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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
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 001-13499
EQUITY ONE, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 52-1794271
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1696 N.E. MIAMI GARDENS DRIVE
NORTH MIAMI BEACH, FL 33179
(Address of principal executive office)
Registrant's telephone number, including area code: (305) 947-1664
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the 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 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 8, 2002, the aggregate market value of the voting stock of
the Registrant held by non-affiliates of the Registrant was approximately
$77,014,605.
As of March 8, 2002, the number of outstanding shares of Common Stock
par value $.01 per share of the Registrant was 29,485,843.
Certain sections of the Registrant's definitive Proxy Statement for the
2002 Annual Meeting of Stockholders are incorporated by reference in Part III of
this Annual Report on Form 10-K to the extent stated herein.
EQUITY ONE, INC.
TABLE OF CONTENTS
-----------------
PAGE
PART I
Item 1. Business..........................................................................................4
Item 2. Properties........................................................................................9
Item 3. Legal Proceedings................................................................................17
Item 4. Submission of Matters to a Vote of Security Holders..............................................17
PART II
Item 5. Market For Registrant's Common Equity and Related Matters........................................18
Item 6. Selected Consolidated Financial Data.............................................................19
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............21
Item 7a. Quantitative and Qualitative Disclosures about Market Risk.......................................30
Item 8. Financial Statements and Supplementary Data......................................................30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............30
PART III
Item 10. Directors and Executive Officers of the Registrant...............................................31
Item 11. Executive Compensation...........................................................................31
Item 12. Security Ownership of Certain Beneficial Owners and Management...................................31
Item 13. Certain Relationships and Related Transactions...................................................31
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports On Form 8-K.................................32
FORWARD-LOOKING INFORMATION
Certain information both included and incorporated by reference in this
Annual Report on Form 10-K may contain forward-looking statements within the
meaning of Section 21E of the Securities and Exchange Act of 1934, as amended,
or Exchange Act, and as such may involve known and unknown risks, uncertainties
and other factors which may cause our actual results, performance or
achievements to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements.
Forward-looking statements, which are based on certain assumptions and describe
our future plans, strategies and expectations, are generally identifiable by use
of the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend" or "project" or the negative thereof or other variations
thereon or comparable terminology.
You should also pay particular attention to those factors discussed
herein under the heading "Business - Risk Factors." You should not rely on the
information contained in any forward-looking statements, and you should not
expect us to update any forward-looking statements.
3
PART I
ITEM 1. BUSINESS
GENERAL
We are a self-administered, self-managed real estate investment trust,
or REIT, that principally acquires, renovates, develops and manages community
and neighborhood shopping centers. Our shopping centers are primarily anchored
by supermarkets or other necessity-oriented retailers such as drug stores or
discount retail stores. As of December 31, 2001, our portfolio consisted of 85
properties, comprising 55 supermarket-anchored shopping centers, six drug
store-anchored shopping centers, 18 other retail-anchored shopping centers, five
commercial properties and one drug store-anchored development, as well as
non-controlling interests in three unconsolidated joint ventures that own
commercial properties. Our existing properties are located primarily in
metropolitan areas of Florida and Texas, contain an aggregate of 8.6 million
square feet of gross leasable area, and were 86.1% occupied based on gross
leasable area as of December 31, 2001.
We were established as a Maryland corporation in 1992 and completed our
initial public offering in May 1998. In addition, we have been operating as a
REIT since 1995. Until 2001, we primarily owned and operated neighborhood and
community shopping centers located in Florida. However, during 2001, through two
strategic acquisitions, we increased our property portfolio in Florida and
expanded our property ownership into metropolitan areas located in Texas,
Arizona and Tennessee.
In September 2001, we acquired Centrefund Realty (U.S.) Corporation, or
CEFUS, a wholly-owned subsidiary of one of our affiliates, First Capital Realty
Inc., an Ontario corporation whose shares are traded on the Toronto Stock
Exchange (TSE:FCR). As a result of this transaction, we acquired 28 shopping
centers and interests in five joint ventures, two of which have been sold. These
properties contained an aggregate of approximately 3.2 million square feet of
gross leasable area.
In addition, in September 2001, we acquired United Investors Realty
Trust, or UIRT, a publicly traded Texas real estate investment trust whose
shares were listed on the Nasdaq National Market. As a result of this
transaction, we acquired 22 shopping centers and an interest in one joint
venture, which has been sold. These properties contained an aggregate of
approximately 2.0 million square feet of gross leasable area.
As a result of the CEFUS and UIRT acquisitions, we were able to nearly
triple the size of our property portfolio consistent with our business strategy
and investment criteria, and, at the same time, centralize management functions,
reduce our combined personnel and achieve other cost-savings measures. Our
resulting portfolio includes shopping centers primarily in Florida and Texas
which are anchored by national and regional supermarkets such as Albertsons,
Kash N' Karry, Kroger, Publix, Randalls and Winn-Dixie or other national
retailers such as Bed Bath & Beyond, Best Buy, Blockbuster, Eckerd, Home Depot
Design Expo, Kmart and Walgreens.
RECENT DEVELOPMENTS
On January 18, 2002 we completed a private placement of 688,000 shares
of our common stock to a limited number of accredited investors. In connection
with the private placement, we sold an aggregate of 344,000 shares of our common
stock at a price of $12.80 per share to unaffiliated investors and 344,000
shares of our common stock at price of $13.05 per share to investors that are
affiliates of ours. The aggregate proceeds of $8.9 million from the private
placement were raised for general corporate purposes. Contemporaneously with the
closing of the private placement, we repaid the existing $8.0 million mortgage
loan secured by our Copperfield shopping center.
On January 23, 2002, we filed a universal shelf registration statement
with the Securities and Exchange Commission that was declared effective on
February 8, 2002. This registration statement will permit us, from time to time,
to offer and sell various types of securities, including common stock, preferred
stock, debt securities, depositary shares and warrants, up to a value of $250
million. The registration statement provides us additional flexibility in
accessing capital markets to fund future growth and for general corporate
purposes.
In February 2002, we completed the sale of our Equity One office
building in Miami Beach, Florida to the City of Miami Beach for a purchase price
of approximately $6.1 million. We expect to realize a gain on the sale of this
property of approximately $4.3 million. In connection with the sale, we also
received $450,000 as a settlement for pending litigation against the City of
Miami Beach.
4
In February 2002, we completed the separate acquisitions of Wickham
Eckerd, a freestanding drug store located in Melbourne, Florida, for a purchase
price of $2.4 million, and of Leesburg Eckerd, a freestanding drug store located
in Leesburg, Florida, for a purchase price of $3.8 million. The acquisition of
these two properties, together with our previous acquisitions of our Ryanwood
and Barker Cypress shopping centers, enables us to defer recognition of the
capital gain realized by CEFUS on the sale of the Harbour Financial Center in
August 2001 pursuant to Section 1031 of the Internal Revenue Code.
On February 27, 2002, we entered into a variable-rate revolving credit
facility with Wells Fargo under which we may borrow up to $29.4 million.
Borrowings under the facility will bear interest at LIBOR plus a margin ranging
from 1.15% to 1.50% based on our overall leverage. The entire principal amount
is due February 26, 2005. Contemporaneously with the closing of the Wells Fargo
facility, we borrowed $17.0 million to repay existing mortgage loans on our
Oakbrook and Mandarin Landing shopping centers, both of which were assigned,
along with three other assets, as collateral for the Wells Fargo facility. In
addition, we reduced the availability under our existing, credit facility with
City National Bank of Florida from $17.8 million to $10.8 million.
On February 25, 2002, we exercised an option to purchase all of the
outstanding shares of common stock of a company owned by several of our
affiliates, the sole asset of which is an 8.5 acre parcel of land located at the
southeast corner of S.W. 147th Avenue and Coral Way in Miami, Florida. In
connection with the exercise of our option, we paid an exercise price of $2.0
million. Because of the affiliated nature of this transaction, our board
received an independent appraisal of the parcel prior authorizing us to exercise
our option. We intend to spend an additional $8.0 million over the next 12
months to develop an 84,000 square foot shopping center on this parcel, which
will be anchored by a 44,000 square foot Publix supermarket.
On February 25, 2002, we exercised an option to purchase all of the
outstanding shares of common stock of a company owned by several of our
affiliates, the sole asset of which is a 6.2-acre property, which is adjacent to
our Bird Ludlam shopping center in Miami, Florida. In connection with the
exercise of our option, we paid an exercise price of $1.0 million. Subsequent to
our purchase of this property, on February 26, 2002, we sold the property for
$400,000 in cash and an 8% interest-only note in the amount of $1.4 million due
on February 26, 2003. In connection with this sale, we expect to realize a gain
in the amount of $800,000.
On February 28, 2002, we sold Benbrook, a retail center located in
Benbrook, Texas, for a net purchase price of $2.6 million. We expect to realize
a gain on the sale of this property of approximately $1.1 million.
BUSINESS AND GROWTH STRATEGIES
Our business strategy has been and will continue to be to maximize
long-term shareholder value by generating sustainable cash flow growth and
increasing the long-term value of our real estate assets. To that end, we now
own and manage a portfolio of 79 community and neighborhood shopping centers
primarily anchored by supermarkets or other necessity-oriented retailers such as
drug stores or discount retail stores. In order to achieve our objectives in the
future, we intend to:
o maximize the value of our existing shopping centers by leasing
and re-leasing those properties at higher rental rates to
creditworthy tenants and renovating and developing those
properties to make them more attractive to such tenants;
o acquire additional neighborhood and community shopping centers
in high growth, high density metropolitan areas that are
primarily anchored by supermarkets or other necessity-oriented
retailers;
o sell or dispose of properties that do not meet our investment
criteria, asset type or geographic focus; and
o capitalize on our substantial asset base to effectively access
capital to fund our growth.
ENHANCING PORTFOLIO PERFORMANCE. We seek to maximize the value of our
existing shopping centers by leasing and re-leasing those properties at higher
rental rates to creditworthy tenants. These efforts improve the financial
performance of our shopping center portfolio. We believe that we have developed
strong, mutually beneficial relationships with creditworthy tenants,
particularly our anchor tenants, by consistently meeting or exceeding the
expectations and demands of those tenants. Over the years, this strategy has
allowed us to leverage our relationship with existing tenants to lease and
re-lease our properties and therefore maintain or improve the
5
financial performance of our existing properties or properties we acquire.
Moreover, we intend to renovate or develop a number of under-performing assets
that we acquired as a result of the CEFUS and UIRT transactions in order to make
them more attractive for leasing or re-leasing to creditworthy tenants.
ACQUISITION AND DEVELOPMENT OF SHOPPING CENTERS. As we seek to grow our
business, we intend to acquire additional neighborhood and community shopping
centers through individual property acquisitions, development of new properties,
property portfolio purchases and acquisitions of other REITs and real estate
companies, both privately-held and publicly-traded.
We select properties for acquisition or development, which have or are
suitable for supermarket or other anchor tenants that offer daily necessities
and value-oriented merchandise. The properties must be well located, typically
in high growth, high-density metropolitan areas, and have high visibility, open
air designs, ease of entry and exit and ample parking. Although we focus
primarily on well-performing, supermarket-anchored properties with strong cash
flows, we also acquire under-performing assets, which are adaptable over time
for expansion, renovation or redevelopment. When evaluating potential
acquisitions, whether well-performing or under-performing, and development
projects, we consider factors such as:
o the location, construction quality, design and visibility of the
property;
o economic, demographic, and regulatory and zoning conditions in the
property's local and regional market;
o tenants' gross sales per square foot measured against industry
standards;
o competition from comparable retail properties in the market area and
the possibility of future competition;
o the current and projected cash flow of the property and the potential
to increase cash flow;
o the terms of tenant leases, including the relationship between the
property's current rents and market rents and the ability to increase
rents upon lease rollover;
o the occupancy and demand by tenants for properties of a similar type in
the market area;
o the potential to complete a strategic renovation, expansion, or
re-tenanting of the property;
o the property's current expense structure and the potential to increase
operating margins;
o the potential for capital appreciation of the property; and
o the ability to subsequently sell or refinance the property.
When evaluating expansion, renovation and development possibilities, we
often do not initiate construction until we have secured commitments from anchor
tenants. In addition, when evaluating acquisitions of portfolios of properties,
REITs or other real estate businesses, we review the component properties
against the criteria described above, as well as opportunities for synergies and
cost savings on a combined basis, geographic fit with our existing markets and
the extent of non-core assets included in the acquisition.
In 2001, we acquired 50 new properties as a result of the CEFUS and
UIRT transactions as well as two individual shopping centers. In addition, we
commenced and completed additions of 40,000 and 24,000 square feet at our Lake
Mary and Sky Lake shopping centers.
We currently are focused on properties located in the southeast and
southwest regions of the United States. In addition, in making new real estate
investments, we intend to continue to place primary emphasis on obtaining 100%
equity interests in well-located, income-producing properties with attractive
yields and potential for increases in income and capital appreciation.
SELLING CERTAIN ASSETS. Over time, when assets we acquire no longer
meet our investment criteria, or when assets provide the opportunity for
significant gains, we may attempt to sell or otherwise dispose of those assets.
6
For instance, we acquired several properties as a result of the UIRT and CEFUS
acquisitions, which were not located in high growth, metropolitan areas or
otherwise were not consistent with our investment criteria outlined above. We
have already sold several of these properties and may attempt to sell others in
the future. Since December 1, 2000, we have sold five properties for aggregate
gross proceeds of approximately $40.4 million.
USING OUR CAPITAL TO EXPAND OUR BUSINESS. We intend to further grow and
expand our business by using cash available from operations or from lines of
credit or, if appropriate market conditions exist, by accessing the capital
markets by means of our recently filed universal shelf registration statement to
issue equity, debt or a combination thereof. In addition, as we have in the
past, we intend to utilize tax-advantaged structures to acquire properties from
sellers who wish to defer capital gains. Such structures may include entering
into a joint venture or other type of co-ownership with a seller, whether in the
form of a limited partnership or limited liability company, in which we would
acquire a controlling interest. We may offer the seller an interest in the
venture that is convertible or exchangeable for shares of common stock or
otherwise allow the seller to have an equity interest in our company.
COMPETITIVE STRENGTHS
We believe that we distinguish ourselves from other owners and
operators of community and neighborhood shopping centers in a number of ways,
including:
o SHOPPING CENTERS ANCHORED BY SUPERMARKETS OR NECESSITY-ORIENTED
RETAILERS. For the year ended December 31, 2001, shopping centers
anchored by supermarkets or other necessity retailers such as drug
stores or discount retail stores accounted for approximately 98.5% of
our total net operating income. As of March 1, 2002, these types of
shopping centers represented approximately 98.9% of our gross leasable
area, with supermarket-anchored centers representing 70.4%. We believe
that supermarket and other necessity-oriented retailers are resistant
to economic downturns by the nature of their business and generate
continuous consumer traffic through our shopping centers. This traffic
enhances the quality, appeal and longevity of our shopping centers and
benefits our other tenants.
o ATTRACTIVE LOCATIONS IN HIGH-GROWTH AREAS. Our portfolio of properties
is concentrated in high-density areas that are experiencing high
population growth such as Florida and Texas. As of March 1, 2002, these
states constitute 60.9% and 33.9% of our gross leasable area. The
strong demographics of these markets provide our properties with a
growing supply of shoppers and increased demand for the goods and
services of our tenants.
o DIVERSE TENANT BASE. No single tenant currently represents more than
10% of our annualized minimum rent and only one tenant, Publix,
represents more than 5% of such revenue. As of December 31, 2001,
Publix represented 5.5% of our annualized minimum rent. As of December
31, 2001, we had 1,615 leases with our tenants, including national and
regional supermarket chains, drug stores, discount retail stores, other
nationally or regionally known stores, a variety of other regional and
local retailers and a number of local service providers such as
doctors, dentists, hair salons, restaurants and others. We believe that
this diversity of tenants will enable us to generate more stable cash
flows over time and limits our exposure to the financial conditions of
any particular tenant.
o SEASONED MANAGEMENT TEAM. Our senior executives and managers average
more than 20 years of experience in the acquisition, management,
leasing, redevelopment and construction of real estate or retail
properties and many have been with us since our inception. In
particular, we believe that our in-depth market knowledge and long-term
tenant relationships developed by our senior management provide us with
a key competitive advantage.
o PROPERTY ACQUISITION STRENGTHS. We believe we have certain competitive
advantages which enhance our ability to capitalize on acquisition
opportunities, including our long standing relationships with real
estate bankers and brokers, tenants and institutional and other real
estate owners in our current target markets; our access to capital; our
ability to offer cash and tax advantaged structures to sellers; and our
demonstrated ability to conduct a rapid, efficient and effective due
diligence investigation of the property, portfolio or company. In 2001,
we acquired 52 new properties primarily through our acquisitions of
CEFUS and UIRT.
7
o STRONG RELATIONSHIP WITH TENANTS. We believe we have cultivated strong
relationships with supermarket and other anchor tenants, which, in
combination with our in-depth knowledge of our primary markets, have
contributed substantially to our success in identifying, acquiring and
operating our properties.
FINANCING STRATEGY
Our financing strategy is to maintain a strong and flexible financial
position by limiting our debt to a prudent level and minimizing our variable
interest rate exposure. We intend to finance future growth with the most
advantageous source of capital available to us at the time of an acquisition.
These sources may include selling common stock, preferred stock, debt
securities, depository shares or warrants through public offerings or private
placements, or incurring additional indebtedness through secured or unsecured
borrowings either at the parent level or through mortgages with recourse limited
to specific properties.
RISK FACTORS
We are subject to certain business risks arising in connection with
owning real estate which include, among others:
o the bankruptcy or insolvency of, or a downturn in the business of, any
of our major tenants could reduce cash flow;
o the possibility that tenants will not renew their leases as they expire
or renew at lower rental rates could reduce cash flow;
o vacated anchor space will affect the entire shopping center because of
reduced customer flow;
o poor market conditions in the areas where we own shopping centers could
create increased vacancy and reduce demand for tenant space;
o unfavorable economic conditions could also result in the inability of
tenants in certain retail sectors to meet their lease obligations and
otherwise adversely affect our ability to attract and retain desirable
tenants;
o our rapid growth could place strains on our management and resources;
o we may not be successful in identifying suitable properties or
companies for acquisition that meet our criteria which may impede our
growth;
o risks relating to leverage, including uncertainty that we will be able
to refinance our indebtedness, and the risks of higher interest rates;
o unsuccessful development activities would result in the expenditure of
capital and no corresponding increase in cash flow;
o our inability to satisfy our cash requirements for operations and the
possibility that we may be required to borrow funds to meet
distribution requirements in order to maintain our qualification as a
REIT;
o potential liability for unknown or future environmental matters and
costs of compliance with the Americans with Disabilities Act;
o limitations in our charter and bylaws and under Maryland law may have
the effect of delaying or preventing a change of control of our
company; and
o our dependency on the contributions of our senior executives and
corporate management team, and the loss of those services could have a
material adverse effect on our business.
If any of these risks are realized, then they could have an adverse
effect on our business, prospects or our ability to pay dividends in the future.
8
COMPETITION
There are numerous commercial developers, real estate companies,
including REITs such as Regency Realty Corporation, Weingarten Realty Investors
and IRT Property Company, and other owners of real estate in the areas in which
our properties are located that compete with us in seeking land for development,
properties for acquisition, financing and tenants. Many of such competitors have
substantially greater resources than we have. All of our existing properties are
located in developed areas that include other shopping centers and other retail
properties. The number of retail properties in a particular area could
materially adversely affect our ability to lease vacant space and maintain the
rents charged at our existing properties.
REGULATIONS
REGULATIONS. Retail properties are subject to various laws, ordinances
and regulations. We believe that each of our existing properties maintains all
required material operating permits and approvals.
AMERICANS WITH DISABILITIES ACT. Our properties are subject to the
Americans with Disabilities Act of 1990. Under the Disabilities Act, all places
of public accommodation are required to comply with federal requirements related
to access and use by disabled persons. The Disabilities Act has separate
compliance requirements for "public accommodations" and "commercial facilities"
that generally require that buildings and services, including restaurants and
retail stores, be made accessible and available to people with disabilities. The
Disabilities Act's requirements could require removal of access barriers and
could result in the imposition of injunctive relief, monetary penalties or, in
some cases, an award of damages. We believe that our properties are in
substantial compliance with the requirements under the Disabilities Act and have
no reason to believe that these requirements or the enforcement of these
requirements will have a materially adverse impact on our business.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and
regulations, we may be liable for the cost to remove or remediate certain
hazardous or toxic substances at our shopping centers. These laws often impose
liability without regard to whether we knew of, or were responsible for, the
presence of the hazardous or toxic substances. The cost of required remediation
and our liability for remediation could exceed the value of the property and/or
our aggregate assets. The presence of such substances, or the failure to
properly remediate such substances, may adversely affect our ability to sell or
rent the property or borrow using the property as collateral. We have several
properties that will require or are currently undergoing varying levels of
environmental remediation. We have no reason to believe that these remediations
will have a material financial effect on us due to our financial statement
reserves and insurance programs designed to mitigate the cost of remediation, as
well as various state-regulated programs that shift the responsibility and cost
to the state.
EMPLOYEES
At December 31, 2001, we had 79 full-time employees. Our employees are
not represented by any collective bargaining group, and we consider our
relations with our employees to be good.
ITEM 2. PROPERTIES
We maintain our principal executive and management office at 1696 N.E.
Miami Gardens Drive, North Miami Beach, Florida in the Shops at Skylake. As of
December 31, 2001, our portfolio consisted primarily of shopping centers
anchored by supermarket and other necessity-oriented retailers and contained an
aggregate of approximately 8.6 million square feet of gross leasable area. Other
than our leasehold interests in our Green Oaks, Parkwood and Richwood shopping
centers, each of which is located in Dallas, Texas, all of our other properties
are owned in fee simple. In addition, some of our properties are subject to
mortgages as described under "Management's Discussion and Analysis of Financial
9
Condition and Results of Operations - Mortgage Indebtedness." The following
table provides a brief description of each of our properties as of December 31,
2001:
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
SUPERMARKET AND OTHER NECESSITY-ORIENTED RETAILER ANCHORED CENTERS
FLORIDA (43 PROPERTIES)
NORTH FLORIDA (9 PROPERTIES)
Atlantic Village June 100,559 25 $973,466 $10.06 96.2% Publix, Jo-Ann
ATLANTIC BEACH 1995 Fabrics, Dollar Tree
Beauclerc May 71,127 12 $221,316 $6.33 49.2% Big Lots, Walgreens*
Village 1998
JACKSONVILLE
Commonwealth February 81,467 16 $620,673 $8.00 95.2% Winn-Dixie,
JACKSONVILLE 1994 Rent-A-Center, Pizza
Hut
Forest Village April 71,526 17 $681,434 $10.21 93.3% Publix, Video
TALLAHASSEE 2000 Warehouse, Waffle
House
Fort Caroline January 74,546 14 $523,424 $7.29 96.3% Winn-Dixie, Eckerd*
JACKSONVILLE 1994 (Bealls Outlet),
McDonald's
Losco Corners May 8,700 7 $106,972 $19.46 63.2% Winn-Dixie (5)
JACKSONVILLE 2000
Mandarin Landing December 141,565 37 $1,216,888 $8.85 97.1% Publix, Office
JACKSONVILLE 1999 Depot, Eckerd, Aqua
Zoo
Monument Point January 75,128 13 $490,576 $6.53 100.0% Winn-Dixie, Eckerd
JACKSONVILLE 1997
Oak Hill December 78,492 19 $538,533 $6.86 100.0% Publix, Walgreens*
JACKSONVILLE 1995 (Bonus Dollar)
CENTRAL FLORIDA (6 PROPERTIES)
Eustis Square October 126,791 27 $740,643 $6.68 87.4% Publix, Walgreens*
EUSTIS 1993 (Bealls Outlet),
Bealls Department
Store
Forest Edge December 68,631 12 $487,284 $7.10 100.0% Winn-Dixie, Auto
ORLANDO 1996 Zone, Rent-A-Center
Kirkman Shoppes September 88,820 32 $1,548,387 $17.43 100.0% Eckerd
ORLANDO 2001
Lake Mary December 339,084 69 $3,446,132 $10.60 95.9% Albertsons, Kmart,
ORLANDO 1988 Sun Star Theatres,
Euro Fitness
Park Promenade January 125,818 27 $1,169,076 $9.29 100.0% Publix, Blockbuster
ORLANDO 1999 Orange County Library
Walden Woods January 75,336 11 $490,009 $6.59 98.7% Winn-Dixie*,
PLANT CITY 1999 Walgreens
10
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
FLORIDA WEST COAST (8 PROPERTIES)
East Bay Plaza July 85,426 22 $467,699 $9.49 57.7% Albertsons (5), Family
LARGO 1993 Dollar, Hollywood Video
Lake St. September 57,015 8 $539,625 $9.46 100.0% Kash N' Karry
Charles 2001
TAMPA
Marco Town September 109,574 45 $1,497,255 $16.41 83.4% Publix
Center 2001
MARCO ISLAND
Mariners September 85,507 15 $621,791 $8.03 90.6% Kash N' Karry
Crossing 2001
SPRING HILL
Ross Plaza September 85,903 20 $708,554 $8.70 94.8% Walgreens, Ross
TAMPA 2001 Dress for Less
Shoppes of December 84,705 22 $800,168 $9.50 100.0% Publix, Bealls Outlet
North Port 2000
NORTH PORT
Skipper Palms September 86,503 17 $734,799 $8.49 100.0% Winn-Dixie
TAMPA 2001
Summerlin June 109,156 28 $1,053,100 $10.49 91.9% Winn-Dixie, Eckerd
Square 1998
FORT MYERS
SOUTH FLORIDA (20 PROPERTIES)
Bird Ludlum August 192,282 50 $2,665,909 $13.86 100.0% Winn-Dixie, Eckerd,
MIAMI 1994 Vision Works,
Blockbuster
Bluff Square September 132,395 51 $1,444,202 $11.11 98.2% Publix, Walgreens
JUPITER 2001
Boca Village September 94,111 24 $1,276,683 $13.66 99.3% Publix, Eckerd
BOCA RATON 2001
Boynton Plaza September 99,324 30 $875,810 $9.92 88.9% Publix, Eckerd
BOYNTON BEACH 2001
Cashmere Corners September 89,234 18 $668,002 $7.67 97.6% Albertsons,
PORT ST. LUCIE 2001 Blockbuster
Jonathan's Landing September 26,820 12 $467,809 $17.44 100.0% Winn-Dixie, Kmart
JUPITER 2001
Lantana Village January 176,110 26 $1,106,674 $6.32 99.4% Blockbuster,
LANTANA 1998 Albertsons (5)
Oakbrook September 225,073 35 $1,714,194 $8.84 86.2% Publix, Eckerd,
PALM BEACH GARDENS 2001 Roly's Bistro,
Jacobson Department
Store, Inc.
Pine Island August 254,907 48 $2,320,694 $9.13 99.7% Publix, Home Depot
DAVIE 1999 Design Expo, Rite Aid*
(Bealls Outlet)
11
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
Plaza Del Rey August 50,146 21 $608,630 $12.84 94.5% Navarro Pharmacy
MIAMI 1991
Point Royale July 209,863 26 $1,271,004 $6.40 94.6% Winn-Dixie, Best
MIAMI 1995 Buy, Eckerd
Pompano January 80,697 1 $540,000 $6.69 100.0% Lowe's
POMPANO BEACH 2001
Prosperity Center September 122,106 9 $1,795,043 $14.70 100.0% Office Depot, Barnes
PALM BEACH GARDENS 2001 & Noble, Bed Bath &
Beyond, Carmine's,
TJ Maxx
Ridge Plaza August 155,204 29 $1,312,764 $8.75 96.7% AMC Theatre,
DAVIE 1999 Kabooms, Republic
Security Bank, Uncle
Funnys, Round Up
Ryanwood November 114,925 33 $984,548 $8.95 95.7% Publix, Bealls
VERO BEACH 2001 Outlet,
Books-A-Million
Sawgrass Promenade September 107,092 29 $1,197,243 $11.28 99.1% Publix, Blockbuster,
DEERFIELD BEACH 2001 Walgreens
Shops at Skylake August 174,199 47 $2,553,315 $15.17 96.6% Publix, Goodwill,
NORTH MIAMI 1997 Radio Shack, First
BEACH Union, Blockbuster
University Mall September 326,307 45 $642,148 $10.20 19.3% Eckerd
FT. LAUDERDALE 2001
West Lakes Plaza November 100,747 27 $1,065,814 $10.58 100.0% Winn-Dixie, Navarro
MIAMI 1996 Pharmacy
Westburry September 33,706 21 $542,477 $16.09 100.0% Pizza Hut, Dairy
MIAMI 2001 Queen
TEXAS (32 PROPERTIES)
HOUSTON (15 PROPERTIES)
Albertsons September 15,542 8 $230,865 $14.85 100.0% Albertsons (5),
Bissonnet 2001 Blockbuster, Dollar
HOUSTON Tree
Albertsons September 36,611 16 $526,039 $16.33 88.0% Albertsons (5), Dollar
Spring Shadows 2001 Tree, Hallmark
HOUSTON
Barker Cypress December 61,720 10 $589,685 $11.69 81.7% H.E. Butt Grocery
HOUSTON 2001
Beechcrest September 90,797 15 $793,105 $8.89 98.3% Randalls* (Viet Ho),
HOUSTON 2001 Walgreens*
Benchmark September 58,384 5 $708,125 $12.13 100.0% Bally's Fitness, IHOP
Crossing 2001
HOUSTON
Colony Plaza September 26,530 15 $430,467 $18.61 87.2% Starbucks, GNC
HOUSTON 2001
12
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
Copperfield September 160,695 36 $915,799 $11.77 48.4% JoAnn Fabrics
HOUSTON 2001
Grogan's Mill September 118,398 28 $1,380,290 $11.75 99.2% Randall, Petco
HOUSTON 2001
Hedwig September 69,504 13 $943,878 $13.58 100.0% Warehouse Music, Ross
HOUSTON 2001 Dress For Less
Highland Square September 64,171 27 $1,016,282 $15.88 99.7% Radio Shack, Smoothie
HOUSTON 2001 King
Market at First September 107,301 36 $1,562,942 $15.28 95.3% Kroger (5), TJ Maxx,
Colony 2001 Eckerd
HOUSTON
Mason Park September 160,047 39 $1,446,717 $12.05 75.0% Kroger (5), Palais
HOUSTON 2001 Royal, Petco,
Walgreens* (Eloise
Collectibles)
Mission Bend September 129,675 26 $1,077,346 $9.04 91.9% Randalls, Factory 2 U
HOUSTON 2001 Stores, Inc.
Steeplechase September 104,002 26 $1,145,250 $11.19 98.4% Randalls
HOUSTON 2001
Woodforest September 12,741 4 $205,180 $16.10 100.0% Hollywood Video
HOUSTON 2001
DALLAS (15 PROPERTIES)
Benbrook(6) September 247,422 25 $495,512 $3.04 65.9% Sutherland Lumber,
FORT WORTH 2001 JoAnn Fabrics
Green Oaks September 65,091 32 $524,320 $11.41 70.6% Kroger (5)
DALLAS 2001
Melbourne Plaza September 47,517 18 $455,126 $11.06 86.6% Souper Salad, Family
DALLAS 2001 Christian
Minyard's September 58,695 1 $375,648 $6.40 100.0% Minyard's
GARLAND 2001
Northwest September 33,366 17 $314,241 $10.85 86.8% Blockbuster
Crossing 2001
DALLAS
Parkwood September 81,590 20 $962,061 $13.38 88.1% Albertsons (5), Planet
DALLAS 2001 Pizza, Hollywood
Video, Starbucks
Plymouth East September 56,435 10 $235,742 $4.18 100.0% Kroger
DALLAS 2001
Plymouth North September 444,221 59 $1,645,057 $7.18 51.6% Blockbuster, Dollar
DALLAS 2001 General, Thrift of
America, US Postal
Service
Plymouth South September 49,102 7 $285,080 $6.77 85.8% Betcha Bingo
DALLAS 2001
Plymouth West September 178,810 16 $687,601 $4.33 88.8% Tok Won Kim, Bargain
DALLAS 2001 City
13
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
Richwood September 54,872 28 $746,117 $16.32 83.3% Albertsons (5),
DALLAS 2001 Blockbuster
Rosemeade Park September 49,554 19 $572,423 $13.49 85.6% Kroger (5),
DALLAS 2001 Blockbuster, Allure
Health and Spa
Sterling Plaza September 65,205 16 $890,762 $14.13 96.7% Bank One, Warehouse
DALLAS 2001 Entertainment
Townsend September 140,436 39 $1,084,501 $9.14 84.5% Albertsons (5), Stage
DESOTO 2001 Store, Victory Gym,
Tutor Time
Village Park September 44,387 12 $420,797 $16.23 58.4% Petco, Leather Direct
DALLAS 2001
SAN ANTONIO (2 PROPERTIES)
Bandera Festival September 189,438 31 $1,297,264 $8.69 78.8% Eckerd*, Blockbuster,
SAN ANTONIO 2001 Kmart
Wurzbach September 59,771 3 $170,729 $2.86 100.0% Albertsons
SAN ANTONIO 2001
ARIZONA (3 PROPERTIES)
Big Curve September 126,402 32 $1,180,903 $9.54 97.9% Albertsons (5),
YUMA 2001 Walgreens, Miller's
Outpost
Park Northern September 126,852 27 $719,934 $6.43 88.3% Safeway, Bealls,
PHOENIX 2001 Showbiz Pizza
Southwest September 78,398 17 $576,820 $7.36 100.0% Food City, Walgreens
Walgreens 2001
PHOENIX
TENNESSEE (1 PROPERTY)
McMinn Plaza September 107,200 9 $560,307 $7.18 72.8% Ingles
ATHENS 2001
- ---------------------------- --------- ----- ----------- ------ -------
TOTAL/WEIGHTED AVERAGE 8,517,509 1,839 $71,903,682 $9.80 86.1%
SUPERMARKET AND ========= ===== =========== ====== =======
NECESSITY-ORIENTED RETAILER
ANCHORED CENTERS (79
PROPERTIES)
OTHER COMMERCIAL PROPERTIES
- ---------------------------
El Novillo September 10,000 1 $136,704 $13.67 100.0% Jumbo Buffet
MIAMI BEACH 2001
Epsilon September 18,707 5 $275,656 $14.74 100.0% Fat Tuesdays
WEST PALM BEACH 2001
EQY Building(7) September 28,780 15 $376,734 $16.00 81.8%
MIAMI BEACH 2001
14
AVERAGE
GLA ANNUALIZED MINIMUM RENT PERCENT
(SQ. FT.) NUMBER OF MINIMUM RENT AS PER LEASED SQ. LEASED AT
DATE AT DEC. TENANTS OF DECEMBER 31, FT. AT DEC. DEC. 31,
PROPERTY ACQUIRED(1) 31, 2001 (2) 2001(3) 31, 2001 2001 CERTAIN TENANTS (4)
- ---------------- ----------- --------- --------- --------------- -------------- ---------- -----------------------
Mandarin May 52,880 534 N/A N/A 98.7%
Mini-storage 1994
JACKSONVILLE
Montclair August 9,375 20 N/A N/A 100.0%
Apartments 1998
MIAMI BEACH
Coral Way N.E. July -- -- N/A N/A -- (4.05 acres)
Land(8) 1999
MIAMI
- ---------------------------- --------- ----- ----------- ------ -------
TOTAL/WEIGHTED AVERAGE 8,637,251 2,414 $72,692,776 $9.84 86.1%
(85 PROPERTIES) (9) ========= ===== =========== ====== =======
- --------------------
(1) For purposes of this table, all properties formerly owned by CEFUS or UIRT
are deemed to have been acquired by us at the time we acquired CEFUS and
UIRT.
(2) Number of tenants includes both leased and vacant units.
(3) Calculated by annualizing the tenant's monthly rent payment at December 31,
2001, excluding expense reimbursements, percentage rent payments and other
charges.
(4) Includes all tenants who occupy more than 10,000 square feet, as well as
any supermarket tenants which are on an adjacent or contiguous, separately
owned parcel and do not pay any rent or expense recoveries to us.
(5) This tenant is on an adjacent or contiguous, separately owned parcel and
does not pay rent or any expense recoveries to us.
(6) Our Benbrook property was sold on February 28, 2002. See "Business--Recent
Developments."
(7) The Equity One Building was sold on February 1, 2002. See "Business--Recent
Developments."
(8) Future development property, located at the northeast corner of S.W. 147th
Avenue and Coral Way in Miami-Dade County, Florida.
(9) Weighted average minimum rent per leased square foot and weighted average
percent leased have been calculated excluding Mandarin Mini-storage,
Montclair Apartments and Coral Way N.E. land.
* Indicates a tenant that has closed its store and ceased to operate at the
property, but continues to pay rent under the terms of its lease. The
sub-tenant, if any, is shown in parentheses.
MAJOR TENANTS
The following table sets forth as of December 31, 2001, the gross
leasable area ("GLA") of our existing properties (excluding Mandarin
Mini-storage and Montclair Apartments) leased to supermarket anchor tenants,
other anchor tenants and non-anchor tenants:
SUPERMARKET ANCHOR OTHER ANCHOR NON-ANCHOR
TENANTS TENANTS TENANTS TOTAL
------------------ ------------ ---------- -----------
Leased GLA (sq. ft.) 1,860,342 2,217,672 3,309,144 7,387,158
Percentage of Total Leased GLA 25.2% 30.0% 44.8% 100.0%
15
The following table sets forth as of December 31, 2001, the annual
minimum rent of our existing properties (excluding Mandarin Mini-storage and
Montclair Apartments) attributable to supermarket anchor tenants, other anchor
tenants and non-anchor tenants:
SUPERMARKET ANCHOR OTHER ANCHOR NON-ANCHOR
TENANTS TENANTS TENANTS TOTAL
------------------ ------------ ----------- -----------
Annual Minimum Rent ("AMR") $11,325,398 $14,539,452 $46,827,926 $72,692,776
Percentage of Total AMR 15.6% 20.0% 64.4% 100.0%
The following table sets forth as of December 31, 2001 information
regarding leases with our ten largest and all other remaining tenants:
ANNUALIZED PERCENT OF
MINIMUM RENT AGGREGATE AVERAGE ANNUAL
NUMBER OF GLA PERCENT OF AT DECEMBER ANNUALIZED MINIMUM RENT
TENANT LEASES (SQUARE FEET) TOTAL GLA 31, 2001 MINIMUM RENT PER SQUARE FOOT
- ----------------------- ---------- ------------- ---------- ------------ ------------ ---------------
Publix 16 647,634 7.6% $ 4,004,304 5.5% $ 6.18
Winn-Dixie 11 503,931 5.9% 3,191,701 4.4% 6.33
Randalls 4 199,223 2.3% 1,431,823 2.0% 7.19
Kmart 3 257,768 3.0% 1,268,768 1.7% 4.92
Eckerd 13 130,979 1.5% 1,063,720 1.4% 8.12
Walgreens 10 154,996 1.8% 1,031,839 1.4% 6.66
Blockbuster 11 63,116 0.7% 989,016 1.4% 15.67
Albertsons 4 177,544 2.1% 868,251 1.2% 4.89
Kash N' Karry 2 94,610 1.1% 726,425 1.0% 7.68
Bed, Bath & Beyond 1 37,525 0.4% 562,875 0.8% 15.00
------ --------- ----- ------------ ------ ------
SUBTOTAL/AVERAGE 75 2,267,326 26.4% 15,138,722 20.8% 6.68
Remaining Tenants 1,540 5,119,832 59.7% 57,554,054 79.2% 11.24
------ --------- ----- ------------ ------ ------
TOTAL/AVERAGE 1,615 7,387,158 86.1% $ 72,692,776 100.0% $ 9.84
====== ========= ===== ============ ====== ======
LEASE EXPIRATIONS
The following table sets forth the anticipated expirations of our
tenant leases as of December 31, 2001 (excluding renewal options of Mandarin
Mini-storage and Montclair Apartments) for each year from 2002 through 2011 and
thereafter:
PERCENT OF
ANNUALIZED AGGREGATE AVERAGE ANNUAL
NUMBER OF GLA PERCENT OF MINIMUM RENT ANNUALIZED MINIMUM RENT PER
YEAR LEASES (SQUARE FEET) TOTAL GLA AT EXPIRATION MINIMUM RENT SQUARE FOOT
- ----------------------- ---------- ------------ ----------- ------------ ------------- -----------------
2002 316 716,612 8.4% $ 9,380,328 12.4% $ 13.09
2003 335 1,081,683 12.6% 10,855,309 14.3% 10.04
2004 335 964,056 11.2% 10,917,544 14.4% 11.32
2005 226 872,899 10.2% 8,806,262 11.6% 10.09
2006 183 854,401 10.0% 9,330,902 12.3% 10.92
2007 47 430,491 5.0% 4,108,437 5.4% 9.54
2008 33 268,914 3.1% 3,651,016 4.8% 13.58
2009 25 126,614 1.5% 2,013,378 2.7% 15.90
2010 46 265,674 3.1% 2,804,655 3.7% 10.56
2011 21 393,061 4.6% 2,893,753 3.8% 7.36
Thereafter 48 1,412,753 16.4% 11,159,987 14.6% 7.90
------- --------- ------ ------------ ------- -------
SUB-TOTAL/AVERAGE 1,615 7,387,158 86.1% 75,921,571 100.0% 10.28
Vacant 245 1,187,838 13.9% -- 0.0% 0.00
------- --------- ------ ------------ ------- -------
TOTAL/AVERAGE 1,860 8,574,996 100.0% $75,921,571 100.0% $ 8.85
======= ========= ====== ============ ======= =======
16
Historically, we have not incurred substantial costs associated with
tenant improvements relating to lease expirations or renewals. Additionally,
because most leasing activities are performed in-house, we have not historically
incurred substantial costs associated with leasing commissions. No assurance can
be given that such expenses will not increase in the future.
INSURANCE
Our tenants are generally responsible under their leases for providing
adequate insurance on the property they lease. We believe that our properties
are covered by adequate fire, flood and property insurance, all provided by
reputable companies. However, certain of our properties are not covered by
disaster insurance with respect to certain hazards (such as hurricanes) for
which coverage is not available or available only at rates, which in our
opinion, are not economically justifiable.
JOINT VENTURE INVESTMENTS
As of December 31, 2001, we owned non-controlling interests in three
unconsolidated joint ventures, as follows:
o We own a 50.1% interest in the joint venture which owns Park
Place, a retail shopping center located in Plano, Texas that
was 100% occupied as of December 31, 2001. We plan to develop
two parcels adjacent to property at a cost of $2.6 million
with the target completion date of December 2003. The
property is encumbered by a floating-rate loan with a balance
of $14.0 million as of December 31, 2001 that matures in April
2002 and is guaranteed by CEFUS, our wholly-owned subsidiary.
Discussions are currently underway for replacement financing
on comparable terms.
o We own a 50% interest in the joint venture which owns City
Centre, an office/rental center located in Palm Beach Gardens,
Florida that was 95% occupied as of December 31, 2001. The
property includes a parcel of land targeted for future office
development. It is encumbered by an 8.54% fixed-rate mortgage
loan with a balance of $13.1 million as of December 31, 2001
that matures in April 2010.
o We own a 50% interest in the joint venture which owns Oaks
Square, a retail center located in Gainesville, Florida that
was 100% occupied as of December 31, 2001. The property is
encumbered by a 7.63% fixed-rate mortgage loan with a balance
of $16.8 million as of December 31, 2001 that matures in
December 2010.
ITEM 3. LEGAL PROCEEDINGS
Neither our properties nor we are subject to any material litigation.
Furthermore, to the best of our knowledge, except as described above with
respect to environmental matters, there is no litigation threatened against us
or any of our properties, other than routine litigation and administrative
proceedings arising in the ordinary course of business, which collectively are
not expected to have a material adverse effect on our business, financial
condition, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted for stockholder vote during the fourth
quarter of 2001.
17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
MARKET INFORMATION AND DIVIDENDS
Our common stock began trading on the New York Stock Exchange, or NYSE,
on May 18, 1998, under the symbol "EQY." On March 6, 2002, we had 389
stockholders of record representing 4,269 beneficial owners. The following table
sets forth for the periods indicated the high and low sales prices as reported
by the NYSE and the distributions declared by us:
DISTRIBUTIONS
HIGH LOW DECLARED
--------- --------- -------------
First Quarter, 2000 $ 10.7500 $ 9.1875 $ 0.26
Second Quarter, 2000 10.0000 9.0000 0.26
Third Quarter, 2000 10.6875 9.5000 0.26
Fourth Quarter, 2000 10.6250 9.3750 0.32
First Quarter, 2001 $ 11.0000 $ 9.7000 $ 0.26
Second Quarter, 2001 12.5300 10.0100 0.26
Third Quarter, 2001 11.9800 10.6400 0.27
Fourth Quarter, 2001 14.1000 11.5200 0.27
Dividends paid during 2001 and 2000 totaled $18.6 million and $13.2
million, respectively. Included in the $0.32 distribution for the fourth quarter
of 2000 was a special distribution of $0.06 attributable to the $1.5 million
termination fee we received in connection with General Cinema's termination of
its lease at Lake Mary. Future declarations of dividends will be made by us at
the discretion of our board of directors and will depend upon our earnings,
financial condition and such other factors as our board of directors deems
relevant. In order to qualify for the beneficial tax treatment accorded to real
estate investment trusts under the Internal Revenue Code of 1986, or the Code,
we are currently required to make distributions to holders of our shares in an
amount at least equal to 90% of our "real estate investment trust taxable
income," as defined in Section 857 of the Code.
SALE OF UNREGISTERED SECURITIES
On August 17, 2001, we sold 1.3 million unregistered shares of our
common stock to Alony Hetz Properties & Investments Ltd. at a price of $10.875
per share, resulting in net proceeds of $14.1 million. On September 17, 2001, we
sold 650,000 unregistered shares of our common stock to Alony Hetz Properties &
Investments Ltd.at a price of $10.875 per share, resulting in net proceeds of
$7.1 million.
On September 18, 2001 we issued an aggregate of 503,331 unregistered
shares of our common stock to two of our officers in connection with their
exercises of previously granted options to purchase 503,331 shares of our common
stock at a price of $10.00 per share. We received notes totaling $5.0 million in
payment of the full exercise price of these options. The notes bear interest at
5% per annum and mature on September 30, 2006. Each of the officers has pledged
his shares received upon exercise as security for his obligations under his
note.
On September 20, 2001, we exchanged 10.5 million unregistered shares of
our common stock with affiliates of First Capital Realty Inc. in return for all
of the shares of common stock in CEFUS.
During 2001, we issued 145,900 unregistered shares of our common stock
to our employees and directors in consideration of services rendered to our
company by them.
Each of these issuances was exempt from registration pursuant to the
exemption provided by Section 4(2) of the Securities Act of 1933. In each case
we exercised reasonable care to insure that the purchasers did not acquire these
shares with a view to their distribution.
18
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated operating data and balance sheet data set
forth below have been derived from our consolidated financial statements,
including the consolidated financial statements for the years ended December 31,
2001, 2000 and 1999 contained elsewhere herein. The consolidated financial
statements as of and for the years ended December 31, 2001, 2000 and 1999 have
been audited by Deloitte & Touche LLP, independent auditors. The data set forth
below should be read in conjunction with the consolidated financial statements
and related notes, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this annual report.
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- --------- -------- -------
(in thousands other than per share, percentage and ratio data)
STATEMENT OF OPERATIONS DATA:
Total revenues (1)........................... $ 82,987 $ 49,621 $ 27,163 $ 22,994 $ 20,545
========= ========= ========= ======== ========
Property operating expenses.................. 24,936 13,661 7,082 5,965 5,245
Rental property depreciation and
amortization............................... 11,114 6,284 3,502 2,881 2,392
Interest expense and amortization of
deferred financing fees.................... 22,243 12,807 5,086 5,014 5,681
Put option expense........................... -- -- -- 1,320 --
General and administrative expenses.......... 3,553 2,559 1,622 1,381 1,029
--------- --------- --------- -------- --------
Total expenses............................... 61,846 35,311 17,292 16,561 14,347
========= ========= ========= ======== ========
Net income................................... $ 18,721 $ 12,555 $ 13,589 $ 9,065 $ 6,198
========= ========= ========= ======== ========
Basic earnings per share .................... $ 0.83 $ 0.88 $ 1.26 $ 1.01 $ 0.96
Diluted earnings per share .................. 0.83 0.87 1.26 1.00 0.87
BALANCE SHEET DATA:
Total rental properties, after accumulated
depreciation............................. $ 627,687 $ 483,699 $ 204,919 $138,623 $119,250
Total assets................................. 668,536 542,817 212,497 152,955 126,903
Mortgage notes payable....................... 345,047 280,396 97,752 67,145 71,004
Total liabilities............................ 390,269 321,267 121,068 71,737 73,323
Minority interest in CEFUS................... -- 33,887 -- -- --
Shareholders' equity......................... 278,267 187,663 91,429 81,218 53,580
OTHER DATA:
EBITDA to interest coverage ratio (2)........ 2.5 2.6 3.6 3.1 2.5
Funds from operations (3).................... $ 30,931 $ 19,044 $ 13,354 $ 10,598 $ 8,576
Cash flows from:.............................
Operating activities..................... 32,804 15,506 20,169 3,697 8,843
Investing activities..................... (44,298) (11,165) (62,239) (23,824) (6,173)
Financing activities..................... 10,053 (2,421) 40,903 19,123 (2,023)
GLA (square feet) (at end of period)......... 8,637 3,169 2,836 2,078 2,004
Occupancy (at end of period)................. 86% 95% 95% 95% 93%
Dividends per share.......................... $ 1.06 $ 1.10 $ 1.02 $ 1.00 $ 0.95
- --------------------------
(1) Excludes real estate sales.
(2) EBITDA to interest coverage ratio is the ratio of earnings before interest,
taxes, depreciation and amortization ("EBITDA") to interest expense
including the amortization of deferred financing costs. The 2001 ratio
excludes a $609 loss on the sale of real estate from EBITDA, the 2000 ratio
excludes a $63 loss on the sale of real estate from EBITDA, the 1999 ratio
excludes a $3,800 gain on the
19
sale of real estate from EBITDA, and the 1998 ratio excludes a $2,600 gain
on the sale of real estate and the $1,300 put option expense from EBITDA.
EBITDA is not intended to represent cash flow from operations and should
not be considered as an alternative to operating or net income computed in
accordance with GAAP, as an indicator of our operating performance, as an
alternative to cash flows from operating activities (calculated in
accordance with GAAP) or as a measure of liquidity. We believe that EBITDA
is a fairly standard measure in our industry, commonly reported and widely
used by analysts and investors as a measure of profitability for companies
with significant depreciation, amortization and non-cash expenditures.
Similarly, the EBITDA to interest coverage ratio is commonly used along
with cash flows from operating activities (calculated in accordance with
GAAP) as a measure of a company's ability to pay its current interest
obligation. However, not all companies calculate EBITDA using the same
methods; therefore, the EBITDA figures set forth above may not be
comparable to EBITDA reported by other companies.
(3) We define funds from operations ("FFO") consistent with the NAREIT
definition as net income before gains (losses) on the sale of real estate,
extraordinary items and minority interest (as well as expenses associated
with minority interests), plus real estate depreciation and amortization of
capitalized leasing costs. We believe that FFO should be considered along
with, but not as an alternative to, net income as defined by GAAP as a
measure of our operating performance. Our calculation of FFO may not be
comparable to similarly titled measures reported by other companies. FFO
does not represent cash generated from operating activities in accordance
with GAAP and is not necessarily indicative of funds available to fund our
needs. Our calculation of FFO may not be comparable to similarly titled
measures reported by other companies. We calculate FFO as follows:
YEAR ENDED DECEMBER 31,
2001 2000 1999* 1998* 1997*
-------- -------- ------- ------- -------
(in thousands)
Net income........................ $ 18,721 $ 12,555 $ 13,589 $ 9,065 $ 6,198
Depreciation and amortization..... 11,202 6,312 3,483 2,845 2,378
Depreciation attributable to
joint ventures.................. 238 33 -- -- --
Extraordinary item - prepayment
penalty......................... 1,546 -- -- -- --
Deferred income tax (benefit)
expense......................... (374) 1,071 -- -- --
Put option expense................ -- -- -- 1,320 --
Minority interest in consolidated
subsidiary...................... 99 -- 96 -- --
Interest on convertible
partnership units............... 259 20 -- -- --
Loss (gain) on sale of real estate 609 63 (3,814) (2,632) --
Minority interest in CEFUS share
of FFO adjustments.............. (1,369) (1,010) -- -- --
-------- -------- ------- ------- -------
FFO............................... $ 30,931 $ 19,044 $13,354 $10,598 $ 8,576
======== ======== ======= ======= =======
----------------------------
* Restated to conform to NAREIT's current FFO definition.
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, WHICH ARE INCLUDED ELSEWHERE
IN THIS ANNUAL REPORT.
We are a self-administered, self-managed real estate investment trust,
or REIT, that principally acquires, renovates, develops and manages community
and neighborhood shopping centers primarily anchored by supermarkets or other
necessity-oriented retailers such as drug stores or discount retail stores. As
of December 31, 2001, our portfolio consisted of 85 properties, contained an
aggregate of 8.6 million square feet of gross leasable area, and was 86.1%
occupied based on gross leasable area.
In September 2001, we made two strategic acquisitions which nearly
tripled the size of our property portfolio. On September 20, 2001, we acquired
Centrefund Realty (U.S.) Corporation, or CEFUS, a wholly-owned subsidiary of one
of our affiliates, First Capital Realty Inc., an Ontario corporation whose
shares are traded on the Toronto Stock Exchange (TSE:FCR). As a result of this
transaction, we acquired 28 shopping centers and other retail properties which
contained an aggregate of approximately 3.2 million square feet of gross
leasable area and assumed additional indebtedness in the amount of approximately
$157.0 million. Because of the beneficial ownership of approximately 68% of
First Capital's common stock by Gazit-Globe (1982), Ltd., our majority
beneficial stockholder, the acquisition of CEFUS has been accounted for on a
push-down basis and partially in a manner similar to a pooling of interests. The
"push-down" component of the accounting treatment incorporates Gazit-Globe
(1982) Ltd.'s fair market valuation of the CEFUS assets and liabilities on
August 18, 2000. Our results for the period between August 18, 2000, the day
that Gazit-Globe acquired its beneficial interest in First Capital, and
September 19, 2001 have been restated to consolidate our operations with those
of CEFUS subject to a 31.93% minority interest in CEFUS. Our results from
September 20, 2001, the day we acquired CEFUS, eliminate this minority interest.
For a more complete discussion of this accounting treatment and the specific
impact it has had on our results of operations, see Note 1 to our consolidated
financial statements included elsewhere in this annual report.
On September 21, 2001, we completed our acquisition of United Investors
Realty Trust, or UIRT, a Texas real estate investment trust. As a result of this
transaction, we acquired 22 shopping centers which contained an aggregate of
approximately 2.0 million square feet of gross leasable area and assumed
additional indebtedness in the aggregate amount of approximately $80.0 million.
The acquisition of UIRT was accounted for using the purchase method of
accounting and the results of UIRT are included in our consolidated financial
statements from the date we acquired it.
Our real estate portfolio has grown substantially during 2001 as a
result of these acquisitions. We intend to continue to expand our business by
acquiring and developing additional neighborhood and community shopping centers
in the near future primarily through a combination of individual property
acquisitions, development of new properties, property portfolio purchases and
acquisitions of other REITs and real estate companies.
RESULTS OF OPERATIONS
We derive substantially all of our revenues from rents received from
tenants under existing leases on each of our properties. These revenues include
fixed rents, recoveries of expenses that we have incurred and which we pass
through to the individual tenants and percentage rents that are based on
specified percentages of tenants' revenues, in each case as provided in the
particular leases.
Our primary cash expenses consist of our property operating expenses,
which include real estate taxes, repairs and maintenance, payroll, insurance,
utilities and other expenses, general and administrative expenses, which include
payroll, office expenses, professional fees and other administrative expenses,
and interest expense, primarily on mortgage indebtedness. In addition, we incur
substantial non-cash charges for depreciation and amortization on our
properties. We also capitalize certain expenses, such as taxes and interest,
incurred in respect of property under development or redevelopment until the
property is ready for its intended use.
21
YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000
Total revenues increased by $33.4 million, or 67.2%, to $83.0 million
for the year ended December 31, 2001 from $49.6 million for the year ended
December 31, 2000. This increase was primarily due to an increase in revenues of
$22.5 million resulting from the consolidation of the results of CEFUS for the
entire year of 2001 compared to the period from August 18, 2000 to December 31,
2000 for the prior year and an additional $6.3 million of revenues from the
acquisition of UIRT in September 2001. In addition, revenues increased by $2.5
million for the year ended December 31, 2001 compared to 2000 as a result of our
acquisition of two shopping centers and the completion of development projects
in 2001 and the latter part of 2000. Same property revenues increased by $1.2
million, or 3.7%, to $33.8 million for the year ended December 31, 2001 from
$32.6 million for the year ended December 31, 2000 as a result of higher rental
rates and the completion of additions to some of our properties. Finally,
investment revenue increased by $345,000 and management fees, consisting
primarily of real estate services provided to third parties, increased by
$567,000 for the year ended December 31, 2001 compared to the year ended
December 31, 2000.
Property operating expenses increased by $11.3 million, or 82.5%, to
$24.9 million for the year ended December 31, 2001 from $13.7 million for the
year ended December 31, 2000. The increase in property operating expenses was
primarily the result of $6.8 million of increased operating expenses from the
consolidation of CEFUS for the entire year 2001 compared to the shorter period
in 2000 and $2.0 million of operating expenses for UIRT from its acquisition
date. In addition, property operating expenses increased by $401,000 for the
year ended December 31, 2001 compared to the year ended December 31, 2000 as a
result of our acquisition of two shopping centers and the completion of
development projects in 2001 and the latter part of 2000. Same property
operating expenses increased by $459,000, or 5.2%, to $9.3 million for the year
ended December 31, 2001 from $8.9 million for the year ended December 31, 2000
as a result of higher operating costs and the completion of additions to some of
our properties. Finally, property management expenses increased by $1.6 million
for the year ended December 31, 2001 compared to the year ended December 31,
2000 as a result of managing a substantially larger portfolio of properties, of
which $1.1 million was due to an increase in employee salaries and benefits.
Rental property depreciation and amortization expense increased by $4.8
million, or 76.9%, to $11.1 million for the year ended December 31, 2001, from
$6.3 million for the year ended December 31, 2000. The increase resulted
primarily from depreciation and amortization expenses attributable to CEFUS and
UIRT in the amounts of $3.4 million and $731,000, respectively, and $683,000
attributable to our acquisition of new properties and completion of new
development projects.
Interest and amortizatiion of deferred financing fees increased by $9.4
million, or 73.7%, to $22.2 million for the year ended December 31, 2001 from
$12.8 million for the year ended December 31, 2000. The increase in interest
expense was primarily due to interest of $7.0 million and $1.4 million on
indebtedness assumed in connection with the acquisitions of CEFUS and UIRT,
respectively. In addition, interest expense increased for the year ended
December 31, 2001 as compared to the year ended December 31, 2000 as a result of
increased mortgage interest of $1.3 million from the assumption of two loans,
the closing of two new loans and interest on convertible partnership units of
$218,000, and decreased capitalized interest expense of $79,000. These increased
interest expenses were partially offset by a reduction of $644,000 due to
decreased borrowing under our credit facility with City National Bank of
Florida.
General and administrative expenses increased by $994,000, or 38.8%, to
$3.6 million for the year ended December 31, 2001 from $2.6 million for the year
ended December 31, 2000. The increase was primarily the product of our growth.
Included in these expenses, compensation expenses increased by $245,000,
directors' fees increased by $136,000, professional fees increased by $134,000,
general and administrative costs increased by $76,000 related to inclusion of
CEFUS for a full twelve months, and all other costs increased $303,000.
Minority interest in CEFUS increased by $1.0 million to $1.6 million
for the year ended December 31, 2001 from $603,000 for the year ended December
31, 2000. This increase was a result of the consolidation of CEFUS for the
period from January 1 to September 19, 2001, subject to a minority interest as
described above, compared to the shorter period in 2000. In addition, we
recorded extraordinary item expense of $1.5 million for the year ended December
31, 2001 as a result of the payment of a prepayment penalty in connection with
the prepayment of a loan secured by one of our properties. The increase in
equity in income of unconsolidated subsidiaries of $489,000 for the year ended
December 31, 2001 relates primarily to our interest in the three joint ventures
acquired in the CEFUS acquisition and is attributable to the inclusion of
CEFUS's results for the full year in 2001, as well as commencement of operations
at these properties upon completion of development.
22
As a result of the foregoing, net income increased by $6.2 million, or
49.1%, to $18.7 for the year ended December 31, 2001 compared to $12.6 million
for the year ended December 31, 2000.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Total revenues increased by $22.5 million, or 82.7%, to $49.6 million
for the year ended December 31, 2000 from $27.2 million for the year ended
December 31, 1999. This increase in revenue was primarily due to an increase in
rental revenues of $14.3 million resulting from the consolidation of the
operations of CEFUS for the period from August 18 to December 31, 2000. In
addition, revenues increased by $6.0 million for the year ended December 31,
2000 compared to the year ended December 31, 1999 as a result of our acquisition
of six properties and the completion of certain development projects. Same
property revenues, including a termination fee of $1.1 million, increased by
$2.0 million, or 8.3%, to $26.2 million for the year ended December 31, 2000
from $24.2 million for the year ended December 31, 1999 as a result of higher
rental rates and completion of additions to some of our properties. Finally,
investment revenue increased by $1.2 million, most of which can be attributed to
the acquisition of CEFUS, and management fees increased by $100,000 for the year
ended December 31, 2000 compared to the year ended December 31, 1999. These
increases were partially offset by a reduction of rental revenue in the amount
of $1.2 million due to the sale of one of our properties during 2000.
Property operating expenses increased by $6.6 million, or 92.9%, to
$13.7 million for the year ended December 31, 2000 from $7.1 million for the
year ended December 31, 1999. The increase in property operating expenses was
primarily the result of $4.5 million of increased operating expenses resulting
from the acquisition of CEFUS for the period from August 18 to December 31,
2000. In addition, property operating expenses increased by $1.4 million for the
year ended December 31, 2000 as compared to the year ended December 31, 1999 as
a result of our acquisition of six properties and the completion of certain
development projects. Same property operating expenses increased by $990,000, or
15.5%, to $7.4 million for the year ended December 31, 2000 from $6.4 million
for the year ended December 31, 1999 as a result of higher operating costs and
completion of additions to some of our properties, partially offset by a
reduction in operating expenses of $290,000 due to sale of one of our properties
during 2000.
Rental property depreciation and amortization expense increased by $2.8
million, or 79.4%, to $6.3 million for the year ended December 31, 2000, from
$3.5 million for the year ended December 31, 1999. The increase resulted
primarily from depreciation and amortization expenses attributable to the
acquisition of CEFUS in the amount of $2.1 million and our acquisition of new
properties and completion of new development projects in the amount of $715,000.
Interest and amoritzation of financing fees increased by $7.7 million,
or 151.9%, to $12.8 million for the year ended December 31, 2000 from $5.1
million for the year ended December 31, 1999. The increase in interest expense
was primarily due to interest of $5.4 million attributed to indebtedness assumed
in connection with the acquisition of CEFUS. In addition, mortgage interest
increased by approximately $2.1 million primarily due to a net increase in
mortgage loans during 2000 of $23.9 million relating to the acquisition of new
properties, the completion of phase one and phase two of the Shops at Skylake,
and the September 1999 assumption of the Pine Island mortgage of $26.3 million
offset by mortgage amortization and certain mortgage repayments, an increase in
interest payable with respect to our line of credit of approximately $598,000
and an increase in capitalized interest of $373,000 which reduced interest
expense.
General and administrative expenses increased by $937,000, or 57.8%, to
$2.6 million for the year ended December 31, 2000 from $1.6 million for the year
ended December 31, 1999. The increase was primarily the product of increases in
compensation costs of $748,000, directors' fees of $78,000 and general and
administrative costs related to the acquisition of CEFUS of $198,000. All other
costs decreased by $87,000.
As a result of the foregoing, net income decreased by $1.0 million, or
7.6%, to $12.6 million for the year ended December 31, 2000 compared to $13.6
million for the year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
We anticipate that cash generated from operating activities will
provide the necessary funds on a short-term basis for our operating expenses,
interest expense and scheduled principal and interest payments on outstanding
indebtedness, recurring capital expenditures necessary to properly maintain the
shopping centers and distributions to stockholders.
During 2001, we generated cash from operations of $32.8 million,
reflecting our net income of $18.7 million plus non-cash deductions to income,
the most significant of which were depreciation and amortization of
23
$12.9 million, minority interest in CEFUS of $1.6 million and a loss on the sale
of real estate of $609,000. In addition, operating cash benefited from, among
other items, a $3.9 million reduction in restricted cash resulting from the
release of the escrow on our loan related to our Skylake property, a $1.8
million reduction in accounts and other receivables, $2.6 million decrease in
notes receivable resulting from repayments, a $1.6 million reduction in prepaid
and other assets, partially offset by an increase in deposits of $3.0 million
and a reduction in accounts payable and accrued expenses of $7.4 million.
We used $44.3 million of cash in investing activities, reflecting $37.4
million used for additions to property and $36.3 million of cash used in the
acquisition of UIRT. These uses were partially offset by sales of rental
property of $22.3 million and $6.6 million from the sale of joint venture
interests, among other items.
We generated $10.1 million in cash from financing activities primarily
reflecting approximately $9.4 million in borrowings in excess of mortgage note
repayments, $19.9 million from the sale of common stock net of stock issuance
costs and the payment of $18.6 million in cash dividends to stockholders.
For 2001 we incurred cash payments for interest, net of capitalized
interest, of $20.5 million. Capitalized interest, which includes interest for
development properties and interest incurred to finance additions and
renovations until operational, amounted to $2.1 million.
Moreover, we expect to meet long-term liquidity requirements for
maturing debt, non-recurring capital expenditures and acquisition, renovation
and development of shopping centers from excess cash generated from operating
activities, working capital reserves, additional borrowings under our existing
credit facilities, long-term secured and unsecured indebtedness and through the
issuance of additional equity or debt securities raised in the private or public
markets.
Our total mortgage notes payable at December 31, 2001 and 2000
consisted of the following:
(in thousands)
MORTGAGE NOTES PAYABLE 2001 2000
---------------------------- ---------- ----------
Fixed rate mortgage loans................................. $ 296,887 $ 243,279
Variable rate mortgage loans.............................. 48,160 37,117
---------- ----------
Total notes payable............................... $ 345,047 $ 280,396
========== ==========
Each of these loans is secured by a mortgage on one or more of certain
of our properties. As of December 31, 2001, the percentage of the total real
estate cost of our properties that was encumbered by debt was 55.9%. For a more
complete description of our mortgage indebtedness, see "--Mortgage Indebtedness"
below.
Certain of the mortgages on our properties involving an aggregate
principal amount of approximately $62 million contain prohibitions on transfers
of ownership which may have been violated by our previous issuances of common
stock or in connection with past acquisitions and may be violated by
transactions involving our capital stock in the future. If a violation were
established, it could serve as a basis for a lender to accelerate amounts due
under the affected mortgage. We are in the process of obtaining the necessary
consents from the lenders. Based on discussions with various lenders, current
credit market conditions and other factors, we believe that such consents will
be obtained or that the mortgages would not be accelerated. Accordingly, we
believe that the ultimate outcome of this matter will not have a material
adverse impact on our results of operations or financial condition.
As of December 31, 2001, we had a $20.6 million credit agreement
secured by six properties with City National Bank of Florida, of which $1.4
million was outstanding on that date. This facility accrues interest at 2.25%
over the thirty-day LIBOR rate, payable monthly, adjusted every six months, and
matures on May 4, 2002. In February 2002, the facility was reduced to an
availability of $10.8 million secured by five properties, and there was a zero
balance outstanding. This facility has also been used to provide a $1.0 million
letter of credit in connection with the Pine Island/Ridge Plaza financing and to
support approximately $448,000 in escrows for property taxes on the properties
comprising its collateral, thereby reducing its gross availability to
approximately $9.4 million.
24
On September 17, 2001, we entered into a $30.0 million revolving line
of credit with Bank Leumi Le-Israel B.M. This facility accrues interest at 1.25%
over the 30 or 90-day LIBOR rate, at our option, and is payable monthly or
quarterly depending on our rate selection. The facility matures on September 16,
2002, with an option to extend it an additional 180 days. Under the Bank Leumi
credit agreement, we agreed not to mortgage or encumber seven of our properties,
as amended on February 18, 2002. The outstanding balance on this facility was
$26.0 million as of December 31, 2001, and was increased to $30.0 million as of
March 1, 2002.
On February 27, 2002, we entered into a variable-rate revolving credit
facility with Wells Fargo under which we may borrow up to $29.4 million against
a borrowing base of five properties pledged to secure the facility. Borrowings
under the facility will bear interest, at our option, at the prime rate or based
on LIBOR plus a margin ranging from 1.15% if the ratio of our total liabilities
to gross asset value is less than 0.5, to 1.50% if the ratio of our total
liabilities to gross asset value is or exceeds 0.6. The entire principal amount
is due February 14, 2005. This new facility also prohibits shareholder
distributions in excess of 95% of funds for operations calculated at the end of
each fiscal quarter for the four fiscal quarters then ending. Notwithstanding
this limitation, we can make shareholder distributions to avoid income taxes on
asset sales. If a default under the facility exists, our ability to pay
dividends would be limited to the amount necessary to maintain our status as a
REIT.
The facility also contains financial covenants that require us to
maintain:
o A consolidated net worth of not less than $251.4 million plus 90% of
net proceeds of equity issuances;
o A ratio of total liabilities to gross asset value of not more than
0.65;
o A ratio of EBITDA to interest expense of not less than 1.90;
o A ratio of EBITDA to fixed charges of not less than 1.65; and
o An occupancy rate on properties in the borrowing base of not less than
85%.
We expect to commence development in early 2002 of an 84,000 square
foot shopping center on a parcel of land located at the southeast corner of S.W.
147th Avenue and Coral Way in Miami-Dade County, Florida. We anticipate the cost
of development to be approximately $10.0 million, including the $2.0 million of
costs we incurred upon the exercise of our option to purchase from several of
our affiliates all of the outstanding shares of common stock of Equity One
(Coral Way), Inc. the sole asset of which consisted of this parcel of land. We
expect to commence development in late 2002 of a 25,000 square foot drug-store
anchored shopping center on a parcel of land we already own at the northeast
corner of S.W. 147th Avenue and Coral Way in Miami-Dade County, Florida at a
total cost of $2.0 million. Development of phase three of the Shops at Skylake,
totaling approximately 105,000 square feet is anticipated to commence and be
completed in 2003 at an estimated cost of approximately $7.3 million. We expect
to fund the costs of these development projects from cash flow from operations,
borrowings under our various revolving credit facilities and other sources of
cash, including obtaining permanent debt on certain unencumbered rental
properties.
Our debt level could subject us to various risks, including the risk
that our cash flow will be insufficient to meet required payments of principal
and interest, and the risk that the resulting reduced financial flexibility
could inhibit our ability to develop or improve our rental properties, withstand
downturns in our rental income or take advantage of business opportunities. In
addition, because we currently anticipate that only a small portion of the
principal of our indebtedness will be repaid prior to maturity, it is expected
that it will be necessary to refinance the majority of our debt. Accordingly,
there is a risk that such indebtedness will not be able to be refinanced or that
the terms of any refinancing will not be as favorable as the terms of our
current indebtedness.
On August 17, 2001, we sold 1,300,000 unregistered shares of our common
stock to Alony Hetz Properties & Investments Ltd. at a price of $10.875 per
share, resulting in net proceeds of $14.1 million. On September 17, 2001, we
sold 650,000 unregistered shares of our common stock to Alony Hetz at a price of
$10.875 per share, resulting in net proceeds of $7.1 million.
On January 18, 2002, we completed a private placement of 688,000 shares
of our common stock to a limited number of accredited investors. In connection
with the private placement, we sold an aggregate of 344,000 shares of our common
stock at a price of $12.80 per share to unaffiliated investors and 344,000
shares of our
25
common stock at price of $13.05 per share to investors that are affiliates of
ours. The $8.9 million proceeds from the private placement were raised for
general corporate purposes.
In addition, on January 23, 2002, we filed a universal shelf
registration statement with the Securities and Exchange Commission, which will
permit us, from time to time, to offer and sell various types of securities,
including common stock, preferred stock, debt securities, depositary shares and
warrants, up to a value of $250 million. The registration statement provides us
additional flexibility in accessing capital markets to fund future growth and
for general corporate purposes.
We believe, based on currently proposed plans and assumptions relating
to our operations, that our existing financial arrangements, together with cash
flows from operations, will be sufficient to satisfy our cash requirements for a
period of at least twelve months. In the event that our plans change, our
assumptions change or prove to be inaccurate or cash flows from operations or
amounts available under existing financing arrangements prove to be insufficient
to fund our expansion and development efforts our to the extent we discover
suitable acquisition targets the purchase price of which exceed our existing
liquidity, we would be required to seek additional sources of financing. There
can be no assurance that any additional financing will be available on
acceptable terms, or at all and any equity financing could be dilutive to
existing shareholders. If adequate funds are not available, our business
operations could be materially adversely affected.
We believe that we qualify and intend to qualify as a REIT under the
Internal Revenue Code. As a REIT, we are allowed to reduce taxable income by all
or a portion of our distributions to stockholders. As distributions have
exceeded taxable income, no provision for federal income taxes has been made.
While we intend to continue to pay dividends to our stockholders, we also will
reserve such amounts of cash flow as we consider necessary for the proper
maintenance and improvement of our real estate, while still maintaining our
qualification as a REIT.
MORTGAGE INDEBTEDNESS
The following table sets forth certain information regarding our
mortgage indebtedness related to our properties as of December 31, 2001:
BALANCE AT
DECEMBER INTEREST BALANCE DUE
31, 2001 RATE(1) MATURITY DATE AT MATURITY
------------ ---------- ------------- ------------
(in thousands)
FIXED RATE MORTGAGE DEBT
Ft. Caroline $2,098 9.350% April 2002 $2,078
Village by the Parks 3,723 8.180% June 2002 3,687
Eustis Square 4,474 9.000% July 2002 4,344
Forest Edge 1,646 6.900% October 2002 1,567
Lantana 3,953 6.950% March 2005 3,484
Benchmark 3,466 9.250% July 2005 3,170
Sterling Plaza 4,175 8.750% September 2005 3,794
Townsend Square 4,989 8.500% October 2005 4,703
Green Oaks 3,172 8.375% November 2005 2,861
Melbourne Plaza 1,833 8.375% November 2005 1,654
Northwest Crossing 1,745 8.375% November 2005 1,574
Oak Hill 2,103 7.625% January 2006 1,713
Walden Woods 2,590 7.875% August 2006 2,071
Big Curve 5,658 9.190% October 2006 5,059
Highland Square 4,215 8.870% December 2006 3,743
Park Northern 2,463 8.370% December 2006 1,963
University Mall 12,837 8.440% December 2006 11,922
Rosemeade 3,305 8.295% December 2007 2,864
Colony Plaza 3,088 7.540% January 2008 2,834
Parkwood(2) 6,353 7.280% January 2008 5,805
Richwood(2) 3,273 7.280% January 2008 2,990
Mariners Crossing 3,468 7.080% March 2008 3,154
Commonwealth 2,967 7.000% March 2008 2,204
Pine Island/Ridge Plaza 25,588 6.910% July 2008 23,104
Shoppes at Westburry 2,330 7.300% October 2008 2,113
26
BALANCE AT
DECEMBER INTEREST BALANCE DUE
31, 2001 RATE(1) MATURITY DATE AT MATURITY
------------ ---------- ------------- ------------
(in thousands)
Shoppes of Northport 4,288 6.650% February 2009 3,526
Prosperity Centre 7,045 7.875% March 2009 4,137
Park Promenade 6,413 8.100% February 2010 5,833
Skipper Palms 3,611 8.625% March 2010 3,318
Jonathan's Landing 2,960 8.050% May 2010 2,639
Bluff's Square 10,232 8.740% June 2010 9,401
Kirkman Shoppes 9,662 8.740% June 2010 8,878
Ross Plaza 6,739 8.740% June 2010 6,192
Boynton Plaza 7,622 8.030% July 2010 6,902
Pointe Royale 4,974 7.950% July 2010 2,502
Plymouth Park East 1(3) 158 8.250% August 2010 113
Plymouth Park East 2(3) 474 8.250% August 2010 340
Plymouth Park North(3) 8,459 8.250% August 2010 6,076
Plymouth Park South(3) 632 8.250% August 2010 454
Plymouth Park Story North(3) 389 8.250% August 2010 279
Plymouth Park West 2,528 8.250% August 2010 1,816
Shops at Skylake 15,275 7.650% August 2010 11,644
Minyard's 2,578 8.320% November 2010 2,175
Forest Village 4,575 7.270% April 2011 4,134
Boca Village 8,459 7.200% May 2011 7,466
Sawgrass Promenade 8,459 7.200