bank
By:______________________ By:____________________
Title: Title:
COMMERZBANK, A.G., ATLANTA FOUR WINDS FUNDING CORPORATION,
AGENCY, as a Bank (SEAL) as a Bank (SEAL)
By: ___________________________ By:_____________________
Title: Title:
10
<PAGE>
By:___________________________ By: ____________________
Title: Title:
FIRST TENNESSEE BANK NATIONAL SOUTHTRUST BANK, NATIONAL
ASSOCIATION, (SEAL) ASSOCIATION, (SEAL)
as a Bank as a Bank
By:___________________________ By:_____________________
Title: Title:
11
<PAGE>
EXHIBIT F
---------
COMPLIANCE CERTIFICATE
----------------------
Reference is made to the Amended and Restated Credit Agreement dated as of
September 2, 1998, as amended by First Amendment to Credit Agreement dated as of
June 10, 1999 (as so amended and as hereafter modified and supplemented and in
effect from time to time, the "Credit Agreement") by and among JDN Realty
Corporation, the Banks from time to time parties thereto, and Wachovia Bank,
N.A., as Agent. Capitalized terms used herein shall have the meanings ascribed
thereto in the Credit Agreement.
Pursuant to Section 5.01(c) of the Credit Agreement, ______________, the
duly authorized ______________________ of the Borrower, hereby (i) certifies to
the Agent and the Banks that the information contained in the Compliance Check
List attached hereto is true, accurate and complete as of __________, ____, and
that no Default is in existence on and as of the date hereof and (ii) restates
and reaffirms that the representations and warranties contained in Article IV of
the Credit Agreement are true on and as of the date hereof as though restated on
and as of this date.
JDN REALTY CORPORATION
By:___________________________
Its:
12
<PAGE>
COMPLIANCE CHECK LIST
JDN REALTY CORPORATION
--------------------------
_____________, ____
1. Ratio of Consolidated Total Liabilities to Gross Asset Value (Section 5.20)
The ratio of Total Consolidated Liabilities to Gross Asset Value shall at
all times be equal to or less than 0.55 to 1.0.
(a) Total Consolidated Liabilities
Schedule 1 $_________
(b) Gross Asset Value Schedule 2 $_________
(c) Actual ratio of (a) to (b) _______to 1.0
Maximum ratio 0.55 to 1.0
2. Ratio of Total Secured Debt to Gross Asset Value (Section 5.21)
The ratio of Total Secured Debt to Gross Asset Value shall at all times be
equal to or less than 0.40 to 1.0.
(a) Total Secured Debt Schedule 3 $_________
(b) Gross Asset Value Schedule 2 $_________
(c) Actual ratio of (a) to (b) ______to 1.0
Maximum ratio 0.40 to 1.0
3. Ratio of EBITDA to Consolidated Interest Expense (Section 5.22)
The ratio of EBITDA to Consolidated Interest Expense for the Fiscal Quarter
just ended and the 3 immediately preceding Fiscal Quarters will not be less
than 2.0 to 1.00, calculated at the end of each Fiscal Quarter.
(a) EBITDA Schedule 4 $_________
(b) Consolidated Interest Expense/2/ $_________
_________________
/2/ During Fiscal Quarter just ended and immediately preceding 3 Fiscal Quarters
13
<PAGE>
(c) actual ratio of (a) to (b) _____to 1.0
Minimum ratio 2.0 to 1.0
4. Ratio of Unencumbered Assets to Unsecured Funded Debt (Section 5.23)
The ratio of Unencumbered Assets to Unsecured Funded Debt shall at all
times be equal to or greater than 1.75 to 1.00.
(a) Net Operating Income from each
and owned for at least one Fiscal
Quarter Schedule 5 $_________
(b) 10 times (a) $_________
(c) 4 times (b) $_________
(d) book value of each Property not subject
to a Mortgage and owned for less than
one Fiscal Quarter $_________
(e) book value of all Construction in Progress $_________
(f) sum of (c),(d) and (e) $_________
(g) Unsecured Funded Debt Schedule 6 $_________
(h) Actual ratio of (f) to (g) _____ to 1.0
Minimum ratio 1.75 to 1.0
5. Ratio of Unsecured Net Operating Income to Unsecured Interest Expense
(Section 5.24) The ratio of Unsecured Net Operating Income to Unsecured
Interest Expense shall at all times be equal to or greater than 1.75 to
1.0.
(a) Unsecured Net Operating Income Schedule 5 $_________
(b) Unsecured Interest Expense/2/ $_________
(c) Actual ratio of (a) to (b) ____ to 1.0
Minimum ratio 1.75 to 1.0
___________________
/2/ Include only Consolidated Interest Expense for Fiscal Quarter attributable
to Unsecured Funded Debt.
14
<PAGE>
6. Restricted Payments (Section 5.15)/3/
The Borrower's Restricted Payments in any calendar year shall not exceed
95% of Funds from Operations for such period, unless (i) the Borrower must
pay out an amount in excess of 95% of Funds from Operations to permit the
Borrower to preserve its status as a real estate investment trust under the
applicable provision of the Code.
(a) Restricted Payments for current
calendar year $_________
(b) Funds from Operations for current
calendar year Schedule 7 $_________
(c) 95% of (b) $_________
Limitation: (a) may not exceed (c)
7. Guarantees (Section 5.25)
Neither the Borrower nor any Guarantor will create, assume or suffer to
exist any Guarantees of Debt of other Persons, except (i) Guarantees in
existence on May 23, 1997 in the aggregate as of August 31, 1998 of
21,770,661, (ii) Guarantees of Debt of the Borrower or other Guarantors and
(iii) other Guarantees in an aggregate amount not exceeding at any time 10%
of Gross Asset Value as of the last day of the Fiscal Quarter just ended.
(a) Amount Guaranteed by other Guarantees
not permitted by clauses (i) and (ii) $_________
(b) Gross Asset Value Schedule 2 $_________
(c) 10% of (b) $_________
Limitation: (a) may not exceed (c)
8. Consolidations, Mergers and Sales of Assets (Section 5.05)
_____________________
/3/ Include this paragraph 6 and Schedule 7 only with the first Compliance
Certificate furnished after the end of each Fiscal Year. Amounts included herein
are for the year ended December 31, ____
15
<PAGE>
Neither the Borrower nor any of the Guarantors will consolidate or merge with or
into, or acquire all or substantially all of the assets or stock of any other
Person, or sell, lease or otherwise transfer all or any substantial part of its
assets to, any other Person, provided that:
--------
[(i) . . . (iv)]
(v) the foregoing limitation on the acquisition of all or
substantially all the assets or stock of another Person shall not
prohibit, during any Fiscal Quarter, the acquisition of all or
substantially all of the assets or stock of another Person unless the
aggregate assets or stock acquired in a single acquisition or series
of related acquisitions of all or substantially all of the assets or
stock of another Person by the Borrower and the Guarantors during such
Fiscal Quarter constituted more than 20% of Gross Asset Value at the
end of the most recent Fiscal Quarter immediately preceding such
Fiscal Quarter;
(vi) the foregoing limitation on the sale, lease or other
transfer of assets shall not prohibit, during any Fiscal Quarter, a
transfer of assets (in a single transaction or in a series of related
transactions) unless the aggregate assets to be so transferred, when
combined with all other assets transferred, by the Borrower and the
Guarantors during such Fiscal Quarter and the immediately preceding 3
Fiscal Quarters (but in each case excluding transfers permitted under
clauses (i) through (iv) above), constituted more than 25% of Gross
Asset Value at the end of the most recent Fiscal Quarter immediately
preceding such Fiscal Quarter.
(a) Aggregate amount of assets or stock
acquired in a single acquisition or
series of related acquisitions
during Fiscal Quarter just ended $_________
(b) Gross Asset Value Schedule 2 $_________
(c) 20% of (b) $_________
Limitation: (a) may not exceed (c)
(d) Aggregate amount of assets sold
during Fiscal Quarter just
ended $_________
(e) Aggregate amount of assets sold
during 3 prior Fiscal Quarters $_________
16
<PAGE>
(f) Sum of (d) and (e) $_________
(g) 25% of (b) $_________
Limitation: (f) may not exceed (g)
9. Loans or Advances (Section 5.16)
Neither the Borrower nor any of the Guarantors shall make loans or advances
to any Person except as permitted by Section 5.17 and except:
(i) loans or advances to employees and directors not exceeding
$10,000,000 in the aggregate principal amount outstanding at any
time;
[(ii) . . . (iii)]
(iv) other loans and advances by the Borrower and the Guarantors
to any JDN Venture which (x) are evidenced by notes (and, if
requested by the Agent, acting at the direction of the Required
Banks, with such notes, together with any related mortgage, have been
assigned to and pledged with the Agent, for the benefit of itself and
the Banks, as security for the payment of all obligations of the
Borrower to the Agent and the Banks hereunder) and (y) are in an
amount which, together with Investments permitted by clause (vi) of
Section 5.17, do not exceed 15% of Gross Asset Value as of the end of
the most recent Fiscal Quarter;
(a) Loans and advances to officers
and directors $_________
Limitation $10,000,000
(b) Other loans and advances evidenced by
notes (and, if required, pledged with
Agent) and not
permitted by clauses (i) through (iii) $________
(c) See line (e) and "Limitation" of paragraph 10 below
10. Investments (Section 5.17)
Investments of the Borrower as of the Closing Date (other than in
Subsidiaries, which are set forth in Schedule 4.08), are set forth on
Schedule 5.17. Neither the Borrower nor any of the Guarantors
17
<PAGE>
shall make Investments after the Closing Date in any Person except as
permitted by Section 5.16 and except Investments in:
[(i) . . . (v)]
(vi) other Investments by the Borrower and the Guarantors in an amount
which, (x) together with loans and advances permitted by clause (iv) of
Section 5.16, do not exceed 15% of Gross Asset Value as of the end of the
most recent Fiscal Year, and (y) with respect to Investments in Persons over
which, after giving effect to such Investment, the Borrower or the
Guarantors do not have Control, do not exceed 5% of Gross Asset Value as of
the end of the most recent Fiscal Year;
(a) Line (b) of paragraph 9 above $_________
(b) Other Investments not permitted by
clauses (i) through (v) $_________
(c) Sum of (a) and (b) $_________
(d) Gross Asset Value Schedule 2 $_________
(e) 15% of (d) $_________
Limitation: (c) may not exceed (e)
(f) Investments included in line (b) in
Persons over which the Borrower or the
Guarantors do not have control $_________
(g) 5% of (d) $_________
Limitation: (f) may not exceed (g)
11. Ratio of EBITDA to Consolidated Fixed Charges (Section 5.30)
The ratio of EBITDA to Consolidated Fixed Charges for the Fiscal Quarter
just ended and the 3 immediately preceding Fiscal Quarters will not be less
than 1.75 to 1.00, calculated at the end of each Fiscal Quarter.
(a) EBITDA Schedule 4 $_________
(b) Consolidated Interest Expense/4/ $_________
(c) dividends paid or declared
______________________
/4/ During Fiscal Quarter just ended and immediately preceding 3 Fiscal
Quarters
18
<PAGE>
but not yet paid on preferred
stock/4/ $_________
(d) aggregate amount of scheduled
principal amortization paid /5/ $_________
(e) sum of (b) through (d) $_________
(f) actual ratio of (a) to (e) ____ to 1.0
Minimum ratio 1.75 to 1.0
_________________________
/5/ During Fiscal Quarter just ended and immediately preceding 3 Fiscal
Quarters, but excluding any principal payments under this Agreement or any
other agreement pertaining to revolving debt permitted under Section 5.26
and excluding any balloon payments on other Debt.
19
<PAGE>
Schedule 1
----------
Total Consolidated Liabilities
------------------------------
(a) Consolidated Liabilities $_________
(b) Debt Guaranteed by Borrower or any
Guarantor $_________
(c) face amount of all letters of credit
issued for the account of the
Borrower or any Guarantor $_________
TOTAL CONSOLIDATED LIABILITIES (sum of (a)
through (c) $__________
20
<PAGE>
Schedule 2
----------
Gross Asset Value
-----------------
(a) Net Operating Income for the 3 month
period ending on the last day of the
month just ended prior to the date of
determination, from each Property owned
by the Borrower or any Guarantor for
at least one Fiscal Quarter $__________
(b) 40 times (a) $__________
(c) book value of each Property owned by
the Borrower or any Guarantor
for less than one Fiscal Quarter $__________
(d) book value of Construction in
Progress of each Property owned
by the Borrower or any Guarantor $__________
(e) aggregate amount of all restricted
cash held by a Qualified Intermediary
on behalf of the Borrower or any
Guarantor $__________
(f)) aggregate principal amount
outstanding of all Replacement
Property Development Loans as
to which the development of the
relevant property is controlled
by the Borrower, a Guarantor or
an Affiliate thereof. $__________
GROSS ASSET VALUE (sum of (b) through (f)) $__________
21
<PAGE>
Schedule 3
----------
Total Secured Debt/6/
---------------------
<TABLE>
<CAPTION>
INTEREST FINAL
RATE/7/ MATURITY TOTAL
------- -------- -----
<S> <C> <C> <C>
Money Borrowed
- --------------
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
Total Money Borrowed $_________
Deferred Purchase Price/8/
- --------------------------
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
Total Deferred Purchase Price $_________
Capital Leases in which Borrower is the Tenant
- ----------------------------------------------
____________________________________________________________ $_________
____________________________________________________________ $_________
Total Capital Leases $_________
Letter of Credit Reimbursement
Obligations
- -----------
____________________________________________________________ $_________
____________________________________________________________ $_________
Total Letter of Credit
Reimbursement Obligations $_________
Guarantees of Debt of Persons other than Borrower and Guarantors
- ----------------------------------------------------------------
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
</TABLE>
__________________________
/6/ Include only Debt secured by a Mortgage
/7/ If rate is fixed, insert contract rate. If rate is floating, state that.
/8/ Exclude trade accounts payable in the ordinary course of business.
22
<PAGE>
<TABLE>
<S> <C> <C> <C>
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
_____________________________ __________ __________ $_________
TOTAL SECURED DEBT $_________
</TABLE>
23
<PAGE>
Schedule 4
----------
EBITDA
------
<TABLE>
<S> <C>
____ quarter ____
consolidated net income $________
less extraordinary gains ($________)
plus extraordinary losses $________
plus Consolidated Interest Expense $________
plus taxes on income $________
plus depreciation and amortization $________
plus other non-cash charges $________
Total $________
____ quarter ____
consolidated net income $________
less extraordinary gains ($________)
plus extraordinary losses $________
plus Consolidated Interest Expense $________
plus taxes on income $________
plus depreciation and amortization $________
plus other non-cash charges $________
Total $________
____ quarter ____
consolidated net income $________
less extraordinary gains ($________)
plus extraordinary losses $________
plus Consolidated Interest Expense $________
plus taxes on income $________
plus depreciation and amortization $________
plus other non-cash charges $________
Total $________
____ quarter ____
consolidated net income $________
less extraordinary gains ($________)
plus extraordinary losses $________
plus Consolidated Interest Expense $________
plus taxes on income $________
plus depreciation and amortization $________
plus other non-cash charges $________
Total $________
EBITDA $
========
</TABLE>
24
<PAGE>
Schedule 5
----------
Net Operating Income/9/
-----------------------
(for Fiscal Quarter just ended)
____ quarter ____
Property revenues $________
less Property expenses
(excluding depreciation, amortization
and debt service) ($________)
less management fee (3% of gross
rental income, excluding
percentage rents) ($________)
less capital reserve ($0.15 per leasable
square foot) ($________)
NET OPERATING INCOME $________
______________________________
/9/ Include only Properties not subject to a Mortgage and owned for at least
one Fiscal Quarter
25
<PAGE>
Schedule 6
----------
Unsecured Funded Debt/10/
-------------------------
<TABLE>
<CAPTION>
INTEREST FINAL
RATE/11/ MATURITY TOTAL
-------- -------- -----
<S> <C> <C> <C>
Money Borrowed
- --------------
_____________________________ __________ _________ $_________
_____________________________ __________ _________ $_________
_____________________________ __________ _________ $_________
_____________________________ __________ _________ $_________
_____________________________ __________ _________ $_________
Total Money Borrowed $_________
_______
Deferred Purchase Price/12/
- ---------------------------
_____________________________ __________ _________ $_________
_____________________________ __________ _________ $_________
_____________________________ __________ _________ $_________
_____________________________ __________ _________ $_________
Total Deferred Purchase Price $_________
Capital Leases in which the Borrower is the tenant
- --------------------------------------------------
___________________________________________________________ $_________
___________________________________________________________ $_________
Total Capital Leases $_________
Letter of Credit Reimbursement
</TABLE>
_________________________
/10/ Include only Debt not secured by a Mortgage
/11/ If rate is fixed, insert contract rate. If rate is floating, state that.
/12/ Exclude trade accounts payable in the ordinary course of business.
26
<PAGE>
<TABLE>
<S> <C>
Obligations
- -----------
___________________________________________________________ $_________
___________________________________________________________ $_________
Total Letter of Credit
Reimbursement Obligations $_________
<CAPTION>
Guarantees of Debt of Persons other than Borrower and Guarantors
- ----------------------------------------------------------------
<S> <C> <C> <C>
_____________________________ ___________ __________ __________
_____________________________ ___________ __________ __________
_____________________________ ___________ __________ __________
_____________________________ ___________ __________ __________
_____________________________ ___________ __________ __________
TOTAL UNSECURED FUNDED DEBT $
==========
</TABLE>
27
<PAGE>
Schedule 7/13/
--------------
Funds from Operations/1/
------------------------
(for Fiscal Year just ended)
Net income $________
plus depreciation and amortization
of real estate assets $________
plus net loss/(gain) on real estate
sales $________
plus loss/(gains) on extraordinary
items $________
plus depreciation of real estate
assets held in unconsolidated
entities $________
FUNDS FROM OPERATIONS $________
_______________________________
/13/ Include only with the first Compliance Certificate furnished after the
end of each Fiscal year.
28
<PAGE>
CONSENT AND REAFFIRMATION OF GUARANTOR
The undersigned (i) acknowledges receipt of the foregoing First Amendment
to Credit Agreement (the "First Amendment"), (ii) consents to the execution and
delivery of the First Amendment by the parties thereto and (iii) reaffirms all
of its obligations and covenants under the Guaranty Agreement dated as of
September 2, 1998 executed by it, and agrees that none of such obligations and
covenants shall be affected by the execution and delivery of the First
Amendment.
JDN DEVELOPMENT COMPANY, INC. (SEAL)
By: ______________________
Title:
_________________________
29
<PAGE>
JDN Realty Corporation
Computation of Ratio of Earnings to Fixed Charges
Exhibit 12
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Fixed Charges:
Interest Expense (including
amortization of deferred debt cost) $ 6,745 $ 4,198 $ 13,103 $ 7,553
Interest Capitalized 1,809 1,417 3,283 2,721
----------- ----------- ----------- -----------
Total Fixed Charges $ 8,554 $ 5,615 $ 16,386 $ 10,274
=========== =========== =========== ===========
Earnings:
Net (loss) before income tax benefit,
net gain (loss) on real estate sales
extraordinary items and
cumulative effect of change in
accounting principle $ 12,325 $ 9,968 $ 24,476 $ 19,080
Fixed Charges 8,554 5,615 16,386 10,274
Capitalized Interest (1,809) (1,417) (3,283) (2,721)
----------- ----------- ----------- -----------
Total Earnings $ 19,070 $ 14,166 $ 37,579 $ 26,633
=========== =========== =========== ===========
Ratio of Earnings to Fixed Charges 2.23 2.52 2.29 2.59
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 0 1,652
<SECURITIES> 0 0
<RECEIVABLES> 8,681 5,408
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 910,951 709,920
<DEPRECIATION> 60,782 45,675
<TOTAL-ASSETS> 1,056,902 811,290
<CURRENT-LIABILITIES> 0 0
<BONDS> 234,604 234,542
0 0
20 0
<COMMON> 332 310
<OTHER-SE> 526,139 437,100
<TOTAL-LIABILITY-AND-EQUITY> 1,056,902 811,290
<SALES> 0 0
<TOTAL-REVENUES> 51,630 36,255
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 22,258 15,764
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,790 3,826
<INCOME-PRETAX> 24,476 19,165
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 24,476 19,165
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,132 19,165
<EPS-BASIC> 0.67 0.64
<EPS-DILUTED> 0.66 0.63
</TABLE>
