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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): FEBRUARY 15, 2000
(FEBRUARY 14, 2000)
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JDN REALTY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 1-12844 58-1468053
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification
Incorporation) Number)
359 EAST PACES FERRY ROAD
SUITE 400
ATLANTA, GEORGIA 30305
(Address of Principal Executive Offices) (Zip Code)
(404) 262-3252
(Registrant's Telephone Number, including Area Code)
NOT APPLICABLE
(Former Name)
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ITEM 5. OTHER EVENTS.
JDN Realty Corporation (the "Company") is filing this Current
Report on Form 8-K in order to file with the Securities and Exchange Commission
a script for the Company's 10:30 A.M. EST teleconference on Monday, February
14, 2000. A copy of the related script is included as an exhibit to this filing.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99.1 Script for Company's 10:30 A.M. EST teleconference on
Monday, February 14, 2000
</TABLE>
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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 hereunto duly authorized.
JDN REALTY CORPORATION
By: /s/ John D. Harris, Jr.
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John D. Harris, Jr.
Vice President and Controller
Date: February 15, 2000
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99.1 Script for Company's 10:30 A.M. EST teleconference on
Monday, February 14, 2000
</TABLE>
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EXHIBIT 99.1
TELECONFERENCE SCRIPT
FINAL - 10:30 A.M. EST
FEBRUARY 14, 2000
Moderator
Good morning, this is Michael Geczi from Sitrick And Company and I would like to
welcome you to the JDN Realty Corporation conference call.
I assume all of you have read the news release we issued this morning announcing
the fact that JDN has established a temporary Office of the Chief Executive
Officer, in light of the resignation of J. Donald Nichols as CEO. As you know
from the release, Mr. Nichols will continue as non-executive Chairman of the
company. The new Office of the CEO will be shared by two members of JDN's senior
management - William J. Kerley, the Chief Financial Officer, and Elizabeth L.
Nichols, the President.
Bill and Elizabeth will be conducting this conference call with you this
morning, and I will turn the call over to them in a moment. But, first, I want
to reemphasize the fact that, as noted in our conference call advisory this
morning, the call will be one-way only. Given the fact that the special
committee is engaged in an ongoing inquiry, and we have not yet released our
financial results for 1999, there will be no question-and-answer session at the
conclusion of this presentation. A replay of this call will be available in two
hours, and can be accessed for up to one week. The replay number is (800)
642-1687. The conference ID number is 752187.
Before we can get started, I need to read you the following:
JDN Realty Corporation considers certain of the following statements,, with
respect to the Company's beliefs and expectations of the outcome of future
events, such as the estimates of the amounts and accounting treatment for the
unreported compensation and
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transactions noted in this release, to be forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, both as amended. Such statements are, by their
nature, subject to certain risks and uncertainties. We caution you that a number
of factors may adversely affect the Company and its results of operation. Other
risks, uncertainties and factors that could adversely affect the Company and its
operations 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. JDN
Realty Corporation does not undertake any obligation to release publicly any
revisions to forward-looking statements contained herein to reflect events or
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.
I'll now turn this over to Bill Kerley
Bill?
Bill Kerley
Thank you, Mike. Good morning.
Perhaps it would be helpful if I spent a few moments reviewing the details of
today's announcement:
- - First of all, Donnie Nichols has resigned, effective immediately, as Chief
Executive Officer, but will remain as non-executive Chairman of the Board
of Directors with responsibility for maintaining and creating tenant
relationships and for identifying development opportunities for the
company. Following my remarks, Elizabeth Nichols will provide you with
additional information on Donnie's new responsibilities.
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- - Secondly, an interim Office of the Chief Executive Officer (CEO) has been
created and will be headed by Elizabeth Nichols and me. A search committee
of the Board, chaired by William G. Byrnes, also has been created to
initiate immediately a nationwide search for a permanent CEO. Other members
of the committee are William B. Greene and Philip G. Satre, each of whom is
a non-management board member.
- - We also announced that the public release of our earnings for the year
ended December 31, 1999, will be delayed and is not expected to occur
before the beginning of March 2000. The delay is the result of the
company's discovery of certain real estate transactions, which included
undisclosed compensation arrangements and related party transactions
involving Jeb L. Hughes, senior vice president of development for JDN
Development Company, and C. Sheldon Whittelsey, IV, vice president of
development, both of whom have resigned effective immediately.
- - Furthermore, the law firm associated with these transactions has been
terminated.
Now, let me spend a few moments on these transactions, which were not accurately
recorded in the company's accounting records, and were not accurately recorded
or disclosed in JDN's audited financial statements for its years ended December
31, 1994 through 1998. A substantial number of these transactions were approved
by Donnie Nichols. However, let me add that all of the subject transactions -
INCLUDING THOSE THAT WERE NOT APPROVED BY DONNIE -- violated the policies of the
company and JDN Development Company. The company does not believe that Donnie
received any personal remuneration from these transactions. Additionally, it is
important to understand that the subject transactions involved 21 of the
company's approximately 150 development projects over the indicated five-year
period.
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As a result of the discovery, a special committee of non-management members of
the Board of Directors was formed, has engaged counsel, and is conducting an
inquiry into the nature and extent of these transactions and their impact on the
company's financial statements and credit agreements.
Now, as to the financial impact of the discovered transactions:
According to information currently available, the company believes that the
approximate total of unreported compensation for the years 1994 through 1998 was
as follows:
- - In 1994, UNREPORTED COMPENSATION WAS $600,000. We had net income of $3
million and funds from operation of $9.8 million
- - In 1995, UNREPORTED COMPENSATION WAS $800,000. Net income was $10.7 million
and FFO was $17.2 million.
- - In 1996, UNREPORTED COMPENSATION WAS $1 MILLION. Net income was $16.7
million and FFO was $24.7 million.
- - In 1997, UNREPORTED COMPENSATION WAS $1 MILLION. Net income was $21.3
million and FFO was $37.7 million.
- - In 1998, UNREPORTED COMPENSATION WAS $1.5 MILLION. Net income was $41.4
million and FFO was $56.8 million.
We continue to review these foregoing periods, as well as the company's
unaudited periods in 1999. These numbers exclude additional sums for the excess
of the fair value over the company's cost for certain land conveyances and also
exclude any related
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payroll or income tax liabilities, which are still being evaluated. In addition,
these amounts include certain sums that the company may seek to recover.
The compensation and other amounts are likely to be accounted for as an expense
for each of the year's incurred, which would result in a restatement of the
company's financial statements for each of those years, and reduce net income
and funds from operations for those periods.
It is important to point out that we believe the net-asset value of our real
estate is not adversely affected by these transactions.
We currently believe that the inaccuracies in our financial statements are a
breach of certain non-financial and non-operating covenants included in JDN's
principal credit facility and, thus, constitute a default. We are discussing
with our banks obtaining, to the extent necessary, a waiver of any uncured
default. A default under the credit agreement, if not waived, could result in a
default under the company's indenture relating to its unsecured medium-term
notes.
Finally, we do not believe that the company's qualification as a real estate
investment trust (REIT) for federal income tax purposes is likely to be affected
by the undisclosed compensation or related party transactions.
Now, I'd like Elizabeth Nichols to say a few words.
Elizabeth?
Elizabeth Nichols
Thank you, Bill.
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I think Bill's remarks provide you with a good sense of the events to date. What
I would like to do now is briefly discuss where JDN is going from here.
JDN Realty is one of the most highly regarded - and best-performing - companies
in the REIT industry. This has not occurred by happenstance -- nor is it the
result of the activities of just a few people. It is directly attributable to a
sound operating strategy, an outstanding management team - with breadth and
depth - and to extremely dedicated employees who are assisting us through this
process.
Our mission has been clear: to create shareholder value through the development,
asset management, acquisition and disposition of shopping centers.
We have been effective in implementing our strategy - OVER THE LONG TERM --
because of five distinct competitive advantages that set JDN apart from its
competition. I'd like to take a minute to briefly discuss these:
- - First of all, during our 20-plus-year history, we have earned a reputation
for delivering what is expected of us ... the fact is, we have never failed
to meet our commitments to our anchor tenants for reliability, consistency
and predictability.
- - Another advantage, without question, is the strength and quality of our
relationships ... we do business, and have for a long time, with some of
the nation's leading retailers
- - A strong asset management process is another point of differentiation. This
includes management, leasing, acquisition and disposition
- - We have dedicated and experienced employees who form the backbone of our
organization
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- - We are financially strong
These competitive advantages drive our operating performance, some of the
highlights of which I would like to emphasize to you:
- - THE QUALITY OF OUR INCOME STREAM IS EXTREMELY HIGH. The fact is, 50 percent
of the rent we collect is derived from investment grade tenants ... many of
which are on long-term contractual leases.
- - OUR OCCUPANCY LEVELS CONSISTENTLY ARE HIGH. We have consistently maintained
at least 95% occupancy levels in our operating portfolio, including
acquisitions we have currently bought for releasing. Additionally, our
recently completed development projects are at 98% occupancy rates.
- - OUR DISPOSITION PROGRAM IS ACTIVE AND HEALTHY. We have consummated the
previously announced sale of approximately $140 million of completed
projects since September 30, 1999.
- - OUR DEVELOPMENT PIPELINE IS ROBUST. As you recall, our development pipeline
stood at $312.2 million as of September 30, 1999. There has been no let up
since that time
Now, let me speak briefly about our development activities.
The responsibilities previously held by Mr. Hughes and Mr. Whittelsey will be
assumed by several members of our senior development team, including Jim
Angeloni, Mark Goldberg and Steve Lane, all of whom will continue to handle
tenant relationships and new developments. Additionally, David Henzlik, who has
been JDN's Director of Leasing, joined the development team late last year.
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Each of these persons is highly experienced with tenant relationships and/or the
development process. For example, Jim Angeloni has developed more than two
million square feet of retail space for such national retailers as Wal-Mart,
Lowe's, Sam's Club, Kohl's and Staples. Mark Goldberg's experience furthers our
development opportunities in the important intermountain region, where many of
our anchor tenants are adding stores and actively seeking JDN's help with their
growth plans.
In his new role, Donnie Nichols will assist the effort by identifying
development opportunities for the company. He will:
- - Continue to maintain and capitalize on our many tenant relationships in the
retail industry
- - Create new tenant relationships
- - Identify development opportunities for the company, focusing on both an
assignment-driven and location-driven basis
That concludes my remarks. In closing, I want to say to you that JDN is
committed to communicating with you as frequently and as completely as we
possibly can during this period. Obviously, we are constrained, both by an
upcoming earnings announcement as well as the ongoing inquiry. We will do our
best to get information as we are able.
We are a strong company, with talented management, dedicated employees, strong
business fundamentals and the right strategy.
We are moving ahead with confidence.
Thank you.
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