UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 No. 1-13080
GROVE PROPERTY TRUST
(Exact name of registrant as specified in its charter)
Maryland 06-1391084
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
598 Asylum Avenue, Hartford, Connecticut 06105
(Address of Principal Executive Offices) (Zip Code)
(860) 246-1126
(Issuer's Telephone Number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of Each Class: Name of Each Exchange on Which Registered:
-------------------- ------------------------------------------
Common Shares of Beneficial Interest, American Stock Exchange
$.01 par value
Securities registered pursuant to Section 12(g) of the Exchange Act:
NONE
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 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:
The number of Common Shares of Beneficial Interest outstanding as of April 30,
2000 was 8,250,072.
1
<PAGE>
GROVE PROPERTY TRUST
Form 10-Q
Index
- --------------------------------------------------------------------------------
Page
Part I: Financial Information 3
Item 1: Consolidated Financial Statements (unaudited) 3
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999 3
Consolidated Statements of Income for the Three
Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3: Quantitative and Qualitative Disclosures
About Market Risk 13
Part II: Other Information 14
Item 1: Legal Proceedings 14
Item 2: Change in Securities and Use of Proceeds 14
Item 3: Defaults upon Senior Securities 14
Item 4: Submission of Matters to a Vote of Security Holders 14
Item 5: Other Information 14
Item 6: Exhibits and Reports on Form 8-K 14
Signatures 15
2
<PAGE>
<TABLE>
GROVE PROPERTY TRUST
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(Unaudited)
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
ASSETS
------
<S> <C> <C>
Real estate assets:
Land ................................................... $ 45,818 $ 45,770
Buildings and improvements ............................. 268,061 266,432
Furniture, fixtures and equipment ...................... 4,286 3,972
--------- ---------
318,165 316,174
Less accumulated depreciation .......................... (20,144) (17,639)
--------- ---------
Net real estate assets ............................... 298,021 298,535
Real estate held for sale ................................... -- 2,671
Cash and cash equivalents ................................... 12,734 12,733
Due from affiliates ......................................... 121 112
Deferred charges, net of accumulated amortization
of $295 and $229, respectively ......................... 1,668 1,714
Other assets ................................................ 1,883 1,432
--------- ---------
Total assets .............................................. $ 314,427 $ 317,197
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Mortgage notes payable (including fair value step up of
$8,006 and $8,164, respectively) ..................... $ 178,263 $ 180,290
Revolving credit facility .............................. 13,700 15,300
Accounts payable, accrued expenses and other liabilities 11,065 11,377
Acquisition notes payable .............................. 4,675 4,675
Distributions payable .................................. 2,196 2,177
Security deposits ...................................... 3,371 3,394
Due to affiliates ...................................... 81 78
--------- ---------
Total liabilities ......................................... 213,351 217,291
Minority interest in the Operating Partnership .............. 32,351 32,231
Shareholders' equity:
Preferred shares, $.01 par value per share,
1,000,000 shares authorized; no shares
issued or outstanding ................................ -- --
Common shares, $.01 par value per share,
34,000,000 shares authorized; 8,224,425 and 8,197,141
shares issued and outstanding, respectively .......... 82 82
Additional paid-in capital ............................. 76,127 75,968
Distributions in excess of earnings .................... (7,484) (8,375)
--------- ---------
Total shareholders' equity ................................ 68,725 67,675
--------- ---------
Total liabilities and shareholders' equity ................ $ 314,427 $ 317,197
========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
GROVE PROPERTY TRUST
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<CAPTION>
For the Three Months Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Revenues:
Rental income .............................................. $15,524 $15,253
Property management income-affiliates ...................... 35 49
Other property related income .............................. 142 174
Interest income ............................................ 166 146
------- -------
Total revenues ......................................... 15,867 15,622
------- -------
Expenses:
Property operating expenses ................................ 5,819 6,086
Real estate taxes .......................................... 1,346 1,410
Interest expense ........................................... 3,624 3,400
Depreciation ............................................... 2,522 2,433
Amortization ............................................... 76 63
General and administrative ................................. 519 935
------- -------
Total expenses ......................................... 13,906 14,327
------- -------
Income before gain on sales of property, minority
interests and extraordinary item .................... 1,961 1,295
Gain on sales of property ...................................... 1,533 0
------- -------
Income before minority interests and extraordinary item 3,494 1,295
Minority interest in consolidated partnerships ................. -- 15
Minority interest in Operating Partnership ..................... 1,122 387
------- -------
Income before extraordinary item ...................... 2,372 893
Extraordinary income related to debt extinguishment, net ....... -- 226
------- -------
Net income .......................................... $ 2,372 $ 1,119
======= =======
Income before extraordinary item per common share - basic ...... $ 0.29 $ 0.10
======= =======
Extraordinary item per common share - basic .................... $ 0.00 $ 0.03
======= =======
Net income per common share - basic ............................ $ 0.29 $ 0.13
======= =======
Income before extraordinary item per common share - diluted .... $ 0.28 $ 0.10
======= =======
Extraordinary item per common share - diluted .................. $ 0.00 $ 0.03
======= =======
Net income per common share - diluted .......................... $ 0.28 $ 0.13
======= =======
Weighted average number of common shares outstanding - basic ... 8,217 8,642
Effect of stock options ........................................ 206 84
------- -------
Weighted average number of shares outstanding - diluted ........ 8,423 8,726
======= =======
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
<TABLE>
GROVE PROPERTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the Three Months Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Operating Activities:
Net income ........................................................ $ 2,372 $ 1,119
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ............................ 2,598 2,496
Extraordinary item related to debt extinguishment ........ -- (226)
Minority interests ....................................... 1,122 402
Non-cash compensation expense ............................ 21 30
Gain on sale of property ................................. (1,533) --
Change in other assets ............................................ (451) (643)
Change in accounts payable, accrued expenses, other
liabilities and security deposits ............................ (335) (980)
-------- --------
Net cash provided by operating activities ......................... 3,794 2,198
-------- --------
Investing activities:
Purchase of partnership interests ............................ -- (249)
Additions to real estate assets .............................. (1,991) (1,044)
Proceeds from sales of property, net ......................... 4,194 --
-------- --------
Net cash provided by (used in) investing activities ...... 2,203 (1,293)
-------- --------
Financing activities:
Net proceeds from mortgage notes payable ..................... -- 388
Net (repayments of) borrowings under Revolving credit facility (1,600) 4,550
Equity offering costs ........................................ -- (11)
Repayment of mortgage notes payable .......................... (2,027) (7,370)
(Advances to) borrowings from affiliates, net ................ (6) 154
Financing costs .............................................. (20) (234)
Prepayment penalty on debt refinancing ....................... -- (79)
Repurchase of common shares .................................. (169) (1,358)
Dividends and distributions paid ............................. (2,174) (2,060)
-------- --------
Net cash used in financing activities .................... (5,996) (6,020)
-------- --------
Net change in cash and cash equivalents ........................... 1 (5,115)
Cash and cash equivalents, beginning of period .................... 12,733 15,262
-------- --------
Cash and cash equivalents, end of period .......................... $ 12,734 $ 10,147
======== ========
Supplemental Information:
Cash paid for interest ....................................... $ 3,671 $ 3,396
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
GROVE PROPERTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
1. FORMATION AND DESCRIPTION OF THE COMPANY
- ---------------------------------------------
Grove Property Trust (the "Company") was organized in the State of Maryland
on April 4, 1994, as a Real Estate Investment Trust ("REIT"). The Company
currently operates fifty-five apartment communities and four specialty
retail properties. The apartment communities are generally mid-priced or
subsidized multi-family communities that are primarily located in the
southern New England area.
2. SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------
Basis of Presentation
---------------------
The financial statements are presented on a consolidated basis. Included in
the Company's financial statements are the accounts of the Operating
Partnership and various property partnerships. Properties are owned either
directly by the Operating Partnership or are owned by various limited
partnerships or limited liability companies that in turn are wholly owned
by the Operating Partnership. All significant intercompany transactions are
eliminated in consolidation.
The accompanying interim financial statements have been prepared by the
Company's management in accordance with accounting principles generally
accepted in the United States for interim financial information and with
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the interim financial statements presented herein
reflect all adjustments of a normal and recurring nature, which are
necessary to fairly state the interim financial statements. The results of
operations for the interim period ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December
31, 2000. These financial statements should be read in conjunction with the
Company's audited financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31,
1999.
3. MORTGAGE NOTES PAYABLE
- ----------------------------
Total mortgage notes payable of $178.3 million includes a fair value step
up of $8.0 million. The contractual principal amount outstanding of
mortgage notes payable is $170.3 million. The $8.0 million step up relates
to $44.6 million of above market interest rate mortgages, which were
assumed in connection with the purchase of the 20 apartment communities in
October 1998 through December 1998 (the "McNeil Portfolio"). The interest
rates on the assumed debt are between 7.46% and 12.47%. The step up was
computed using the Company's estimated market interest rate at acquisition
of 7.0%. The step up amount is not the legal stipulated principal amount of
the respective mortgage and, accordingly, this increase does not increase
the contractual obligation of the Company. If these loans are paid off in
advance of their maturity, the amount of the related step up on the
consolidated balance sheets will be accounted for as extraordinary income.
Mortgage notes payable consist of the following at March 31, 2000 (in
thousands):
Amortizing first mortgage notes $ 115,263
Interest only first mortgage notes 63,000
--------------
$ 178,263
==============
The amortizing first mortgage notes have fixed interest rates between 6.19%
and 12.47%. These notes mature between the years 2000 and 2031 and are
collateralized by thirty-two of the properties with an aggregate carrying
amount of approximately $160.4 million as of March 31, 2000. Certain of
these notes are partially guaranteed by certain executive officers and
shareholders of the Company.
There is one interest only first mortgage note. This note has a principal
balance of $63.0 million requiring monthly payments of interest at an
effective fixed interest rate of 6.71% and matures in 2008. This note is
collateralized by seventeen properties with an aggregate-carrying amount of
approximately $85.3 million as of March 31, 2000.
6
<PAGE>
Annual principal payments due as of March 31, 2000, are as follows (in
thousands):
Period Ending March 31,
-----------------------
2000 $ 2,466
2001 3,349
2002 3,630
2003 7,987
2004 6,360
Thereafter 154,471
----------
$ 178,263
==========
4. ACQUISITION NOTES PAYABLE
- ------------------------------
In conjunction with the purchase of the McNeil Portfolio, the Company
agreed to issue additional OP units and pay cash (together the "Acquisition
Notes Payable") to certain continuing partners in the event that any of
certain McNeil Portfolio properties were converted to a market rate
property. During the first quarter of 2000, the Company made no payment
under the Acquisition Notes Payable.
In 2000, it is estimated that $3.7 million ($1.7 million in cash and $2.0
million in OP units) of Acquisition Notes Payable will be paid. Thereafter,
it's estimated that $1.0 million ($0.3 million in cash and $0.7 million in
OP units) of Acquisition Notes Payable will be paid. The number of OP units
to be issued in conjunction with the payment of Acquisition Notes Payable
will be based on the 15-day average closing price of the Company's stock
just prior to the payment date.
5. SHAREHOLDERS' EQUITY
- --------------------------
The following table outlines the 2000 activity in the Operating Partnership
equity accounts:
<TABLE>
<CAPTION>
Number of:
--------------------------
Limited
Company's Partners'
Operating Operating
Partnership Partnership
Units Units
---------- ----------
<S> <C> <C>
Outstanding at December 31, 1999 ................................ 8,197,141 3,903,936
Common Units exchanged January 2000 through March 2000 ......... 32,456 (32,456)
Common Shares repurchased January 2000 through March 2000 ....... (13,152) --
Common Shares issued pursuant to employee stock compensation plan 7,980 --
--------------------------
Outstanding at March 31, 2000 ................................... 8,224,425 3,871,480
==========================
Ownership Percentage ........................................ 68 % 32 %
==========================
Common Shares have been reserved for future issuance as follows:
Common Units not owned by the Company (see above) 3,871,480
Stock options issued ............................. 1,125,209
Additional stock options issuable ................ 371,355
----------
5,368,044
==========
</TABLE>
6. SEGMENT REPORTING
- -----------------------
The following table presents information about reported segment profit or
loss and segment assets. The Residential segment consists of 4,927
apartment units, the Subsidized Residential segment consists of 1,231
apartment units, and the Retail segment consists of approximately 129,900
square feet. The Company does not allocate income taxes or unusual items to
segments. In addition, not all segments have significant noncash items
other than depreciation and amortization in reporting profit or loss
(dollars in thousands):
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000
---------------------------------
(In thousands)
Subsidized
Residential Residential Retail Total
----------- ----------- ------ -----
<S> <C> <C> <C> <C>
Revenues .................... $ 11,613 $ 3,552 $ 648 $ 15,813
Interest Expense ............ $ 2,383 $ 643 $ 154 $ 3,180
Depreciation and amortization $ 1,962 $ 379 $ 147 $ 2,488
Segment Profit .............. $ 2,636 $ 1,189 $ 216 $ 4,041
Segment Assets .............. $237,497 $ 55,747 $ 18,835 $312,079
FFO ......................... $ 4,434 $ 1,318 $ 352 $ 6,104
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
---------------------------------
(In thousands)
Subsidized
Residential Residential Retail Total
----------- ----------- ------ -----
<S> <C> <C> <C> <C>
Revenues .................... $ 11,413 $ 3,455 $ 660 $ 15,528
Interest Expense ............ $ 1,938 $ 806 $ 70 $ 2,814
Depreciation and amortization $ 1,889 $ 357 $ 143 $ 2,389
Segment Profit .............. $ 2,194 $ 1,237 $ 288 $ 3,719
Extraordinary income ........ $ 0 $ 324 $ 0 $ 324
Segment Assets .............. $237,335 $ 54,351 $ 19,657 $311,343
FFO ......................... $ 4,065 $ 1,269 $ 429 $ 5,763
</TABLE>
The following presentation is the reconciliation of reportable segment
revenues, profit or loss, FFO, assets and other significant items to the
Company's consolidated totals:
For the Three Months
--------------------
Ended March 31,
---------------
(In thousands)
2000 1999
--------- ---------
Revenues
--------
Total revenues for reportable segments .. $ 15,813 $ 15,528
Other revenues .......................... 54 94
--------- ---------
Total consolidated revenues ............. $ 15,867 $ 15,622
========= =========
Profit or Loss
--------------
Total profit/loss for reportable segments $ 4,041 $ 3,719
Other profit or loss .................... (547) (2,424)
--------- ---------
Income before extraordinary expense and
minority interests .................... $ 3,494 $ 1,295
========= =========
FFO
---
FFO for reportable segments ............. $ 6,104 $ 5,763
Other FFO ............................... (1,697) (2,093)
--------- ---------
FFO before minority interests ........... $ 4,407 $ 3,670
========= =========
Assets
------
Total assets for reportable segments .... $ 312,079 $ 311,343
Other assets ............................ 2,348 10,203
--------- ---------
Total consolidated assets ............... $ 314,427 $ 321,546
========= =========
8
<PAGE>
Three Months Ended March 31, 2000
---------------------------------
(In thousands)
Other Significant Items
-----------------------
Segment Consolidated
Totals Non-segment Totals
------ ----------- ------
Interest expense ............ $3,180 $ 444 $3,624
Depreciation and amortization $2,488 $ 110 $2,598
Three Months Ended March 31, 1999
---------------------------------
(In thousands)
Other Significant Items
-----------------------
Segment Consolidated
Totals Non-segment Totals
------ ----------- ------
Interest expense ............ $2,814 $ 586 $3,400
Depreciation and amortization $2,389 $ 107 $2,496
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
- ---------------------
Results of operations of the Company for the three months ended March 30, 2000
and 1999.
- --------------------------------------------------------------------------------
Total rental revenues increased $0.3 million to $15.9 million from $15.6 million
during the three months ended March 31, 2000, as compared to the corresponding
period in 1999. The increase is primarily due to increases in rental rates and
occupancy offset by a decrease in revenues due to the sale of two residential
apartment communities in 2000 and the sale of four residential apartment
communities in fourth quarter of 1999.
The weighted average monthly rental rate increased to $821 for the three months
ended March 31, 2000 from $775 for the same period in 1999. Economic occupancy
increased to an aggregate weighted average occupancy of 96.9% for the three
months ended March 31, 2000 from an aggregate weighted average occupancy of
95.7% for the same period in 1999.
Property operating expenses decreased $0.3 million to $5.8 million from $6.1
million during the three months ended March 31, 2000, as compared to the
corresponding period in 1999. The decrease is primarily due to the operations of
the sold properties, lower utilities and snow removal costs, offset by higher
payroll.
Real estate taxes decreased $0.1 to $1.3 million from $1.4 million during the
three months ended March 31, 2000, as compared to the corresponding period in
1999. The decrease is due primarily to the sold properties.
Interest expense increased $0.2 million to $3.6 million from $3.4 million during
the three months ended March 31, 2000, as compared to the corresponding period
in 1999. The increase is primarily due to new mortgage debt obtained in the
third quarter of 1999.
General and administrative expenses decreased $0.4 million to $0.5 million from
$0.9 million during the three months ended March 31, 2000, as compared to the
corresponding period in 1999. This decrease is primarily due to the decrease in
costs associated with the executive stock bonus plan.
Depreciation and amortization increased $0.1 million to $2.6 million from $2.5
million during the three months ended March 31, 2000, as compared to the
corresponding period in 1999.
The Company's income before extraordinary items increased $1.5 million to $2.4
million from $0.9 million during the three months ended March 31, 2000, as
compared to the corresponding period in 1999. The increase is due to the sale of
two properties in 2000 and increased rental rates and occupancy.
Same Community Analysis
- -----------------------
For the three months ended March 31, 2000 and 1999.
- ---------------------------------------------------
Total Same Community Operations
- -------------------------------
In the first quarter of 2000, total same community operations included 55
apartment communities (6,156 units, 47% in Massachusetts, 41% in Connecticut,
and 12% in Rhode Island) owned by the Company since the beginning of 1999.
Overall, same community net operating income increased 9.7% to $9.2 million from
$8.4 million for the first quarter of 2000 versus the first quarter of 1999. Net
operating income increased due to a 6.6% increase in revenues offset by a 2.2%
increase in operating expenses. Revenues increased primarily due to increases in
rental rates and occupancy. Operating expenses increased primarily due to higher
payroll and property insurance offset by lower utilities and snow removal costs.
On a same community basis, the weighted average monthly rental rate per
apartment increased 5.2% to $821 from $781 and the economic occupancy rate
increased to 97.6% from 96.3% for the first quarter of 2000 versus the first
quarter of 1999.
10
<PAGE>
The following table summarizes total same community operations:
-----------------------
Three Months Ended
March 31, %
-----------------------
2000 1999 Change
---- ---- ------
Average number of apartments ............... 6,156 6,135 0.3%
Economic Occupancy ......................... 97.6% 96.3% 1.3%
Average monthly rental rate per unit ....... $ 821 $ 781 5.2%
Revenues (millions) ....................... $14.93 $ 14.00 6.6%
Operating expenses (millions) ............. 5.75 5.63 2.2%
-------------------------------
Net operating income (millions) ....... $ 9.18 $ 8.37 9.7%
===============================
Eastern Massachusetts and Rhode Island Same Community Operations
- ----------------------------------------------------------------
In the first quarter, eastern Massachusetts and Rhode Island same community
operations included 28 apartment communities (3,287 units, 76% in eastern
Massachusetts, and 24% in Rhode Island) owned by the Company since the beginning
of 1999. Overall, eastern Massachusetts and Rhode Island Same Community net
operating income increased 11.7% to $5.5 million from $4.9 million for the first
quarter of 2000 versus the first quarter of 1999. Net operating income increased
due to a 7.4% increase in revenues offset by a 0.7 % increase in operating
expenses. Revenues increased primarily due to increases in rental rates and
occupancy. Operating expenses increased primarily due to higher payroll, repairs
and maintenance, and marketing and advertising offset by lower utilities,
eviction costs, and snow removal costs. Eastern Massachusetts and Rhode Island
same community weighted average monthly rental rate per apartment increased 5.9%
to $873 from $825 and the economic occupancy rate increased to 98.6% from 96.7%
for the first quarter of 2000 versus the first quarter of 1999.
The following table summarizes eastern Massachusetts and Rhode Island Same
Community operations:
--------------------
Three Months Ended
March 31, %
--------------------
2000 1999 Change
---- ---- ------
Average number of apartments ........ 3,287 3,287
Economic Occupancy .................. 98.6% 96.7% 2.0%
Average monthly rental rate per unit $ 873 $ 825 5.9%
Revenues (millions) ................. $ 8.60 $ 8.01 7.4%
Operating expenses (millions) ....... 3.13 3.11 0.7%
--------------------------------
Net operating income (millions) . $ 5.47 $ 4.90 11.7%
================================
Connecticut and Western Massachusetts Same Community Operations
- ---------------------------------------------------------------
In the first quarter, Connecticut and western Massachusetts same community
operations included 27 apartment communities (2,869 units, 87% in Connecticut
and 13% in western Massachusetts) owned by the Company since the beginning of
1999. Overall, Connecticut and western Massachusetts same community net
operating income increased 6.8% to $3.7 million from $3.5 million for the first
quarter of 2000 versus the first quarter of 1999. Net operating income increased
due to a 5.6% increase in revenues offset by a 4.0% increase in operating
expenses. Revenues increased primarily due to increases in rental rates,
occupancy, and the purchase of condominiums at three properties. Operating
expenses increased primarily due to higher payroll and insurance offset by lower
snow removal costs. Connecticut and western Massachusetts same community
weighted average monthly rental rate per apartment increased 4.3% to $762 from
$730 and the economic occupancy rate increased to 96.2% from 95.7% for the first
quarter of 2000 versus the first quarter of 1999.
11
<PAGE>
The following table summarizes Connecticut and western Massachusetts same
community operations:
----------------------
Three Months Ended
March 31, %
----------------------
2000 1999 Change
---- ---- ------
Average number of apartments .............. 2,869 2,848 0.7%
Economic Occupancy ........................ 96.2% 95.7% 0.5%
Average monthly rental rate per unit ...... $ 762 $ 730 4.3%
Revenues (millions) ....................... $ 6.33 $ 5.99 5.6%
Operating expenses (millions) ............. 2.62 2.52 4.0%
-----------------------------
Net operating income (millions) ....... $ 3.71 $ 3.47 6.8%
=============================
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents totaled $12.7 million as of March 31, 2000. The
Company's ratio of long-term debt including 1999 Credit Facility to total market
capitalization on March 31, 2000 was 53.9%, based on total market capitalization
of $341.2 million, based on 12,095,905 Common Units and Common Shares, valued at
$13.00 per share/unit (the closing price on March 31, 2000), plus $184.0 million
of long-term debt including borrowings under its 1999 Credit Facility and
excluding the fair value step up of $8.0 million.
On March 15, 2000, the Company declared an $0.18 per share dividend, which was
paid on April 14, 2000. The dividends declared during the period resulted in a
50.3% pay out of funds from operations for the three months ended March 31,
2000.
Acquisition Notes Payable are obligations related to three McNeil Portfolio
properties to pay additional cash and issue additional Common Units when
apartment units are converted to market rate units. In 1998, the mortgages on
the three properties were modified to allow for each property to convert 80% of
its units to market rate units.
During 1998, the Board of Trust Managers authorized the Company to repurchase up
to 400,000 Common Shares. In the first quarter of 1999, the Board of Trust
Managers authorized the Company to purchase up to an additional 500,000 Common
Shares. In the third quarter of 1999, the Board of Trust Managers authorized the
Company to purchase up to an additional 500,000 Common Shares. Purchases of
Common Shares and Common Units presented for redemption which are redeemed for
cash are being funded from operating cash flow and the Company's 1999 Credit
Facility. Since beginning its share repurchase program and through April 30,
2000, the Company has redeemed 457,689 Common Units for cash at an average price
of $11.33 per share and repurchased 878,079 Common Shares at an average price of
$11.41 per share.
The Company intends to meet its short-term liquidity requirements through cash
flow provided by operations and borrowings under the 1999 Credit Facility. The
Company considers its ability to generate cash to be adequate and expects it to
continue to be adequate to meet operating requirements and pay shareholder
dividends in accordance with REIT requirements. The Company may use other
sources of capital to finance additional acquisitions including, but not limited
to, the selling of properties, the selling of additional equity interests in the
Company, non-distributed funds from operations, the issuance of debt securities,
funds from the 1999 Credit Facility, and exchanging Common Shares or Common
Units for properties or interests in properties.
Acquisitions/Dispositions
- -------------------------
The Company regularly evaluates properties for possible acquisition or
disposition. Individual properties may be acquired through direct purchase of
the property or through the purchase of the entity owning such property and may
be made for cash or securities of the Company or the Operating Partnership. In
connection with any acquisition, the Company may incur additional indebtedness.
If the Company acquires or disposes of any property, such acquisition or
disposition could have a significant effect on the Company's financial
condition, results of operations or cash flows.
Funds from Operations
- ---------------------
The Company generally considers funds from operations ("FFO") an appropriate
measure of performance of an equity REIT. FFO is defined as income before gains
(losses) on investments and extraordinary items (computed in accordance with
accounting principles generally accepted in the United States) plus real estate
depreciation less preferred dividends. This definition conforms to the
recommendations set forth in a White Paper adopted by the National Association
of Real Estate Investment Trusts ("NAREIT") in early 1995. The Company believes
that in order to facilitate a clear
12
<PAGE>
understanding of its operating results, FFO should be examined in conjunction
with the net income as presented in the financial statements and information
included elsewhere in this Report. FFO does not represent cash generated from
operating activities in accordance with accounting principles generally accepted
in the United States and is not necessarily indicative of cash available to fund
cash needs. FFO should not be considered as an alternative to net income as an
indication of the Company's performance or as an alternative to cash flow as a
measure of liquidity.
FFO increased to $4.4 million from $3.6 million for the three months ended March
31, 2000 and 1999, respectively. Dividends declared for the three months ended
March 31, 2000 were $0.18 per share, representing 50.3% of FFO, while dividends
declared for the three months ended March 31, 1999 were $0.18 per share
representing 61.7% of FFO.
FFO was calculated as follows (in thousands):
For the Three Months Ended
March 31,
2000 1999
---- ----
Income before gain on sales of property,
extraordinary item and minority interests ......... $1,961 $1,295
Real estate depreciation and amortization ......... 2,446 2,375
------ ------
Funds from operations before minority interests ... 4,407 3,670
Minority interests in consolidated partnerships ... -- 30
------ ------
FFO ............................................... $4,407 $3,640
====== ======
Seasonally
- ----------
Historically, the Company's net income has been lower in the first and second
quarters than in the remainder of the year due to higher utility charges, snow
removal and other weather-related expenses. In addition, rental rates increase
ratably during the year which results in higher rental revenues in the second
half of the year.
Inflation
- ---------
Substantially all of the leases at the residential properties are for a term of
one year or less, which may enable the Company to seek increased rents upon
renewal or reletting. Such short-term leases generally lessen the risk to the
Company of the potential adverse effects of inflation.
"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1996
- ------------------------------------------------------------------------------
Certain statements contained in this report, and in particular in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," statements in other filings with the Securities and Exchange
Commission and statements in other public documents of the Company may be
forward looking and are subject to a variety of risks and uncertainties. Forward
looking statements would typically include words like "believes," "anticipates"
or "estimates." Many factors could cause actual results to differ materially
from these statements. These factors include, but are not limited to, (i)
population shifts which may increase or decrease the demand for rental housing,
(ii) the value of commercial and residential rental properties in the Northeast
where all of the Company's properties are located, in recent years, have
fluctuated considerably, (iii) the effect on the Company's properties of
competition from new apartment complexes which may be completed in proximity to
such properties thereby increasing competition, (iv) the effect of weather and
other conditions which can significantly affect property operating expenses, (v)
the ability of the Company to successfully integrate the operation of properties
it has acquired or may acquire into its business and (vi) other factors which
might be described from time to time in the Company's filings with the
Securities and Exchange Commission. In addition, the Company is subject to the
effects of changes in general business economic conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in interest rates primarily from its 1999
Credit Facility. A hypothetical 100 basis point adverse move (increase) in
interest rates along the entire interest rate yield curve would adversely affect
the net fair value of all interest sensitive financial instruments by $137,000
at March 31, 2000.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
NONE
Item 2: Change in Securities and Use of Proceeds
NONE
Item 3: Defaults upon Senior Securities
NONE
Item 4: Submission of Matters to a Vote of Security Holders
NONE
Item 5: Other Information
NONE
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
No. Description
--- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
NONE
14
<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.
REGISTRANT:
GROVE PROPERTY TRUST
May 12, 2000 By: /s/Joseph R. LaBrosse
----------------------------
Name: Joseph R. LaBrosse
(On behalf of the registrant
and as Chief Financial Officer)
15
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial data extracted from the
consolidated financial statements of Grove Property Trust as of March
31, 2000 and for the quarter then ended and is qualified in its
entirely by reference to such statements.
</LEGEND>
<CIK> 0000920776
<NAME> Grove Property Trust
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 12,734
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,406
<PP&E> 318,165
<DEPRECIATION> 20,144
<TOTAL-ASSETS> 314,427
<CURRENT-LIABILITIES> 21,388
<BONDS> 191,963
0
0
<COMMON> 82
<OTHER-SE> 68,643
<TOTAL-LIABILITY-AND-EQUITY> 314,427
<SALES> 0
<TOTAL-REVENUES> 15,867
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,282
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,624
<INCOME-PRETAX> 2,372
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,372
<EPS-BASIC> 0.29
<EPS-DILUTED> 0.28
</TABLE>
