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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, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission file number 001-13499
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EQUITY ONE, INC.
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(Exact name of Registrant as specified in its charter)
Maryland 52-1794271
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1696 N.E. Miami Gardens Drive, North Miami Beach, FL 33179
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(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (305) 947-1664
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.01 Par Value New York Stock Exchange
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(Title of each class) (Name of exchange on which registered)
None
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Securities registered pursuant to Section 12(g)of the Act:
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.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No
The aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common stock
was last sold as of June 28, 2002, the last business day of the registrant's
most recently completed second fiscal quarter was $177,549,488.
As of March 20, 2003, the number of outstanding shares of Common Stock par
value $.01 per share of the Registrant was 59,766,055.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the Registrant's definitive Proxy Statement for the
2003 Annual Meeting of Stockholders are incorporated by reference in Part III of
this Annual Report on Form 10-K to the extent stated herein.
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EQUITY ONE, INC.
TABLE OF CONTENTS
Page
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PART I
Item 1. Business......................................................2
Item 2. Properties...................................................14
Item 3. Legal Proceedings............................................29
Item 4. Submission of Matters to a Vote of Security
Holders....................................................29
PART II
Item 5. Market For Registrant's Common Equity and Related
Stockholder Matters........................................29
Item 6. Selected Financial Data......................................31
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................33
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...48
Item 8. Financial Statements and Supplementary Data..................49
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................49
PART III
Item 10. Directors and Executive Officers of the Registrant...........50
Item 11. Executive Compensation.......................................50
Item 12. Security Ownership of Certain Beneficial Owners..............50
Item 13. Certain Relationships and Related Transactions...............50
Item 14. Controls and Procedures......................................50
PART IV
Item 15. Exhibits, Financial Statement Schedules and
Reports on Form 8-K........................................51
FORWARD-LOOKING INFORMATION
Certain matters discussed in this Annual Report on Form 10-K and the
information incorporated by reference herein contain "forward-looking
statements" for purposes on Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are based on current expectations and are not
guarantees of future performance.
All statements other than statements of historical facts are forward-
looking statements, and can be identified by the use of forward-looking
terminology such as "may," "will," "might," "would," "expect," "anticipate,"
"estimate," "would," "could," "should," "believe," "intend," "project,"
"forecast," "target," "plan," or "continue" or the negative of these words or
other variations or comparable terminology, are subject to certain risks, trends
and uncertainties that could cause actual results to differ materially from
those projected. Because these statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by the forward-looking statements. We caution you not to place undue
reliance on those statements, which speakIIII only as of the date of this
report.
Among the factors that could cause actual results to differ materially are:
o general economic conditions, competition and the supply of and demand for
shopping center properties in our markets;
o management's ability to successfully combine and integrate the properties
and operations of separate companies that we have acquired in the past or
may acquire in the future;
o interest rate levels and the availability of financing;
o potential environmental liability and other risks associated with the
ownership, development and acquisition of shopping center properties;
o risks that tenants will not take or remain in occupancy or pay rent;
o greater than anticipated construction or operating costs;
o inflationary and other general economic trends;
o the effects of hurricanes and other natural disasters; and
o other risks detailed from time to time in the reports filed by us with the
Securities and Exchange Commission.
Except for ongoing obligations to disclose material information as required
by the federal securities laws, we undertake no obligation to release publicly
any revisions to any forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
PART I
ITEM 1. BUSINESS
General
We are a real estate investment trust, or REIT, that principally acquires,
renovates, develops and manages community and neighborhood shopping centers
located predominately in high growth markets in the southern United States. Our
shopping centers are primarily anchored by supermarkets or other
necessity-oriented retailers such as drug stores or discount retail stores.
As a result of our recently completed merger with IRT Property Company, or
IRT, our property portfolio, as of March 20, 2003, consists of 179 properties,
comprising 122 supermarket-anchored shopping centers, nine drug store-anchored
shopping centers, 41 other retail-anchored shopping centers, one self-storage
facility, one industrial and five retail developments, as well as
non-controlling interests in four unconsolidated joint ventures that own and
operate commercial properties. These properties are located in 12 states in the
southern United States and contain an aggregate of 18.5 million square feet of
gross leasable area, or GLA. Our portfolio includes shopping centers anchored by
national and regional supermarkets such as Albertsons, H.E.B., Kash N' Karry,
Kroger, Publix, Randall's and Winn-Dixie and other national retailers such as
Bed Bath & Beyond, Best Buy, Blockbuster, Eckerd, Home Depot Design Expo, Kmart,
Lowe's, and Walgreens.
We were established as a Maryland corporation in 1992, completed our
initial public offering in May 1998, and have elected to be taxed as a REIT
since 1995. We maintain our principal executive and management office at 1696
N.E. Miami Gardens Drive, North Miami Beach, Florida 33179 in the Shops at
Skylake.
In this annual report, unless stated otherwise or unless the content
requires otherwise, references to "we," "us" or "our" mean Equity One and IRT
combined. We also sometimes refer to Equity One and IRT collectively as the
"merged company."
Recent Developments and 2002 Overview
IRT Merger. On February 12, 2003, we completed our acquisition of IRT by
statutory merger. As a result of the merger, we acquired 92 properties
encompassing approximately 10 million square feet of gross leaseable area. See
"Item 2. - Properties" for a brief description of the merged company portfolio.
In connection with the merger, we paid aggregate cash consideration of
approximately $181 million, issued approximately 17.5 million shares of our
common stock valued at approximately $232 million and assumed approximately $337
million of mortgages, unsecured indebtedness and other liabilities, including
$150 million of IRT's senior unsecured notes. Upon completion of the merger, the
investment grade ratings of the senior unsecured notes were confirmed by Moody's
and Standard & Poor's at Baa3 and BBB-, respectively.
Revolving Credit Facility. On February 7, 2003, we entered into a $340
million unsecured revolving credit facility with Wells Fargo and 14 other
lenders. As of March 27, 2003, we had outstanding approximately $150 million
under the facility which was used in part to fund a portion of the costs of the
merger and to prepay certain indebtedness.
Equity Private Placement. Contemporaneously with the completion of the IRT
merger, we completed a private placement of 6,911,000 shares of our common stock
to a limited number of existing, affiliated investors at a price of $13.50 per
share. The proceeds from the private placement were used, along with a portion
of the proceeds from the Wells Fargo facility, to fund a portion of the costs of
the merger and to prepay certain indebtedness.
Issuance of Public Equity. On March 27, 2002, we completed a public
offering of 3.45 million shares of our common stock at a per share price of
$13.25. The net proceeds of approximately $42.9 million from this offering were
used to repay certain existing indebtedness.
Acquisitions. We intend to focus on retail properties and development
projects that generate stable cash flows and present opportunities for value
appreciation. During 2002, we acquired 11 properties for an aggregate
consideration of approximately $69.5 million. These properties consisted of six
supermarket anchored shopping centers, two drugstores anchored shopping centers,
and three parcels of land held for future development.
Dispositions. Generally, we hold our properties for investment and the
production of rental income until they no longer meet our investment criteria.
During 2002, we sold nine properties for aggregate consideration of
approximately $32.1 million.
During March 2003, we sold an additional two drug store anchored centers
for aggregate consideration of approximately $6.8 million.
Developments and Redevelopments. The following properties are currently
under development:
o Plaza Alegre, an 84,000 square foot, Publix supermarket-anchored
shopping center in southwest Miami-Dade County, Florida, that opened
March 2003;
o a complete redevelopment of University Mall in Pembroke Pines, Florida
incorporating a new Lowe's home improvement store, with completion
targeted in the fourth quarter of 2003; and
o a partial reconfiguration of the Oakbrook Square shopping center in
Palm Beach Gardens, Florida to accommodate a new Stein Mart store,
with completion targeted for the third quarter of 2003.
We are in the planning and permitting stage for several other developments
and redevelopments including:
o the development of a new 25,000 square foot CVS drugstore-anchored
center across the street from Plaza Alegre in Miami-Dade County,
Florida;
o the redevelopment of Salerno Village in Stuart, Florida to accommodate
a new and expanded Winn Dixie supermarket;
o the development of a 12 acre site adjacent to a master-planned
community in Homestead, Florida where we expect to develop a
supermarket anchored center;
o the development of a four acre site adjacent to our Cashmere Corners
property where we expect to commence construction of 20,000 square
feet of retail in the second quarter of 2003; and
o a 120,000 square foot addition to the Shops at Skylake in North Miami
Beach, Florida to accommodate a new L.A. Fitness Sports Center Club
and other tenants.
These five projects are scheduled for completion between the end of 2003
through 2005.
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 179 properties including 172 supermarket and
necessity-oriented retailer anchored centers. 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 their
expectations and demands. 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 financial performance of our
existing properties or properties we acquire. Moreover, we are in the process of
renovating or redeveloping a number of under-performing assets in order to make
them more attractive for leasing or re-leasing to creditworthy tenants.
Acquisition and Development of Shopping Centers. 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, regulatory and zoning conditions in the
property's local and regional market;
o the tenants' gross sales per square foot measured against industry
standards, and the rent payable by the tenants;
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 that 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 supply 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; and
o the potential for capital appreciation of the property.
When evaluating expansion, renovation and development possibilities, we
usually 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, the degree of geographic fit
with our existing markets and the extent of non-core assets included in the
acquisition. For instance, in September of 2001, we acquired 50 properties,
representing approximately 5.2 million square feet of gross leaseable area,
through our acquisitions of United Investors Realty Trust and Centerfund Realty
(U.S.) Corporation. For more information on these acquisitions, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" below.
We currently are focused on properties located in the southern region 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. Generally, we hold our properties for investment
and for the production of rental income. Over time, when assets we acquire no
longer meet our investment criteria, or when sales provide the opportunity for
significant gains, we may attempt to sell or otherwise dispose of those assets.
Using our Capital to Expand Our Business. We intend to further grow and
expand our business by using cash flows from operations, by drawing on our
existing credit facilities or, if appropriate market conditions exist, by
accessing the capital markets 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 our 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, 2002, the merged company's
shopping centers anchored by supermarkets or other necessity retailers
such as drug stores or discount retail stores accounted for
approximately 99.2% of our total annualized minimum rent. We believe
that supermarkets and other necessity-oriented retailers are more
resistant to economic downturns by the nature of their business and
generate frequent 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. The merged company's
portfolio of properties is concentrated in high-density areas that are
experiencing high population growth such as Florida, Texas and
Georgia. After giving effect to the merger, as of December 31, 2002,
these states constitute 46.5%, 16.7% and 13.1% of our supermarket and
necessity-oriented anchored centers gross leaseable area,
respectively. The strong demographics of these and our other 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 represents more than 10.0% of
the merged company's annualized minimum rent and only one tenant,
Publix, represents more than 5.0% of such revenue. After giving effect
to the merger, as of December 31, 2002, Publix represented 8.0% of our
annualized minimum rent and we had over 3,000 leases with 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 enables 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, finance, redevelopment and construction of real estate or
retail properties. In particular, we believe that our in-depth market
knowledge and the long-term tenant relationships developed by our
senior management team 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 bankers,
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.
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, utilizing availability under our $340 million revolving credit
facility 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
You should carefully consider the risks described below. The trading price of
our common stock could decline due to any of these risks.
We are dependent upon certain key tenants, and adverse developments in the
business of these tenants could have a negative impact on our financial
condition.
We own shopping centers which are supported by "anchor" tenants which,
due to size, reputation or other factors, are particularly responsible for
drawing other tenants and shoppers to our centers. For instance, Publix is our
largest tenant and accounts for approximately 1.7 million square feet, or 9.3%,
of our gross leaseable area.
At any time, an anchor tenant or other tenant may experience a
downturn in its business that may weaken its financial condition. As a result,
tenants may delay lease commencement, fail to make rental payments when due or
declare bankruptcy. We are subject to the risk that these tenants may be unable
to make their lease payments or may decline to extend a lease upon its
expiration. Any tenant bankruptcies, leasing delays or failures to make rental
payments when due could result in the termination of the tenant's lease and
material losses to our business and harm to our operating results. For example,
in January 2002, Kmart Corporation, an anchor tenant in eleven of the merged
company's shopping centers, filed for bankruptcy protection and has subsequently
closed stores and terminated leases at four centers. Although we do not believe
that Kmart's bankruptcy will have a materially adverse impact on our financial
condition, if Kmart elects to close some or all of the remaining seven stores in
our centers, it would adversely affect our operating results, including funds
from operations.
In addition to the loss of rental payments, a lease termination by an
anchor tenant or a failure by that anchor tenant to occupy the premises could
result in lease terminations or reductions in rent by other tenants in the same
shopping center whose leases permit cancellation or rent reduction if an anchor
tenant's lease is terminated. Vacated anchor tenant space also tends to
adversely affect the entire shopping center because of the loss of the departed
anchor tenant's power to draw customers to the center. We cannot provide any
assurance that we will be able to quickly re-lease vacant space on favorable
terms, if at all. Any of these developments could adversely affect our financial
condition or results of operations.
Our growth may be impeded if we are not successful in identifying suitable
acquisitions that meet our criteria.
Our business strategy is to make future acquisitions of or investments
in additional real estate assets or other real estate companies. Integral to
this strategy will be our ability to expand in the future by identifying
suitable acquisition candidates or investment opportunities that meet our
criteria and are compatible with our growth strategy. We may not be successful
in identifying suitable real estate assets or other businesses that meet our
acquisition criteria or completing acquisitions or investments on satisfactory
terms. Failures in identifying or completing acquisitions could reduce the
number of acquisitions we are able to make and may slow our growth, which could
in turn harm our future stock price.
Future acquisitions of real estate assets or other real estate companies
may not yield the returns expected, may result in disruptions to our
business, may strain management resources and may result in stockholder
dilution.
Our acquisition strategy and our market selection process may not
ultimately be successful and may not provide positive returns on our capital. If
we acquire a business, we will be required to integrate the operations,
personnel and accounting and information systems of the acquired business and
train, retain and motivate any key personnel from the acquired business. In
addition, acquisitions may cause disruptions in our operations and divert
management's attention away from day-to-day operations, which could impair our
relationships with our current tenants and employees. The issuance of equity
securities in connection with any acquisition could be substantially dilutive to
our stockholders.
In February 2003, we acquired IRT Property Company. No assurance can
be given that we will be able to realize operational synergies or otherwise
reduce the operating expenses of the combined company. In addition, we may face
unanticipated costs as a result of this acquisition. If we do not achieve
operational synergies, cannot reduce the expenses of the combined company or if
we experience material, unanticipated costs or encounter adverse business
developments as a result of the acquisition, our results of operations could be
harmed and our stock price could decline.
We will face increasing competition for the acquisition of real estate
assets, which may impede our ability to make future acquisitions or may
increase the cost of these acquisitions.
We compete with many other entities engaged in real estate investment
activities for acquisitions of community and neighborhood shopping centers,
including institutional pension funds, other REITs and other owner-operators of
shopping centers. These competitors may drive up the price we must pay for real
estate assets or other real estate companies we seek to acquire, or may succeed
in acquiring those companies or assets themselves. In addition, potential
acquisition targets may find competitors to be more attractive suitors because
they may have greater resources, may be willing to pay more or may have a more
compatible operating philosophy. In particular, larger REITs may enjoy
significant competitive advantages that result from, among other things, a lower
cost of capital and enhanced operating efficiencies. In addition, the number of
entities and the amount of funds competing for suitable investment properties
may increase. Such competition may reduce the number of suitable properties and
increase the bargaining position of the owners of those properties. This will
result in increased demand for these assets, and, therefore, increased prices
paid for them. If we must pay higher prices for properties, our profitability
will be reduced, and our stockholders may experience a lower return on their
investment.
Geographic concentration of our properties will make our business
vulnerable to economic downturns in Florida.
Approximately 45% of our gross leasable area is located in Florida. As
a result, economic and real estate conditions in Florida will significantly
affect our revenues and the value of our properties. Business layoffs or
downsizing, industry slowdowns, changing demographics and other similar factors
may adversely affect the economic climate in Florida. Any resulting oversupply
or reduced demand for retail properties in Florida would adversely affect our
operating performances and limit our ability to make distributions to
stockholders.
We may be subjected to liability for environmental contamination for which
we do not have insurance and which might have a material adverse impact on
our financial condition and results of operations.
As an owner and operator of real estate and real estate-related facilities,
we may be liable for the costs of removal or remediation of hazardous or toxic
substances present at, on, under, in or released from our properties, as well as
for governmental fines and damages for injuries to persons and property. We may
be liable without regard to whether we knew of, or were responsible for, the
environmental contamination and with respect to properties previously owned by
IRT, whether the contamination occurred before or after the merger. We have
several properties in our portfolio that will require or are currently
undergoing varying levels of environmental remediation. We do not currently
maintain an umbrella environmental insurance policy covering all of our
properties, and, therefore, any liability, fine or damage will directly impact
our financial results.
Our investments in development and redevelopment projects may not yield
anticipated returns, which would harm our operating results and reduce the
amount of funds available for distributions to stockholders.
A component of our growth strategy is the development and
redevelopment of properties within our portfolio. In addition, we intend to
develop new shopping centers at other locations and pursue other development and
redevelopment activities as opportunities arise. There can be no assurance that
we will be able to do so successfully. Such activities may include expanding
and/or renovating properties or developing new sites. Expansion, renovation and
development projects generally require expenditures of capital, as well as
various governmental and other approvals, which we may not be able to obtain, or
may only obtain after delay and at substantial costs.
While our policies with respect to expansion, renovation and
development activities are intended to limit some of the risks otherwise
associated with such activities, such as initiating construction only after
securing commitments from anchor tenants, we will nevertheless be subject to
risks that construction costs of a property, due to factors such as cost
overruns, design changes and timing delays arising from a lack of availability
of materials and labor, weather conditions and other factors outside of our
control, may exceed original estimates, possibly making the property
uneconomical. Any substantial unanticipated delays or expenses could adversely
affect the investment returns from these redevelopment projects and harm our
operating results. In addition, occupancy rates and rents at a newly completed
property may not be sufficient to make the property profitable, construction and
permanent financing may not be available on favorable terms, or development,
construction and lease-up activities may not be completed on schedule, resulting
in increased debt service expense and construction costs.
We may experience difficulties and additional costs associated with renting
unleased space and space to be vacated in future years.
We plan to improve the performance of several properties by re-leasing
vacated space. However, our ability to rent unleased or vacated space in these
or other properties will be affected by many factors, including the property's
location, current market conditions and covenants found in certain leases
restricting the use of other space at a property. For instance, in some cases,
our tenant leases contain provisions giving the tenant the exclusive right to
sell particular types of merchandise or provide specific types of services
within the particular retail center, or limit the ability of other tenants to
sell that merchandise or provide those services. When re-leasing space after a
vacancy, these provisions may limit the number and types of prospective tenants
for the vacant space. The failure to lease or to re-lease on satisfactory terms
could harm our operating results.
In addition, if we are able to re-lease vacated space, there is no
assurance that rental rates will be equal to or in excess of current rental
rates. In addition, we may incur substantial costs in obtaining new tenants,
including brokerage commission fees paid by us in connection with new leases or
lease renewals, and the cost of making leasehold improvements.
We have substantial debt obligations which may reduce our operating
performance and put us at a competitive disadvantage.
We have outstanding debt and other liabilities after the merger with
IRT in the aggregate amount of approximately $800 million. The loan facilities
require scheduled principal and balloon payments. In addition, we may incur
additional indebtedness in the future. As a result, we are subject to the risks
normally associated with debt financing, including the risk that our cash flow
will be insufficient to meet required payments of principal and interest, the
risk that interest rates may increase on variable-rate debt and the risk that
indebtedness on our properties will not be refinanced at maturity or that the
terms of such refinancing will not be as favorable as the terms of such
indebtedness.
If our internally generated cash is adequate to repay only a portion
of our indebtedness prior to maturity, then we will be required to repay debt
through refinancings or equity offerings. If we are unable to refinance our
indebtedness on acceptable terms, or at all, we might be forced to dispose of
one or more of our properties upon disadvantageous terms, which might result in
losses and might adversely affect our cash available for distribution. If
prevailing interest rates or other factors at the time of refinancing result in
higher interest rates on refinancings, our interest expense would increase,
without a corresponding increase in our rental rates, which would adversely
affect our results of operations. Further, if one of our properties is mortgaged
to secure payment of indebtedness and we are unable to meet mortgage payments,
or if we are in default under the related mortgage or deed of trust, such
property could be transferred to the mortgagee, or the mortgagee could foreclose
upon the property, appoint a receiver and receive an assignment of rents and
leases or pursue other remedies, all with a consequent loss of income and asset
value. Foreclosure could also create taxable income without accompanying cash
proceeds, thereby hindering our ability to meet the REIT distribution
requirements under the Internal Revenue Code.
Changes in interest rates could adversely affect the market price of our
common stock.
The market price of our common stock is affected by the annual
distribution rate on the shares of our common stock. Increasing market interest
rates may lead prospective purchasers of our common stock to seek a higher
annual yield from their investments. Such an increase in market expectations or
requirements would likely adversely affect the market price of our common stock.
In addition, we have several variable rate loans, including our $340 million
revolving credit facility with Wells Fargo. As interest rates rise, more of our
funds from operations will be required to service that debt. Finally, increases
in interest rates may have the effect of depressing the market value of retail
properties such as ours, including the value of those properties securing our
indebtedness.
Our financial covenants may restrict our operating or acquisition
activities, which may harm our financial condition and operating results.
Our revolving credit facility with Wells Fargo, as well as much of our
existing mortgage indebtedness, contains customary covenants and conditions
typically found in similar credit facilities, including, among others, the
compliance with various financial ratios and restrictions upon the incurrence of
additional indebtedness and liens on our properties. Furthermore, the terms of
some of this indebtedness will restrict our ability to consummate transactions
that result in a change of control or to otherwise issue equity or debt
securities. The existing mortgages also contain customary negative covenants
such as those that limit our ability, without the prior consent of the lender,
to further mortgage the applicable property or to discontinue insurance
coverage. If we were to breach covenants in these debt agreements, the lender
could declare a default and require us to repay the debt immediately, and, if
the debt is secured, if we fail to make repayment the lender may be entitled to
take possession of any property securing the loan.
Certain of our indebtedness may currently be in default as a result of
prior issuances of our common stock or prior acquisitions which may serve
as a basis for our lenders to accelerate amounts due under the related
mortgages or demand payments or fees.
Certain of the mortgages on our properties contain prohibitions on
transfers of ownership interests in the mortgagor or its parent without the
prior written consent of the lenders, which provisions may have been violated by
previous transactions completed by us including the merger with IRT. A violation
could serve as a basis for the lenders to accelerate amounts due under the
related mortgages, demand payments or assess fees or penalties.
The outstanding amounts under the mortgages on the affected properties
covered by such restrictions on transfer total approximately $171 million as of
March 20, 2003. In the event that the holders declare defaults under the
mortgage documents, we could be required to prepay the remaining mortgages from
existing resources, refinancings of such mortgages, borrowings under our other
lines of credit or other sources of financing. The repayment of these mortgages
could have an adverse impact on the operations and affect our ability to make
distributions to stockholders in the anticipated amounts.
Our Chairman and Chief Executive Officer and his affiliates own
approximately 45% of our common stock and exercise significant control of
our company and may delay, defer or prevent us from taking actions that
would be beneficial to our other stockholders.
Chaim Katzman, our Chairman and Chief Executive Officer and our
largest stockholder, and his affiliates own approximately 45% of the outstanding
shares of our common stock. Accordingly, Mr. Katzman is able to exercise
significant control over the outcome of substantially all matters required to be
submitted to our stockholders for approval, including decisions relating to the
election of our board of directors and the determination of our day-to-day
corporate and management policies. In addition, Mr. Katzman is able to exercise
significant control over the outcome of any proposed merger or consolidation or
our company under Maryland law. Mr. Katzman's ownership interest in our company
may discourage third parties from seeking to acquire control of our company
which may adversely affect the market price of our common stock.
Several of our controlling stockholders have pledged their shares of our
stock as collateral under bank loans, foreclosure and disposition of which
could have a negative impact on our stock price.
Several of our affiliates stockholders that beneficially own a significant
interest in our company, including Gazit-Globe (1982), Ltd. and related
entities, have pledged a substantial portion of our stock that they own to
secure loans made to them by commercial banks. In the aggregate, these
stockholders have pledged more than 23.7 million shares, representing
approximately 40% of our total outstanding shares.
If a stockholder defaults on any of its obligations under these pledge
agreements or the related loan documents, these banks may have the right to sell
the pledged shares in one or more public or private sales that could cause our
stock price to decline. Many of the occurrences that could result in a
foreclosure of the pledged shares are out of our control and are unrelated to
our operations. Some of the occurrences that may constitute such an event of
default include:
o the stockholder's failure to make a payment of principal or interest
when due;
o the occurrence of another default that would entitle any of the
stockholder's other creditors to accelerate payment of any debts and
obligations owed to them by the stockholder;
o if the bank, in its absolute discretion, deems that a change has
occurred in the condition of the stockholder to which the bank has not
given its prior written consent;
o if the stockholder ceases to pay its debts or manage its affairs or
reaches a compromise or arrangement with its creditors; and
o if, in the opinion of the bank, the value of the pledged shares shall
be reduced or is likely to be reduced (for example, the price of our
common stock declines).
In addition, because so many shares are pledged to secure loans, the
occurrence of an event of default could result in a sale of pledged shares that
would trigger a change of control of our company, even when such a change may
not be in the best interests of our stockholders.
Our organizational documents contain provisions which may discourage the
takeover of our company, may make removal of our management more difficult
and may depress our stock price.
Our organizational documents contain provisions that may have an
anti-takeover effect and inhibit a change in our management. For instance, our
charter contains ownership limits and restrictions on transferability of shares
of our capital stock in order to protect our status as a REIT. These provisions
prevent any one stockholder from owning, actually or constructively, more than
9.9% of the value or number of outstanding shares of our capital stock without
our prior consent. In addition, our charter and bylaws contain other provisions
that may have the effect of delaying, deferring or preventing a change of
control or the removal of existing management and, as a result, could prevent
our stockholders from receiving a premium for their shares of common stock above
the prevailing market prices. These provisions include the ability to issue
preferred stock, staggered terms for our directors, advance notice requirements
for stockholder proposals, the absence of cumulative voting rights and
provisions relating to the removal of incumbent directors. Finally, Maryland law
also contains several statutes that restrict mergers and other business
combinations with an interested stockholder or that may otherwise have the
effect of preventing or delaying a change of control.
We may experience adverse consequences in the event we fail to qualify as a
REIT.
Although we believe that we have operated so as to qualify as a REIT
under the Internal Revenue Code since our REIT election in 1995, no assurance
can be given that we have qualified or will remain qualified as a REIT. In
addition, no assurance can be given that legislation, new regulations,
administrative interpretations or court decisions will not significantly change
the tax laws with respect to qualification as a REIT or the federal income tax
consequences of such qualification. Qualification as a REIT involves the
application of highly technical and complex provisions of the Internal Revenue
Code for which there are only limited judicial and administrative
interpretations. The determination of various factual matters and circumstances
not entirely within our control may affect our ability to qualify as a REIT. For
example, in order to qualify as a REIT, at least 95% of our gross income in any
year must be derived from qualifying sources and we must make distributions to
stockholders aggregating annually at least 90% of our REIT taxable income,
excluding capital gains. We intend to make distributions to our stockholders to
comply with the distribution provisions of the Internal Revenue Code. Although
we anticipate that our cash flows from operating activities will be sufficient
to enable us to pay our operating expenses and meet distribution requirements,
no assurances can be given in this regard.
If we were to fail to qualify as a REIT in any taxable year, we would be
subject to federal income tax, including any applicable alternative minimum tax,
on our REIT taxable income at regular corporate income tax rates, and would not
be allowed a deduction in computing our REIT taxable income for amounts
distributed to our stockholders. Moreover, unless entitled to relief under
certain statutory provisions, we also would be ineligible for qualification as a
REIT for the four taxable years following the year during which qualification
was lost. Such disqualification would reduce our net earnings available for
investment or distribution to our stockholders due to our additional tax
liability for the years involved.
Loss of Key Personnel Could Harm Our Business.
Our ability to successfully execute our acquisition and growth strategy
depends to a significant degree upon the continued contributions of Chaim
Katzman, our Chairman of the Board and Chief Executive Officer, Doron Valero,
our President and Chief Operating Officer, and Howard Sipzner, our Chief
Financial Officer. Pursuant to our employment agreements with Mr. Katzman, he is
only required to devote so much of his business time, attention, skill and
efforts as shall be required for the faithful performance of his duties.
Moreover, there is no guarantee that Mr. Katzman, Mr. Valero or Mr. Sipzner will
remain employed with us. While we have employment agreements with these
executives, we cannot guarantee that we will be able to retain their services.
The loss of the services of Messrs. Katzman, Valero and Sipzner could have a
material adverse effect on our results of operations.
Competition
There are numerous commercial developers, real estate companies, including
REITs such as Regency Realty Corporation, Weingarten Realty Investors and New
Plan Excel Realty Trust, 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.
We believe that the principal competitive factors in attracting tenants in
our market areas are location, price, anchor tenants and maintenance of
properties. We also believe that our competitive advantages include the
favorable locations of our properties, our ability to provide a retailer with
multiple locations with anchor tenants and the practice of continuous
maintenance and renovation of our 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 this act, all places of public
accommodation are required to comply with federal requirements related to access
and use by disabled persons. The 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 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 American with 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. In some cases, contamination has migrated or is expected to migrate
into the groundwater beneath our properties from adjacent properties, such as
service stations. In other cases, contamination has resulted from on-site uses
by current or former owners or tenants, such as gas stations or dry cleaners,
which have released pollutants such as gasoline or dry-cleaning solvents into
the soil or groundwater. We believe that, based on environmental studies
conducted to date, none of these environmental problems is likely to have a
material adverse effect on our financial condition. However, no assurances can
be given that environmental studies obtained by us reveal all environmental
liabilities, that any prior owner of land or a property owned or acquired by us
did not create any material environmental condition not known to us, or that a
material environmental condition does not otherwise exist, or may not exist in
the future.
Employees
At December 31, 2002, we had 95 full-time employees, and as of March 20,
2003, following our merger with IRT, we now have 190 full-time employees. Our
employees are not represented by any collective bargaining group, and we
consider our relations with our employees to be good.
Available Information
Our internet address is www.equityone.net. You can obtain on our website,
free of charge, a copy of our annual report on Form 10-K, our quarterly reports
on Form 10-Q, our Supplemental Information Package, our current reports on Form
8-K, and any amendments to those reports, as soon as reasonably practicable
after we electronically file such reports or amendments with the SEC. Copies are
also available free of charge by contacting our Investor Relations Department
at:
Equity One, Inc.
1696 N.E. Miami Gardens Drive,
North Miami Beach, Florida 33179
Attn: Investor Relations
(305) 947-1664
You may also read and copy any materials we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549, or you may
obtain information by calling the SEC at 1-800-SEC-0300. The SEC maintains an
internet address at http://www.sec.gov that contains reports, proxy statements
and information statements, and other information in which you may obtain
additional information.
ITEM 2. PROPERTIES
Our portfolio consists primarily of shopping centers anchored by
supermarket and other necessity-oriented retailers and contains an aggregate of
approximately 18.5 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; and our McAlpin Square shopping
center located in Savannah, Georgia; our Plaza Acadienne shopping center located
in Eunice, Louisiana and our Shelby Plaza shopping center located in Shelby,
North Carolina, 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 Condition and Results of
Operations - Mortgage Indebtedness."
The following table provides a brief description of the merged company's
properties as of December 31, 2002:
GLA Annualized Average Minimum Percent
(Sq.Ft.)at Minimum Rent Rent Per Leased Leased at
Year Dec. 31, Number of as of December 31, Sq. Ft. at Dec.31, Dec. 31, Anchor Stores and
Property Acquired 2002 Tenants(1) 2002(2) 2002 2002 Certain Tenants(3)
---------- ---------- ---------- ---------- ------------------ ----------------- --------- -----------------------
Supermarket and Other Necessity-Oriented Retailer Anchored Centers
- ------------------------------------------------------------------
FLORIDA (74 properties)
North Florida
(12 properties)
Atlantic Village 1995 100,559 25 $989,608 $10.23 96.2% Publix, Jo-Ann
Atlantic Beach Fabrics
Beauclerc 1998 70,429 12 $537,071 $7.63 100.0% Big Lots, Goodwill,
Village Bealls Outlet
Jacksonville
Commonwealth 1994 81,467 16 $649,698 $8.10 98.4% Winn-Dixie
Jacksonville
Forest Village 2000 71,526 17 $675,747 $10.32 91.5% Publix
Tallahassee
Fort Caroline 1994 74,546 13 $546,460 $7.43 98.7% Winn-Dixie, Eckerd*
Jacksonville (Bealls Outlet)
Losco Corners 2000 8,700 8 $159,905 $18.38 100.0% Winn-Dixie(4)
Jacksonville
Mandarin Landing 1999 141,565 37 $1,146,032 $8.84 91.6% Publix, Office Depot
Jacksonville Eckerd
Monument Point 1997 76,628 14 $497,468 $6.49 100.0% Winn-Dixie, Eckerd
Jacksonville
Oak Hill 1995 78,492 19 $535,058 $6.82 100.0% Publix, Walgreens*
Jacksonville (Bonus Dollar)
Parkmore Plaza 2003 159,067 13 $694,738 $4.40 99.3% Wal-Mart* (Bealls), Big
Milton Lots
Pensacola Plaza 1986 56,098 3 $218,988 $4.27 91.4% FoodWorld
Pensacola
South Beach 2003 289,964 50 $2,624,017 $9.28 97.5% Food Lion, K-Mart,
Regional Stein Mart, Bealls
Jacksonville
Beach
Central Florida (11 properties)
Alafaya Commons 2003 118,186 29 $1,216,072 $10.76 95.7% Publix
Orlando
Conway 2003 72,721 17 $810,301 $11.37 98.0% Publix
Orlando
Eckerd(4) 2002 12,739 1 $338,274 $26.55 100.0% Eckerd
Leesburg
Shoppes of 2002 69,037 13 $761,304 $11.03 100.0% Publix
Eastwood
Orlando
Eustis Square 1993 126,791 27 $742,506 $6.71 87.2% Publix, Walgreens*
Eustis (Bealls Outlet), Bealls
Department Store
Kirkman Shoppes 2001 88,820 32 $1,489,705 $17.46 96.1% Eckerd
Orlando
Lake Mary 1988 342,384 89 $3,924,813 $11.70 98.0% Albertsons, Kmart, Sun
Orlando Star Theatres, Euro
Fitness
Park Promenade 1999 125,818 27 $1,138,052 $9.35 96.7% Publix, Orange County
Orlando Library
Town & Country 2003 71,283 12 $472,035 $6.62 100.0% Albertsons
Kissimmee
Unigold 2003 102,985 20 $1,005,588 $10.18 95.9% Winn-Dixie
Winter Park
Walden Woods 1999 74,336 11 $239,510 $8.65 37.3% Walgreens
Plant City
Florida West Coast (7 properties)
Bay Pointe Plaza 2003 97,390 24 $931,772 $10.24 93.5% Public, Eckerd*(Bealls),
St. Petersburg West Marine
Carrollwood 2003 93,644 35 $872,923 $10.75 86.7% Eckerd
Tampa
Charlotte Square 2003 96,188 27 $676,117 $7.16 98.1% Publix
Port Charlotte
Chelsea Place 2003 81,144 18 $877,298 $10.81 100.0% Publix, Eckerd
New Port Richey
East Bay Plaza 1993 85,426 22 $475,857 $9.96 55.9% Albertsons(5), Family
Largo Dollar, Hollywood Video
Gulf Gate Plaza 2003 174,566 21 $862,659 $5.69 86.9% Bealls, JoAnn Fabrics,
Naples Publix*, Dockside Imp.,
Price Cutter
Lake St. Charles 2001 57,015 8 $555,201 $9.74 100.0% Kash N' Karry
Tampa
Florida West Coast (11 properties)
Lutz Lake 2003 64,985 15 $881,116 $13.56 100.0% Publix
Lutz
Marco Town Center 2001 109,430 45 $1,608,509 $15.98 92.0% Publix
Marco Island
Mariners Crossing 2001 85,507 15 $636,437 $7.92 94.0% Kash N' Karry
Spring Hill
North River 2003 177,128 16 $1,273,353 $7.19 100.0% K-Mart, Walgreens*,
Village Center (Dollar Tree) Bealls
Ellenton
Regency Crossing 2003 85,864 24 $850,398 $10.58 93.6% Publix
Port Richey
Ross Plaza 2001 85,359 20 $716,635 $9.98 84.1% Walgreens*, Ross Dress
Tampa for Less
Seven Hills 2003 64,590 12 $615,481 $9.53 100.0% Publix
Spring Hill
Shoppes of North 2000 84,705 22 $803,009 $9.48 100.0% Publix, Bealls Outlet
Port
North Port
Skipper Palms 2001 86,944 17 $715,205 $8.53 96.4% Winn-Dixie
Tampa
Summerlin Square 1998 109,156 28 $1,067,576 $10.64 91.9% Winn-Dixie, Eckerd
Fort Myers
Venice Plaza 2003 155,987 17 $649,911 $4.48 92.9% Kash N Karry, TJ Maxx,
Venice Appliance Elec Depot
Florida Treasure Coast (9 properties)
Bluff Square 2001 132,395 51 $1,507,511 $11.65 97.7% Publix, Walgreens
Jupiter
Cashmere Corners 2001 89,234 18 $703,013 $4.68 100.0% Albertsons
Port St. Lucie
Eckerd(4) 2002 10,908 1 $223,065 $20.45 100.0% Eckerd
Melbourne
Jonathan's Landing 2001 26,820 12 $480,867 $17.93 100.0% Albertsons(5)
Jupiter
New Smyrna Beach 2003 118,451 34 $1,111,199 $9.98 94.0% Walgreens* (Bealls)
Regional
New Smyrna Beach
Old King Commons 2003 84,759 19 $645,294 $7.73 98.5% Wal-Mart* (Scotty's,
Palm Coast Staples)
Ryanwood 2001 114,925 32 $1,016,861 $9.17 96.5% Publix, Bealls Outlet,
Vero Beach Books-A-Million
Salerno Village 2002 58,804 18 $370,206 $6.58 95.6% Winn Dixie, Eckerd
Stuart
Treasure Coast 2003 133,781 25 $1,104,516 $8.67 95.2% Winn Dixie, TJ Maxx
Vero Beach
South Florida/Atlantic Coast (24 properties)
Bird Ludlum 1994 192,282 49 $2,763,985 $14.59 98.5% Winn-Dixie, Eckerd,
Miami Goodwill
Boca Village 2001 93,428 22 $1,361,250 $14.57 100.0% Publix, Eckerd
Boca Raton
Boynton Plaza 2001 99,324 30 $881,522 $10.07 88.1% Publix, Eckerd
Boynton Beach
Countryside Shops 2003 173,161 44 $1,972,596 $11.67 97.6% Publix, Eckerd,
Cooper City Stein Mart
Greenwood 2003 128,532 34 $1,302,496 $11.29 89.8% Publix, Bealls, World
Palm Springs Savings Bank
Lago Mar 2003 82,613 21 $939,230 $12.48 91.1% Publix
Miami
Lantana Village 1998 175,480 25 $1,111,850 $6.44 98.4% K-Mart, Winn-Dixie, Rite-
Lantana Aid (5) (Dollar
Store)
Meadows 2002 75,524 21 $863,972 $12.01 95.2% Publix
Miami
Oakbrook 2001 220,747 35 $1,652,652 $12.55 59.6% Publix, Eckerd, Duffy's,
Palm Beach Steinmart (Opening May
Gardens 2003)
Pine Island 1999 254,907 47 $2,267,574 $9.21 96.6% Publix, Home Depot
Davie Design Expo, Rite Aid*
(Bealls Outlet)
Pine Ridge 2003 117,399 35 $1,446,541 $12.57 98.2% Fresh Market, Bed Bath
Square & Beyond
Coral Springs
Plaza Del Rey 1991 50,146 23 $626,025 $12.84 97.2% Navarro Pharmacy
Miami
Point Royale 1995 209,863 26 $1,277,794 $6.49 93.9% Winn-Dixie, Best Buy
Miami
Pompano 2001 80,697 1 $540,000 $6.69 100.0% Lowe's(6)
Pompano Beach
Prosperity Center 2001 122,106 9 $1,807,207 $14.80 100.0% Office Depot, Barnes
Palm Beach & Noble, Bed Bath &
Gardens Beyond, Carmine's, TJ
Maxx
Ridge Plaza 1999 155,204 29 $1,368,091 $9.03 97.6% AMC Theatre, Kabooms,
Davie Republic Security Bank,
Uncle Funnys, Round Up
Riverside Square 2003 103,241 33 $1,144,558 $11.84 93.6% Publix
Coral Springs
Sawgrass 2001 107,092 29 $1,196,577 $11.28 99.1% Publix, Blockbuster,
Promenade Walgreens
Deerfield Beach
Shoppes of Ibis 2002 79,420 18 $970,712 $12.22 100.0% Publix
West Palm Beach
Shops at Skylake 1997 174,199 45 $2,622,990 $15.23 98.9% Publix, Goodwill,
North Miami Blockbuster
Beach
Shoppes of 2003 126,638 38 $1,839,888 $15.38 94.4% Publix
Silverlakes
Pembroke Pines
Tamarac Town 2003 124,685 38 $1,190,051 $10.57 90.3% Publix
Square
Tamarac
University Mall 2001 249,508 25 $1,252,632 $5.92 84.7% Eckerd, Lowe's
Ft. Lauderdale (under construction)
West Lakes Plaza 1996 100,747 27 $1,077,845 $10.70 100.0% Winn-Dixie, Navarro
Miami Pharmacy
--------- --------- ----------- ------ ------
Subtotal Florida Properties 8,276,18 1,805 $77,126,847 $9.94 93.8%
(74 properties) --------- --------- ----------- ------ ------
TEXAS (31 properties)
Houston (15 properties)
Barker Cypress 2001 66,945 16 $804,066 $12.53 95.8% H.E.B.
Houston
Beechcrest 2001 90,797 15 $804,699 $8.86 100.0% Randall's* (Viet Ho),
Houston Walgreens*
Benchmark 2001 58,384 5 $708,125 $12.13 100.0% Bally's Fitness
Crossing
Houston
Bissonnet 2001 15,542 8 $223,665 $14.39 100.0% Kroger(5)
Houston
Colony Plaza 2001 26,513 15 $445,063 $18.77 89.4%
Sugarland
Copperfield 2001 134,845 33 $937,156 $12.39 56.1% JoAnn Fabrics
Houston
Forestwood 2002 88,760 16 $920,385 $10.58 98.0% Kroger
Houston
Grogan's Mill 2001 118,493 26 $1,429,553 $12.19 98.9% Randall's(5), Petco
The Woodlands
Hedwig 2001 69,504 13 $970,578 $13.96 100.0% Warehouse Music, Ross
Houston Dress For Less
Highland Square 2001 64,171 27 $1,061,100 $16.59 99.7%
Sugarland
Market at First 2001 107,301 35 $1,679,726 $15.65 100.0% Kroger(5), TJ Maxx,
Colony Eckerd
Houston
Mason Park 2001 160,047 39 $1,441,658 $11.73 76.8% Kroger(5), Palais Royal,
Katy Petco, Walgreens* (Eloise
Collectibles)
Mission Bend 2001 131,575 27 $1,019,333 $8.44 91.8% Randall's
Houston
Spring Shadows 2001 39,611 16 $538,773 $14.21 95.7% H.E.B. (7), Dollar
Houston Tree, Hallmark
Steeplechase 2001 105,152 26 $1,169,989 $11.13 100.0% Randall's
Jersey Village
Dallas (13 properties)
Green Oaks 2001 65,091 33 $573,802 $10.94 80.6% Kroger(5)
Arlington
Melbourne 2001 47,517 18 $474,961 $11.09 90.1%
Plaza(5)
Hurst
Minyard's 2001 65,295 2 $399,648 $6.12 100.0% Minyards/Sack N Save
Garland
Parkwood 2001 81,590 20 $1,040,376 $12.75 100.0% Albertsons(5), Planet
Plano Pizza
Plymouth East 2001 56,435 10 $228,878 $4.17 97.3% Kroger
Irving
Plymouth North 2001 444,193 59 $1,691,066 $7.39 51.5% Dollar General, Thrift
Irving of America, US Postal
Service, Chateau Theatre,
Levines
Plymouth South 2001 49,102 7 $289,165 $6.86 85.8% Betcha Bingo
Irving
Plymouth West 2001 178,930 15 $763,071 $4.46 95.6% Tok Won Kim, Bargain
Irving City
Richwood 2001 54,872 28 $587,217 $12.97 82.5% Albertsons(5)
Richardson
Rosemeade Park 2001 49,554 18 $575,968 $11.92 97.5% Kroger(5), Allure Health
Carrolton and Spa
Sterling Plaza 2001 65,205 16 $924,590 $14.18 100.0% Bank One, Warehouse
Irving Entertainment
Townsend 2001 142,978 38 $1,099,530 $9.06 84.9% Albertsons(5), Bealls,
Desoto Victory Gym, Tutor Time
Village Park 2001 44,387 10 $537,347 $17.48 69.3% Petco
Arlington
San Antonio (3 properties)
Bandera Festival 2001 189,438 32 $1,052,861 $11.16 49.8% Bealls, Eckerd*
San Antonio (Scrapbook Haven)
Blanco Village 2002 108,325 16 $1,696,861 $15.66 100.0% H.E.B.
San Antonio
Wurzbach 2001 59,771 3 $170,729 $2.86 100.0% Albertsons*
San Antonio
---------- --------- ----------- ------ ------
Subtotal Texas Properties 2,980,323 642 $26,259,939 $10.62 83.0%
(31 properties) ---------- --------- ----------- ------ ------
GEORGIA (20 properties)
Atlanta Area (13 properties)
Chastain Square 2003 87,815 26 $1,254,783 $14.81 96.5% Publix
Atlanta
Commerce Crossing 2003 100,668 10 $364,764 $4.01 90.4% Wal-Mart
Georgia
Douglas Commons 2003 97,027 19 $946,838 $9.90 98.6% Kroger
Douglasville
Fairview Oaks 2003 77,052 13 $825,007 $10.71 100.0% Kroger
Ellenwood
Grassland 2003 90,906 14 $983,637 $11.29 95.9% Kroger
Crossing
Alpharetta
Mableton 2003 86,819 17 $799,412 $9.75 94.5% Publix
Crossing
Mableton
Macland 2003 79,699 17 $771,388 $10.02 96.6% Publix
Pointe
Marietta
Market Place 2003 73,686 22 $474,246 $15.30 42.1%
Norcross
Paulding Commons 2003 192,391 31 $1,505,336 $7.95 98.4% Kroger, K-Mart
Dallas
Powers Ferry 2003 83,101 22 $736,362 $10.52 84.2% Micro Center
Plaza
Marietta
Wesley Chapel 2003 170,792 25 $1,149,198 $6.73 100.0% Ingels, Wal-Mart, CVS
Crossing Drugs
Decatur
West Towne 2003 89,596 18 $471,717 $5.90 89.3% Big Lots, Eckerd*
Square
Rome
Williamsburg @ 2003 44,928 27 $751,439 $17.19 97.3%
Dunwoody
Dunwoody
Central Georgia
(5 Properties)
Daniel Village 2003 171,932 38 $1,256,446 $7.94 92.1% Bi-Lo, Eckerd Drug
Augusta
Heritage Walk 2003 159,991 12 $1,059,465 $6.62 100.0% Kroger, K-Mart
Milledgeville
Spalding Village 2003 235,318 29 $1,710,285 $7.39 98.4% Kroger, K-Mart, JC
Griffin Penney
Watson Central 2003 227,747 29 $1,067,821 $5.23 89.6% Winn-Dixie, Wal-Mart
Warner Robins
Walton Plaza 2003 43,460 7 $403,622 $9.29 100.0% Harris Teeter (Omni
Augusta Fitness)
South Georgia (2 properties)
Colony Square 2003 50,000 8 $319,697 $6.63 96.4% Food Lion
Fitzgerald
McAlpin Square 2003 172,125 25 $1,129,023 $6.95 94.3% Kroger, US Post Office,
Savannah Big Lots
--------- --------- ----------- ------ ------
Subtotal Georgia Properties 2,335,053 409 $17,980,486 $8.22 93.7%
(20 properties) --------- --------- ----------- ------ ------
ALABAMA (3 properties)
Madison Centre 2003 64,837 12 $593,181 $9.53 96.0% Publix, Rite Aid
Madison
Stadium Plaza 2003 70,475 20 $527,153 $7.48 100.0% Piggly Wiggly, CVS
Phenix City Drugs
West Gate Plaza 2003 64,378 9 $456,244 $7.09 100.0% Winn-Dixie, Rite Aid
Mobile
--------- --------- ----------- ------ ------
Subtotal Alabama Properties 199,690 41 $1,578,505 $8.00 98.8%
(3 properties) --------- --------- ----------- ------ ------
ARIZONA (3 properties)
Big Curve 2001 126,402 32 $1,168,553 $9.70 95.3% Albertsons(5), Walgreens,
Yuma Miller's Outpost
Park Northern 2001 126,852 25 $757,648 $6.51 91.8% Safeway, Bealls,
Phoenix Showbiz Pizza
Southwest 2001 93,518 18 $521,136 $10.55 52.8% Walgreens
Walgreens
Phoenix
--------- --------- ----------- ------ ------
Subtotal Arizona Properties 346,772 75 $2,447,337 $8.55 82.6%
(3 properties) --------- --------- ----------- ------ ------
KENTUCKY (1 property)
Scottsville 2003 38,450 12 $220,528 $6.89 83.2% Hancock Fabrics
Square
Bowling Green
LOUISIANA (14 properties)
Ambassador Row 2003 193,982 24 $1,556,489 $8.02 100.0% Hobby Lobby, Conn's
Lafayette Appliance, Big Lots,
Chuck E. Cheese's
Ambassador Row 2003 155,483 29 $1,189,371 $9.51 80.4% Marshalls, Bed Bath &
Courtyards Beyond, Gateway
Lafayette Computers, Hancock
Fabrics
Bluebonnet 2003 90,215 20 $679,541 $8.04 93.6% Matheme's, Rite Aid*
Village
Baton Rouge
The Boulevard 2003 68,012 15 $377,927 $8.30 67.0% Piccadilly
Lafayette
Country Club 2003 64,686 10 $335,733 $5.63 92.3% Winn-Dixie
Plaza
Slidell
The Crossing 2003 113,989 14 $643,049 $5.64 100.0% Albertsons, Campo
Slidell Electric, Piccadilly
Elmwood Oaks 2003 130,284 7 $1,252,442 $9.61 100.0% Wal-Mart* The
Hanahan Wherehouse, Advance
Auto* (Goodwill)
Millervillage 2003 94,559 14 $261,216 $8.25 33.5% Rite Aid
Baton Rouge
Pinhook Plaza 2003 194,725 31 $856,475 $6.20 71.0% Rite Aid
Lafayette
Plaza Acadienne 2003 105,419 8 $376,033 $3.57 100.0% Super 1 Store, Fred's,
Eunice Howard Brothers*
Sherwood South 2003 75,607 10 $462,159 $6.26 97.6% Piggly Wiggly, Burke's
Baton Rouge Outlet
Siegen Village 2003 174,578 18 $781,364 $10.03 44.6% Office Depot, Party City
Baton Rouge
Tarpon Heights 2003 56,605 9 $166,488 $5.84 50.4% Eckerd
Galliano
Village at 2003 144,638 12 $1,094,109 $7.56 100.0% Service Merch.*,
Northshore (Marshalls), Kirshman's,
Slidell Bed Bath & Beyond,
Office Depot
--------- --------- ----------- ------ ------
Subtotal Louisiana Properties 1,662,782 212 $10,032,396 $7.41 81.4%
(14 properties) --------- --------- ----------- ------ ------
MISSISSIPPI (1 property)
Shipyard Plaza 2003 66,857 7 $376,692 $5.63 100.0% Rite Aid, Big Lots
Pascagoula
NORTH CAROLINA
(12 properties)
Centre Pointe 2003 163,642 19 $723,076 $5.78 76.4% Wal-Mart*, (Belk's,
Plaza Goody's)
Asheville
Chestnut Square 2003 39,640 7 $263,936 $6.94 96.0% Food Lion, Eckerd*,
Brevard (Dollar General)
The Galleria 2003 92,344 43 $773,613 $9.55 87.7% Harris Teeter, Eckerd
Wrightsville
Beach
Parkwest 2003 85,602 19 $824,264 $9.79 98.4% Food Lion
Crossing
Durham
Plaza North 2003 47,240 9 $322,874 $8.31 94.9% Bi-Lo, CVS Drugs
Hendersonville
Providence 2003 85,930 26 $682,727 $8.31 95.6% Harris Teeter, Eckerd
Square
Charlotte
Riverview 2003 130,058 11 $804,936 $7.03 88.1% Kroger, Upchurch Drugs
Shopping Center
Durham
Salisbury 2003 76,970 18 $542,286 $8.22 85.7% Food Lion, CVS Drug
Marketplace
Salisbury
Shelby Plaza 2003 103,000 7 $310,770 $3.02 100.0% Big Lots, Aaron Rents*,
Shelby (Hancock Fabrics)
Stanley Market 2003 40,400 3 $220,306 $5.45 100.0% Winn-Dixie
Place
Stanley
Thomasville 2003 148,754 12 $892,119 $6.00 100.0% Ingles, K-Mart, CVS
Commons Drugs
Thomasville
Willowdale 2003 120,815 26 $917,886 $8.45 89.9% Harris Teeter, Carmike
Shopping Center Cinemas, Eckerd*,
Durham (Family Dollar)
---------- --------- ----------- ------ ------
Subtotal North Carolina
Properties 1,134,395 200 $7,278,773 $7.02 91.4%
(12 properties) ---------- --------- ----------- ------ ------
SOUTH CAROLINA
(4 properties)
Lancaster Plaza 2003 77,400 4 $102,000 $1.44 91.5% Bi-Lo
Lancaster
Lancaster 2003 29,047 3 $19,212 $6.00 11.0%
Shopping Center
Lancaster
North Village 2003 60,356 14 $487,035 $8.07 100.0% Bi-Lo
Center(6)
Durham
Spring Valley 2003 75,415 17 $688,211 $9.13 100.0% Bi-Lo, Eckerd
Columbia
---------- --------- ----------- ------ ------
Subtotal South Carolina
Properties 242,218 38 $1,296,458 $6.18 86.6%
(4 properties) ---------- --------- ----------- ------ ------
TENNESSEE (2 properties)
Forrest Gallery 2003 214,450 29 $1,112,572 $5.44 95.4% Kroger
Tullahoma
Smyrna Village 2003 83,334 13 $655,565 $8.30 94.8% Kroger
Smyrna
---------- --------- ----------- ------ ------
Subtotal Tennessee properties
(2 properties) 297,784 42 $1,768,137 $6.23 95.3%
---------- --------- ----------- ------ ------
VIRGINIA (2 properties)
Smyth Valley 2003 126,841 14 $735,867 $5.80 100.0% Ingles, Wal-Mart
Crossing
Marion
Waterlick Plaza 2003 98,694 24 $693,034 $8.56 82.1% Kroger, CVS Drugs
Lynchburg
---------- --------- ----------- ------ ------
Subtotal Virginia Properties
(2 properties) 225,535 38 $1,428,901 $6.88 92.2%
---------- --------- ----------- ------ ------
Total/Weighted Average
Supermarket and
Necessity-Oriented Retailer
Anchored Centers
(167 properties) 17,806,048 3,521 $147,794,999 $9.18 90.4%
---------- --------- ------------ ------ ------
Other Properties
- ----------------
El Novillo 2001 10,000 1 $140,815 $14.08 100.0% Jumbo Buffet
Miami Beach, FL
Epsilon 2001 18,707 5 $167,373 $16.40 54.6% Dax Bar & Grill
West Palm Beach,
FL
4101 South I-85 2003 188,514 9 $484,536 $3.26 78.8% -
Industrial
property
Charlotte, NC
Mandarin 1994 52,880 - N/A N/A N/A -
Mini-storage(8) Jacksonville, FL
Land Purchase-Leasebacks
Grand Marche 2003 200,585 N/A N/A N/A 100.0% Piggly Wiggly, Academy
Lafayette, LA Sports
Net Leased Wal-Marts
Wal-Mart Stores, 2003 54,223 1 $157,500 $2.90 100.0% Wal-Mart
Inc.
Mathews, LA
Wal-Mart Stores, 2003 53,571 1 $175,350 $3.27 100.0% Wal-Mart* (Sutherland
Inc. Lumber)
Marble Falls, TX
Developments and
Redevelopments
Cashmere(9) 2001 -- -- N/A N/A -- 4.0 acres
Port St. Lucie, FL
Coral Way N.E.(10) 1999 -- -- N/A N/A -- 4.0 acres
Miami, FL
Homestead(11) 2002 -- -- N/A N/A -- 12.0 acres
Homestead, FL
The Shops of 2003 -- -- N/A N/A -- 14.2 acres
Huntcrest(12)
Lawrenceville, GA
Miramar Park 2003 -- -- N/A N/A -- 2.0 acres
Plaza(13)
Miramar, FL
Plaza Alegre(14) 2002 -- -- N/A N/A -- 8.5 acres
Miami, FL
---------- --------- ------------ ------ ------
Total/Weighted Average
(180 properties) (15) 18,384,528 3,538 $148,920,573 $8.99 90.0%
---------- --------- ------------ ------ ------
- -------------------
(1) Number of tenants includes both occupied and vacant units. (2) Calculated
by annualizing the tenant's monthly base rent payment at December 31, 2002,
excluding expense reimbursements, percentage rent payments and other
charges.
(3) Includes supermarket tenants and certain other tenants, as well as,
occupants that are on an adjacent or contiguous, separately owned parcel
and do not pay any rent or expense recoveries.
(4) Both Eckerd's were sold in March 2003. See "Business--Recent Developments
and 2002 Overview."
(5) This tenant is on an adjacent or contiguous, separately owned parcel and
does not pay rent or any expense recoveries to us.
(6) Lowe's has indicated its binding intent to exercise its option to purchase
the ground lease in April 2003.
(7) H.E.B. is currently expected to occupy this vacant space in late 2003. (8)
There are 534 storage spaces available at this property.
(9) This development property is a 4.0 acre site located adjacent to our
Cashmere retail center. Construction should commence in April 2003 of
20,000 square feet of retail space.
(10) This development property is a 4.0 acre site located at the northeast
corner of S.W. 147th Avenue and Coral Way. Construction should commence in
April 2003 on a 25,000 square foot drugstore anchored shopping center.
(11) This development property is a 12.0 acre site located 25 miles south of
Miami, FL. We expect to develop a supermarket-anchored shopping center in
2005.
(12) This development property is a 97,000 square foot shopping center. The
shopping center opened in January 2003.
(13) This development property is a 2.0 acre site.
(14) This development property is a 84,000 square foot shopping center located
on the southeast corner of S.W. 147th Avenue and Coral Way and is anchored
by 44,000 square foot Publix supermarket and a 14,000 square foot Goodwill
Superstore. The shopping center opened in March 2003.
(15) Weighted average minimum rent per leased square foot and weighted average
percent leased have been calculated excluding Mandarin Mini-storage and
development properties.
* 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.
Most of our leases provide for the monthly payment in advance of fixed
minimum rentals, the tenants' pro rata share of ad valorem taxes, insurance
(including fire and extended coverage, rent insurance and liability insurance)
and common area maintenance for the property. They may also provide for the
payment of additional rentals based on a percentage of the tenants' sales.
Utilities are generally paid directly by tenants except where common metering
exists with respect to a property. In this case, we make the payments for the
utilities and are reimbursed by the tenants on a monthly basis. Generally, our
leases prohibit the tenant from assigning or subletting its space. They also
require the tenant to use its space for the purpose designated in its lease
agreement and to operate its business on a continuous basis. Some of the lease
agreements with major tenants contain modifications of these basic provisions in
view of the financial condition, stability or desirability of those tenants.
Where a tenant is granted the right to assign its space, the lease agreement
generally provides that the original lessee will remain liable for the payment
of the lease obligations under that lease agreement.
Major Tenants
The following table sets forth as of December 31, 2002 the gross leasable
area, or "GLA" of the merged company's existing properties leased to tenants in
supermarket and necessity-oriented retailer anchored centers:
Supermarket Anchor Other Anchor Non-anchor
Tenants Tenants Tenants Total
Leased GLA (sq. ft.) 4,740,771 5,454,631 5,896,361 16,091,763
Percentage of Total Leased GLA 29.5% 33.9% 36.6% 100.0%
The following table sets forth as of December 31, 2002 the annual minimum
rent of the merged company's existing properties attributable to supermarket and
necessity-oriented retailer anchored tenants:
Supermarket Anchor Other Anchor Non-anchor
Tenants Tenants Tenants Total
Annual Minimum Rent ("AMR") $31,674,491 $31,354,116 $84,766,392 $147,794,999
Percentage of Total AMR 21.4% 21.2% 57.4% 100.0%
The following table sets forth as of December 31, 2002 information
regarding leases with the merged company's ten largest and other supermarket and
necessity-oriented retail tenants:
- --------------------------------------------------------------------------------
Average
Annualized Percent of Annual
Minimum Rent Aggregate Minimum Rent
Number of GLA Percent of at December Annualized per Square
Tenant Leases (square feet) Total GLA 31, 2002 Minimum Rent Foot
- ---------------------- --------- ------------- ----------- ------------- ------------ -------------
Publix 40 1,703,410 9.57% $ 11,883,421 8.04% $ 6.98
Kroger 14 740,617 4.16% 5,419,053 3.67% 7.32
Winn-Dixie 16 709,888 3.99% 4,526,746 3.06% 6.38
K-Mart 8 697,895 3.92% 3,721,823 2.52% 5.33
Wal-Mart 6 834,994 4.69% 3,687,045 2.49% 4.42
Eckerd 28 296,871 1.67% 2,577,607 1.74% 8.68
Blockbuster 24 141,479 0.79% 2,036,249 1.38% 14.39
Food Lion/Kash N Kary 8 286,444 1.61% 1,783,465 1.21% 6.23
Safeway, Randall's 5 250,734 1.41% 1,616,185 1.09% 6.45
Bed Bath & Beyond 4 133,038 0.74% 1,455,914 0.99% 10.94
--------- ------------- ----------- -------------- ------------ -------------
Subtotal/Average 153 5,795,370 32.55% 38,707,508 26.19% 6.68
Remaining Tenants 2,967 10,296,393 57.82% 109,087,491 73.81% 10.59
--------- ------------- ----------- ------------- ------------ -------------
Total/Average 3,120 16,091,763 90.37% $147,794,999 100.00% $ 9.18
========= ============= =========== ============= ============ =============
Lease Expirations
The following table sets forth the anticipated expirations of the merged
company's tenant leases in supermarket and necessity-oriented retail centers as
of December 31, 2002 for each year from 2003 through 2012 and thereafter:
Percent of
Aggregate Average Annual
Annualized Annualized Minimum Rent per
Number of GLA Percent of Minimum Rent at Minimum Rent at Square Foot at
Year Leases (square feet) Total GLA Expiration Expiration Expiration
- ------------------ ------------ ------------- ------------- ---------------- ---------------- -----------------
M-T-M 85 147,080 0.83% $ 1,698,509 1.11% $ 11.55
2003 583 1,490,682 8.37% 16,765,197 10.99% 11.25
2004 621 1,698,992 9.54% 19,560,293 12.82% 11.51
2005 663 1,903,742 10.68% 21,386,590 14.01% 11.23
2006 402 1,689,900 9.49% 17,642,730 11.56% 10.44
2007 362 1,761,067 9.89% 17,716,110 11.61% 10.06
2008 120 848,871 4.77% 7,770,537 5.09% 9.15
2009 52 939,635 5.28% 6,341,700 4.16% 6.75
2010 56 606,548 3.41% 4,918,945 3.22% 8.11
2011 38 802,387 5.51% 6,002,640 3.93% 7.48
2012 25 474,651 2.67% 4,524,254 2.96% 9.53
Thereafter 113 3,728,208 20.93% 28,274,678 18.53% 7.58
------------ ------------- ------------- ---------------- ---------------- -----------------
Sub-total/Average 3,120 16,091,763 90.37% 152,602,183 100.00% $ 9.48
Vacant 401 1,714,285 9.63% NA NA NA
------------ ------------- ------------- ---------------- ---------------- -----------------
Total/Average 3,521 17,806,048 100.00% $152,602,183 100.00% $ 8.57
============ ============= ============= ================ ================ ==================
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.
Unconsolidated Joint Venture Investments
As of December 31, 2002, we owned non-controlling interests in four
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, 2002. We plan to develop two parcels adjacent to
the property at a cost of $2.6 million with the target completion date
of December 2003. The property is encumbered by a $15.0 million
interest only loan, maturing April 2005, bearing interest at LIBOR +
1.40%. We have guaranteed this loan.
o We own a 50% interest in the joint venture which owns City Centre, an
office/retail center located in Palm Beach Gardens, Florida that was
93% occupied as of December 31, 2002. It is encumbered by an 8.54%
fixed-rate mortgage loan with a balance of $13.0 million, maturing in
April 2010.
o We own a 50% interest in the joint venture which owns a parcel of
land, adjacent to City Centre that is held for future development.
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, 2002. The property is encumbered by a 7.63%
fixed-rate mortgage loan with a balance of $16.6 million, maturing in
December 2010.
ITEM 3. LEGAL PROCEEDINGS
Following our execution of the merger agreement with IRT in October 2002,
three IRT shareholders filed three separate purported class action and
derivative suits in the Superior Court of Cobb County, State of Georgia, against
IRT, IRT's board of directors and Equity One alleging claims of breach of
fiduciary duty by the defendant directors, unjust enrichment and irreparable
harm. The complaints sought declaratory relief, an order enjoining consummation
of the merger, and unspecified damages. Although the Georgia court did not grant
the plaintiffs the equitable relief requested and permitted the completion of
the merger, two of these lawsuits, Greaves v. IRT Property Company, et. al. and
Phillips v. IRT Property Company, et. al., are still pending and second amended
complaints have been filed in each such suit. The third lawsuit was voluntarily
dismissed. Although we believe that these suits are without merit and intend to
continue to defend them vigorously, there can be no assurance that the pending
litigation will be resolved in our favor.
Except for these two suits, neither we nor our properties are subject to
any litigation which we believe will have a material adverse affect on our
business financial conditional or results of operations or cash flows.
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
2002.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 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 5, 2003, we had 991 stockholders
of record representing 14,864 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, 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
First Quarter, 2002 $ 14.6000 $ 13.3000 $ 0.27
Second Quarter, 2002 14.2500 13.2500 0.27
Third Quarter, 2002 14.1400 12.0800 0.27
Fourth Quarter, 2002 13.7500 11.8500 0.27
Dividends paid during 2002 and 2001 totaled $35.8 million and $18.6
million, respectively. 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 January 18, 2002, we sold 688,000 unregistered shares of our common
stock to a limited number of accredited investors. In connection with this
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 a price of $13.05 per share to investors that were our
affiliates, resulting in aggregate net proceeds of approximately $8.9 million.
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.
Equity Compensation Plan Information
The following table sets forth information regarding securities authorized
for issuance under equity compensation plans as of December 31, 2002. The data
set forth below include equity compensation plans of IRT assumed by us in the
merger as if the merger had been completed on December 31, 2002.
- ------------------------------- ------------------------- ------------------------ --------------------------
Number of securities
remaining available for
Number of securities to Weighted-average future issuance under
be issued upon exercise exercise price of equity compensation plans
of outstanding options, outstanding options, (excluding securities
Plan category warrants and rights warrants and rights reflected in column (a))
- ------------------------------- ------------------------- ------------------------ --------------------------
(a) (b) (c)
- ------------------------------- ------------------------- ------------------------ --------------------------
Equity compensation plans
approved by security 1,787,207(2) $11.50 (3) 1,715,045
holders(1)
- ------------------------------- ------------------------- ------------------------ --------------------------
Equity compensation plans
not approved by security 0 0 0
holders
- ------------------------------- ------------------------- ------------------------ --------------------------
Total 1,787,207 $11.50 1,715,045
- ------------------------------- ------------------------- ------------------------ --------------------------
(1) Includes information related to our 1995 Stock Option Plan and 2000
executive Incentive Compensation Plan and the IRT 1989 Stock Option Plan
and 1998 Long-Term Incentive Plan.
(2) Includes options to purchase 827,457 shares of common stock issuable upon
the exercise of options assumed in the IRT merger.
(3) Weighted average price of assumed IRT options is $11.17 per share.
ITEM 6. SELECTED 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, 2002,
2001 and 2000 contained elsewhere herein. The consolidated financial statements
as of and for the years ended December 31, 2002, 2001 and 2000 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,
------------------------------------------------------------------------------
2002 2001 2000 1999 1998
------------- ------------ ------------ ------------- ------------
(in thousands other than per share, percentage and ratio data)
Statement of Operations Data:
(1)(2)
Total revenues................. $ 103,009 $ 79,877 $ 47,850 $ 26,035 $ 21,936
------------- ------------ ------------ ------------- ------------
Property operating expenses...