-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jy6X1LKaKBBNzo+2cbUMJPnDe36RbZHmoc9xJumF8gvDgZ11zJnl2ygW5FoJAqpz K3UX7LOrPvxbdCAxd6ea1g== 0000936392-98-001351.txt : 19981014 0000936392-98-001351.hdr.sgml : 19981014 ACCESSION NUMBER: 0000936392-98-001351 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980928 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19981013 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW PLAN REALTY TRUST CENTRAL INDEX KEY: 0000071519 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 131995781 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-08459 FILM NUMBER: 98724691 BUSINESS ADDRESS: STREET 1: 1120 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2128693000 MAIL ADDRESS: STREET 1: 1120 AVENUE OF THE AMERICAS STREET 2: 1120 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 8-K 1 FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported) SEPTEMBER 28, 1998 NEW PLAN REALTY TRUST (Exact name of registrant as specified in its charter) MASSACHUSETTS 001-08459 13-1995781 (State or other (Commission File Number) (IRS Employer Jurisdiction of Identification Number) incorporation) 1120 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10036 (212) 869-3000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) 2 This Current Report on Form 8-K is filed by New Plan Realty Trust, a Massachusetts business trust ("New Plan"), in connection with the matters described herein. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On September 28, 1998, Excel Realty Trust, Inc. ("Excel") and New Plan consummated a previously-announced merger pursuant to an Agreement and Plan of Merger dated May 14, 1998, as amended as of August 7, 1998 (the "Merger Agreement"), whereby ERT Merger Sub, Inc., a wholly-owned subsidiary of Excel, was merged with and into New Plan with New Plan surviving as a wholly-owned subsidiary of Excel (the "Merger"). The Merger was approved by the stockholders of Excel and the shareholders of New Plan at special meetings held on September 25, 1998. In connection with the consummation of the Merger, Excel changed its name to "New Plan Excel Realty Trust, Inc." ("New Plan Excel"). As provided in the Merger Agreement, Excel paid a 20% stock dividend prior to the Merger. Upon consummation of the Merger, each share of beneficial interest, no par value, of New Plan was converted into one share of common stock, par value $.01 per share, of New Plan Excel ("New Plan Excel Common Stock"), and each 7.8% Series A Cumulative Step-Up Premium Rate Preferred Share, par value $1.00 per share, of New Plan was converted into one share of 7.8% Series D Cumulative Voting Step-Up Premium Rate Preferred Stock, par value $.01 per share, of New Plan Excel ("New Plan Excel Series D Preferred Stock"). New Plan Excel issued an aggregate of approximately 60,000,000 shares of New Plan Excel Common Stock and 150,000 shares of New Plan Excel Series D Preferred Stock (represented by 1,500,000 depositary shares, each of which represents a one-tenth fractional interest in a share of New Plan Excel Series D Preferred Stock) to New Plan's shareholders in the Merger. The New Plan Excel Common Stock is listed for trading on the New York Stock Exchange under the symbol "NXL." As further provided in the Merger Agreement, the Board of Directors of New Plan Excel and New Plan consists of the six members of Excel's Board and the nine members of the New Plan's Board. The senior management of New Plan Excel and New Plan is as follows: William Newman Chairman of the Board Arnold Laubich Chief Executive Officer Gary B. Sabin President and Chairman of Investment Committee James M. Steuterman Executive Vice President and Co-Chief Operating Officer Richard B. Muir Executive Vice President and Co-Chief Operating Officer David A. Lund Chief Financial Officer
Prior to the consummation of the Merger, New Plan was a self-administered and self-managed equity real estate investment trust which, as of April 30, 1998, owned fee or leasehold interests in 132 shopping centers containing an aggregate of approximately 18.9 million square feet of gross leasable area ("GLA"), six factory outlet centers containing an aggregate of approximately 1.8 million square feet of GLA and 52 apartment communities containing approximately 12,400 units. A copy of the Merger Agreement and its related exhibits and schedules is incorporated by reference in Exhibit 2.1 and is incorporated herein by reference. 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a)(b) Financial Statements of Business Acquired and Pro Forma Financial Information The financial statements and pro forma financial information is filed herewith as follows: New Plan Realty Trust Consolidated Financial Statements Report of Independent Accountants Consolidated Balance Sheets as of July 31, 1998 and 1997 Consolidated Statements of Income for the years ended July 31, 1998, 1997 and 1996 Consolidated Statements of Changes in Shareholders Equity for years ended July 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the years ended July 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements New Plan Excel Realty Trust, Inc. Unaudited Pro Forma Operating and Financial Information Pro Forma Consolidated Condensed Balance Sheets - Unaudited Pro Forma Consolidated Condensed Statements of Income - Unaudited for the year ended July 31, 1998 Pro Forma Consolidated Condensed Statements of Income - Unaudited for the year ended July 31, 1997 Notes and Management's Assumptions to Pro Forma Condensed Financial Information (c) Exhibits 2.1 Agreement and Plan of Merger, dated May 14, 1998, as amended as of August 7, 1998, among Excel Realty Trust, Inc., ERT Merger Sub, Inc. and New Plan Realty Trust (incorporated by reference to Exhibit 2.1 to the Registrant's Registration Statement on Form S-4 (No. 333-61131) filed with the Securities and Exchange Commission on August 11, 1998). 23.1 Consent of PricewaterhouseCoopers LLP. 99.1 Press Release, dated September 25, 1998, announcing stockholder approval of the Merger and the payment of a 20% stock dividend to holders of Excel common stock. 99.2 Press Release, dated September 28, 1998, announcing the consummation of the Merger. ITEM 8. CHANGE IN FISCAL YEAR By unanimous written consent dated as of September 28, 1998, the Board of Directors of New Plan Excel adopted a fiscal year end of December 31, beginning with a short fiscal year ending on December 31, 1998. Because New Plan, the accounting acquiror, had a fiscal year ending July 31, a transaction report for the period from August 1, 1998 through September 30, 1998 will be filed on Form 10-Q. 4 NEW PLAN REALTY TRUST CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT AUDITORS To the Trustees and Shareholders of New Plan Realty Trust: We have audited the accompanying consolidated balance sheets of New Plan Realty Trust and Subsidiaries as of July 31, 1998 and 1997 and the related consolidated statements of income, change in shareholders' equity and cash flows for each of the three years in the period ended July 31, 1998. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of New Plan Realty Trust and Subsidiaries as of July 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended July 31, 1998 in conformity with generally accepted accounting principles. /S/ PRICEWATERHOUSE COOPERS LLP PricewaterhouseCoopers LLP New York, New York September 9, 1998, except for Note Q for which the date is September 28, 1998 5 NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 1998 AND 1997 (In Thousands)
1998 1997 ---------- ---------- ASSETS: Real estate, at cost Land $ 272,176 $ 232,502 Buildings and improvements 1,180,562 1,045,273 ---------- ---------- 1,452,738 1,277,775 Less accumulated depreciation and amortization 136,978 105,866 ---------- ---------- 1,315,760 1,171,909 Cash and cash equivalents 26,284 42,781 Marketable securities 1,787 2,034 Mortgages and notes receivable 13,878 23,107 Receivables Trade and notes, net of allowance for doubtful accounts (1998 - $7,926; 1997 - $5,581) 14,025 12,035 Other 1,376 1,464 Prepaid expenses and deferred charges 7,823 5,000 Other assets 3,592 2,814 ---------- ---------- TOTAL ASSETS $1,384,525 $1,261,144 ========== ==========
See Notes to Consolidated Financial Statements. 6 NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 1998 AND 1997 (In Thousands)
1998 1997 ---------- ---------- LIABILITIES: Mortgages payable $ 114,099 $ 65,573 Notes payable, net of unamortized discount (1998 - $1,211; 1997 - $1,366) 462,789 412,634 Other liabilities 37,520 33,359 Tenants' security deposits 5,590 4,623 ---------- ---------- TOTAL LIABILITIES 619,998 516,189 ---------- ---------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY Preferred shares Par value $1.00, unlimited authorization; issued and outstanding (1998 and 1997 - Series A 150,000 Cumulative Preferred Shares), $75,000 redemption value 72,775 72,775 Shares of beneficial interest Without par value, unlimited authorization; issued and outstanding (1998 - 59,874; 1997 - 58,934) 759,853 738,011 Less: loans receivable for purchase of shares of beneficial interest 2,306 2,814 Add: unrealized gain on securities reported at fair value 813 1,057 ---------- ---------- 831,135 809,029 Less distributions in excess of net income 66,608 64,074 ---------- ---------- TOTAL SHAREHOLDERS' EQUITY 764,527 744,955 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDER' EQUITY $1,384,525 $1,261,144 ========== ==========
See Notes to Consolidated Financial Statements. 7 NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED JULY 31, 1998, 1997 AND 1996 (In Thousands Except For Per Share Amounts)
1998 1997 1996 --------- --------- --------- Revenues: Rental income and related revenues $ 246,309 $ 202,093 $ 162,821 Interest and dividend income 3,950 4,728 4,785 --------- --------- --------- Total revenues 250,259 206,821 167,606 --------- --------- --------- Operating expenses: Operating costs 61,417 52,584 39,531 Real estate and other taxes 22,850 18,449 15,788 Interest expense 36,815 28,256 17,561 Depreciation and amortization 31,622 25,006 20,004 Provision for doubtful accounts 4,171 3,283 1,984 --------- --------- --------- Total operating expenses 156,875 127,578 94,868 --------- --------- --------- 93,384 79,243 72,738 Administrative expenses 2,770 2,203 2,616 --------- --------- --------- Income Before (Loss)/Gain on Sale of Properties and Securities: 90,614 77,040 70,122 (Loss)/gain on sale of properties and securities, net (41) (3) 399 --------- --------- --------- Net Income 90,573 77,037 70,521 Preferred Dividend required (5,850) (461) -- --------- --------- --------- Net Income applicable to Shares of Beneficial Interest $ 84,723 $ 76,576 $ 70,521 ========= ========= ========= Net Income Per Share of Beneficial Interest Basic $ 1.43 $ 1.31 $ 1.25 Diluted $ 1.42 $ 1.30 $ 1.25 Cash Distribution Per Share of Beneficial Interest $ 1.475 $ 1.435 $ 1.395 Weighted Average Shares of Beneficial Interest Outstanding Basic 59,365 58,461 56,484 Diluted 59,774 58,735 56,642
See Notes to Consolidated Financial Statements. 8 NEW PLAN REALTY TRUST CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY For the Years Ended July 31, 1998, 1997 and 1996
Preferred Shares Shares of Beneficial Interest Notes Receivable ---------------------- ---------------------------- ---------------- Issued Amount Issued Amount ------ ------ ------ ------ Balance July 31, 1995 53,262 $622,562 $(3,370) Net income Dividends paid Dividend reinvestment 738 15,126 Exercise of stock options 9 165 Repayment of loans 286 Increase during year Issuance of preferred shares 4,060 81,227 -------- --------- ------- -------- -------- Balance July 31, 1996 58,069 719,080 (3,084) Net income Dividends paid Dividend reinvestment 750 16,475 Exercise of stock options 115 2,456 Repayment of loans 270 Increase during year Issuance of preferred shares 150 72,775 -------- --------- ------- -------- -------- Balance July 31, 1997 150 72,775 58,934 738,011 (2,814) Net income Dividends paid Dividend reinvestment 765 18,197 Exercise of stock options 175 3,645 Repayment of loans 508 Decrease during year -------- --------- ------- -------- -------- Balance July 31, 1998 150 $72,775 59,874 $759,853 $(2,306) ======= ======= ====== ======== ======== Cumulative Unrealized Distributions in Total Gains on Excess of Net Shareholders' Securities Income Equity ---------- ---------------- -------------- Balance July 31, 1995 $ 182 $(48,845) $570,529 Net income 70,521 70,521 Dividends paid (78,962) (78,962) Dividend reinvestment 15,126 Exercise of stock options 165 Repayment of loans 286 Increase during year 461 461 Issuance of preferred shares 81,227 -------- --------------- ----------- Balance July 31, 1996 643 (57,286) 659,353 Net income 77,037 77,037 Dividends paid (83,825) (83,825) Dividend reinvestment 16,475 Exercise of stock options 2,456 Repayment of loans 270 Increase during year 414 414 Issuance of preferred shares 72,775 -------- --------------- ----------- Balance July 31, 1997 1,057 (64,074) 744,955 Net income 90,573 90,573 Dividends paid (93,107) (93,107) Dividend reinvestment 18,197 Exercise of stock options 3,645 Repayment of loans 508 Decrease during year (244) (244) -------- --------------- ----------- Balance July 31, 1998 $ 813 $(66,608) $764,527 ====== ========== ========
See Notes to Consolidated Financial Statements 9 NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1998, 1997 AND 1996 (In Thousands)
1998 1997 1996 --------- --------- --------- OPERATING ACTIVITIES Net Income $ 90,573 $ 77,037 $ 70,521 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 31,622 25,006 20,004 Loss/(Gain) on sale of properties, net 67 10 (540) (Gain)/Loss on sale of securities, net (26) (7) 141 Changes in operating assets and liabilities, net: Change in trade and notes receivable (4,335) (2,054) (5,776) Change in other receivables 88 (355) 13 Change in allowance for doubtful accounts 2,345 1,604 1,054 Change in other liabilities 4,161 3,475 8,239 Change in net sundry assets and liabilities (2,988) 605 (250) --------- --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 121,507 105,321 93,406 --------- --------- --------- INVESTING ACTIVITIES Sales of marketable securities 29 484 4,274 Purchases of marketable securities (1) (2) __ Net proceeds from the sale of properties (67) 3,862 3,474 Purchases and improvement of properties (123,036) (282,607) (186,008) Repayment of mortgage notes receivable, net 9,229 491 821 --------- --------- --------- NET CASH USED IN INVESTING ACTIVITIES (113,846) (277,772) (177,439) --------- --------- ---------
See Notes to Consolidated Financial Statements (Continued on next page) 10 NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1998, 1997 AND 1996 (CONTINUED FROM PREVIOUS PAGE) (In Thousands)
1998 1997 1996 --------- --------- --------- FINANCING ACTIVITIES Distributions to shareholders of shares (93,107) (83,825) (78,962) Issuance of preferred shares pursuant to a public offering, net of offering costs -- 72,775 -- Issuance of shares of beneficial interest pursuant to dividend reinvestment plan 18,197 16,475 15,126 Issuance of shares of beneficial interest pursuant to public offering, net of loans receivable and offering costs -- 81,228 Issuance of shares of beneficial interest upon exercise of stock options 3,645 2,456 164 Proceeds from short-term borrowing -- 12,000 19,500 Repayment of short-term borrowing -- (31,500) -- Proceeds from sale of notes 50,000 223,144 10,000 Principal payments on mortgages (3,401) (862) (10,898) Repayment of loans receivable for the purchase of shares of beneficial interest 508 269 286 --------- --------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES (24,158) 210,932 36,444 --------- --------- --------- (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (16,497) 38,481 (47,589) Cash and cash equivalents at beginning of year 42,781 4,300 51,889 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 26,284 $ 42,781 $ 4,300 ========= ========= =========
See Notes to Consolidated Financial Statements. 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Income Taxes: New Plan Realty Trust was organized July 31, 1972 as a Massachusetts Business Trust. New Plan Realty Trust and subsidiaries (the "Trust") have elected to be taxed as a Real Estate Investment Trust ("REIT") under the applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the Trust does not pay Federal income tax on income as long as income distributed to shareholders is at least equal to 95% of real estate investment trust taxable income and pays no Federal income tax on capital gains distributed to shareholders. The Trust may be subject to tax by certain states that do not recognize the REIT. Provision for such taxes has been included in real estate and other taxes. Basis of Consolidation: The consolidated financial statements include the accounts of New Plan Realty Trust and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Certain prior period amounts have been reclassified to conform to the current year presentation. Real Estate: Real estate is carried at cost less accumulated depreciation and amortization. For financial reporting purposes, depreciation is calculated on the straight-line method based on the estimated useful lives of the assets ranging from 5 to 40 years. Amortization of leasehold improvements is calculated on a straight-line basis over the shorter of the life of the lease or the estimated useful life of the asset. If there is an event or a change in circumstances that indicates that the basis of the Trust's property may not be recoverable the Trust's policy is to assess any impairment in value by making a comparison of the current and projected operating cash flows (excluding interest and income taxes) of the property over its remaining useful life, on an undiscounted basis, to the carrying amount of the property. Such carrying amounts would be adjusted, if necessary, to reflect an impairment in the value of the property. The Trust records sales when, among other criteria, the parties are bound by the terms of a contract, all consideration has been exchanged and all conditions precedent to closing have been performed. These conditions are usually met at the time of closing. The cost and related accumulated depreciation of assets sold are removed from the respective accounts and any gain or loss is recognized in income. New Accounting Standards: During 1998, the Trust adopted the provisions of SFAS 128 and SFAS 129. SFAS 129 had no impact on the financial statements. Pursuant to SFAS 128, the Trust restated all per share data to conform with the provisions of that pronouncement (See Note I). During fiscal 1998, the Financial Accounting Standards Board issued (a) No. 130 "Reporting Comprehensive Income" ("SFAS 130"), which is effective for fiscal years beginning after December 15, 1997, (b) No. 131 "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal years beginning after December 15, 1997, (c) No 132 "Employees Disclosure About Pensions and Other Postretirement Benefits" ("SFAS 132") which is effective for fiscal years beginning after December 15, 1997 and (d) No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"), which is effective for fiscal years beginning after June 15, 1999. Management believes that the implementation of SFAS 130, 131, 132 and 133 will not have a material impact on the Trust's financial statements. In addition, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5") and Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"), which are effective for fiscal years beginning after December 15, 1998. Further, the Emerging Issues Task Force of the Financial Accounting Standards Board released Issue No. 97-11, "Accounting for Internal Costs Relating to Real Estate Property Acquisitions" ("EITF 97-11") and Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial Periods" ("EITF 98-9"). SOP 98-5 requires that certain costs incurred in conjunction with start-up activities be expensed. SOP 98-1 provides guidance on whether the costs of computer software developed or obtained for internal use should be capitalized or expensed. EITF 97-11 requires that the internal pre-acquisition costs of identifying and acquiring operating property be expensed as incurred. EITF 98-9 requires that contingent revenue not be accrued until a future specified sales target is achieved. Management believes that, when adopted, SOP 98-5 and SOP 98-1 will not have a significant impact on the Trust's financial statements. EITF 97-11 and 98-9 were adopted during fiscal year 1998 and did not have a material impact on the Trust's financial statements. Cash Equivalents: Cash equivalents consist of short-term, highly liquid debt instruments with original maturities of three months or less. Items classified as cash equivalents include insured bank certificates of deposit and commercial paper. At times cash balances at a limited number of banks may exceed insurable amounts. The Trust believes it mitigates its risk by investing in or through major financial institutions. Recoverability of investments is dependent upon the performance of the issuer. Revenue Recognition: Lease agreements between the Trust and retail tenants generally provide for additional rentals based on such factors as percentage of tenants' sales in excess of specified volumes, increases in real estate taxes, increases in Consumer Price Indices and common area maintenance charges. These additional rentals are generally included in income when reported to the Trust or when billed to tenants. The Trust recognizes rental income from leases with scheduled rent increases on a straight-line basis over the lease term. Deferred rent receivable, included in trade and notes receivable, represents the difference between the straight-line rent and amounts currently due. Concentration of Credit Risk: No tenant or single property accounts for more than 5% of the Trust's revenues. Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The most significant assumptions and estimates relate to depreciable lives, valuation of real estate and the recoverability of mortgage notes and trade accounts receivable. 12 Internal Software Costs: Any costs associated with modifying computer software for the year 2000 are expensed as incurred. Management does not believe future costs to be incurred will be material. NOTE B - MARKETABLE SECURITIES The Trust has classified all investments in equity securities as available-for-sale. All investments are recorded at current market value with an offsetting adjustment to shareholders' equity (Amounts in Thousands).
July 31, 1998 1997 - -------- ------ ------ Amortized cost/cost basis $ 974 $ 977 Unrealized holdings gains 813 1,057 ------ ------ Fair value $1,787 $2,034 ====== ======
The net decrease in unrealized holding gains that has been included as a separate component of shareholders' equity is $244 for 1998. The weighted average method is used to determine realized gain or loss on securities sold. The market value of marketable securities is based on quoted market prices as of July 31, 1998 and 1997. NOTE C - MORTGAGES & NOTES RECEIVABLE Mortgages and Notes Receivable are collateralized principally by real property and consist of the following (Amounts in Thousands):
July 31, 1998 1997 ------- ------- 10% purchase money first mortgage, due August 31, 1998 $ 5,180 $ 5,180 9.38% purchase money first mortgage, due July 30, 1999 4,205 4,205 9.375% purchase money first mortgage, due July 27, 2002 -- 10,350 12% leasehold mortgage, due May 1, 2008 864 890 11.5% note, due April 30, 2004 212 237 8.75% purchase money first mortgage, due July 23, 1998 -- 795 9% purchase money first mortgage, due July 23, 2000 645 -- 7.2% purchase money first mortgage, due May 9, 2001 750 750 8.75% purchase money first mortgage, due July 23, 2001 700 700 10% leasehold mortgage, due May 31, 2008 1,322 -- ------- ------- $13,878 $23,107 ======= ======= NOTE D - OTHER RECEIVABLES (Amounts in Thousands) July 31, 1998 1997 - -------- ------- ------- Interest and dividends $ 266 $ 599 Notes receivable 46 338 Due from officers, trustees and employees (1) 655 497 Miscellaneous receivables 409 30 ------- ------- $ 1,376 $ 1,464 ======= =======
(1) Amounts, which are interest bearing, are either due on demand or have scheduled maturities. NOTE E - MORTGAGES AND CREDIT FACILITY Mortgages are collateralized by real property with aggregate carrying amounts of approximately $269.7 million before accumulated depreciation and amortization. As of July 31, 1998, mortgages payable bear interest at rates ranging from 3.79% to 10.75%, having a weighted average rate of 7.795% per annum and mature from 1998 to 2008. Scheduled principal payments during each of the next five fiscal years and thereafter are approximately as follows (Amounts in Thousands):
Year Ending July 31, Amount - -------------------- ------ 1999 $ 4,240 2000 30,873 2001 9,562 2002 21,707 2003 18,470 Thereafter 29,247 -------- Total $114,099 ========
13 The Trust has an unsecured revolving credit facility which provides for up to $50 million of debt through November, 1998. At July 31, 1998 there were no amounts outstanding under this facility. At the time of borrowing, the Trust can choose from three interest rate options. There are restrictive covenants that place a ceiling on total indebtedness of the lesser of 65% of tangible net worth or $350,000,000, a ceiling on mortgage indebtedness of $105,000,000, a minimum interest coverage ratio of 2.5 to 1 and a minimum tangible net worth of $400,000,000. The Trust has outstanding approximately $40,000 of letters of credit as of July 31, 1998. Interest costs capitalized for the years ended July 31, 1998, 1997, and 1996 were approximately $12,000, $868,000, and $203,000, respectively. NOTE F - NOTES PAYABLE Notes Payable consists of the following (Amounts in Thousands):
Description Face Amount Due Date 1998 1997 - ----------- ----------- -------- ---- ---- 7.75% Senior notes, effective interest rate 7.95%, net of unamortized discount: 1998 - $1,019; 1997 - $1,132 $100,000 4/6/2005 $ 98,981 $ 98,868 6.80% Senior unsecured notes, effective interest rate 6.87%, net of unamortized discount: 1998 - $192; 1997 - $234 81,000 5/15/2002 80,808 80,766 7.97% unsecured notes 10,000 8/14/2026 10,000 10,000 Variable rate unsecured notes 49,000 8/3/1999 49,000 49,000 Variable rate unsecured notes 10,000 8/3/1998 10,000 10,000 5.95% unsecured notes 49,000 11/2/2026 49,000 49,000 7.65% unsecured notes 25,000 11/2/2026 25,000 25,000 7.68% unsecured notes 20,000 11/2/2026 20,000 20,000 Variable rate unsecured notes 40,000 5/15/2000 40,000 40,000 7.35% unsecured notes 30,000 6/15/2007 30,000 30,000 6.9% unsecured notes 50,000 2/15/2028 50,000 -- -------- -------- Total $462,789 $412,634 ======== ========
The Notes are uncollateralized and subordinate to mortgages payable and rank equally with debt under the revolving credit facility. Where applicable, the discount is being amortized over the life of the respective Notes using the effective interest method. Interest is payable semi-annually or quarterly and the principal is due at maturity. Among other restrictive covenants, there is a restrictive covenant that limits the amount of total indebtedness to 65% of total assets. For the year ended July 31, 1998, $387,000 of amortized discount and issuing costs were included in interest expense. NOTE G - OTHER LIABILITIES (Amounts in Thousands)
July 31, 1998 1997 - -------- ----- ---- Accounts payable $ 3,362 $ 2,096 Taxes payable 10,523 9,289 Interest payable on notes 9,712 7,779 Amounts due seller of property 1,952 1,467 Professional and personnel costs 1,239 1,666 Accrued construction costs 4,789 4,872 Acquisition costs 1,120 1,884 Other 3,715 2,969 Deferred rent expense and rent received in advance 1,108 1,337 ------- ------- $37,520 $33,359 ======= =======
NOTE H - SHAREHOLDERS' EQUITY The Series A Cumulative Preferred Shares are redeemable at the option of the Trust on or after June 15, 2007 at the liquidation preference of $500 a share. The preferred shares pay dividends quarterly at the rate of 7.8% of the liquidation preference per annum through September 15, 2012 and at the rate of 9.8% of the liquidation preference per annum thereafter. In connection with the issuance of the Series A Cumulative Preferred Shares, 1,500,000 depositary shares, each representing a 1/10 fractional interest in a share of cumulative preferred, were sold to the public. 14 The Trust has the following stock option plans (the "Plans") pursuant to which the Trust has granted (and in one instance, may continue to grant) options to purchase Shares of Beneficial Interest of the Trust (the "Shares") to officers, trustees and certain key employees of the Trust: (i) the 1985 Incentive Stock Option Plan (the "1985 Plan"), (ii) the March 1991 Stock Option Plan (the "March 1991 Plan"), (iii) the Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), (iv) the 1991 Stock Option Plan (the "1991 Plan") and (v) the 1997 Stock Option Plan (the "1997 Plan"). The exercise price of a Share pursuant to each of the Plans is or was required (as the case may be) to be no less than the fair market value of a Share on the date of grant. Under the 1985 Plan and the 1991 and 1997 Plans (with the exception of certain option grants of 10,000 Shares or more, as discussed below) and the Non-Qualified Plan, options are exercisable 20% per year commencing one year from the date of grant. In the case of certain option grants of 10,000 Shares or more under the 1991 Plan, such option grants are exercisable 10% after the first anniversary of the date of grant, 25% after the second anniversary of the date of grant, 45% after the third anniversary of the date of grant, 70% after the fourth anniversary of the date of grant and 100% after the fifth anniversary of the date of grant. In the case of the March 1991 Plan, 30% of the options granted are exercisable on the third anniversary of the date of grant and, thereafter, an additional 10% of the granted options are exercisable on a yearly basis. Future option grants can be made only under the 1991 and 1997 Plans. The following table shows the activity and balances for each stock option plan during the fiscal years indicated.
Non- March 1985 Qualified 1991 1991 1997 Options Plan Plan Plan Plan Plan - ------- ---- ---- ---- ---- ---- Outstanding July 31, 1995 351,600 5,000 1,300,000 422,250 Exercised (5,000) -- -- (4,000) Canceled (800) -- -- (20,500) Granted 3,200 -- -- 31,300 ---------- ---------- ---------- ---------- Outstanding July 31, 1996 349,000 5,000 1,300,000 429,050 Exercised (72,700) -- -- (42,100) Canceled -- -- -- (26,800) Granted -- -- -- 571,750 ---------- ---------- ---------- ---------- Outstanding July 31, 1997 276,300 5,000 1,300,000 931,900 Exercised (96,515) -- -- (78,300) Canceled (26,085) -- -- (85,350) (101,250) Granted -- -- 41,500 1,408,750 ---------- ---------- ---------- ---------- --------- Outstanding July 31, 1998 153,700 5,000 1,300,000 809,750 1,307,500 ========== ========== ========== ========== ========= Options exercisable at July 31, 1998 - ------------------------------------ Average outstanding option price, which was the market price of the shares on the dates of grant $ 22.43 $ 21.88 $ 18.88 $ 21.86 $ 24.13 Average price of options exercised during 1998 $ 20.60 -- -- $ 21.16 --
The Trust has adopted the disclosure-only provision of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Accordingly, no compensation expense has been recognized for the options described above which were granted on or after August 1, 1995. Had compensation cost for these options been determined based on the fair value on the grant date consistent with the provisions of SFAS 123, the Trust's net earnings and earnings per share of beneficial interest would have been changed to the pro forma amounts shown below. These pro forma adjustments to net income and net income per common share assume fair values of each option grant estimated using the Black-Scholes option pricing formula. The more significant assumptions underlying the determination of such fair values for options granted during 1998, 1997 and 1996 include: (i) weighted average risk-free interest rates of 5.87%, 6.66% and 6.4%, respectively; (ii) weighted average expected option lives of 6.5 years, 6.3 years and 6.3 years, respectively; (iii) an expected volatility of 18.25%, 19.3% and 15.79%, respectively, and (iv) an expected dividend yield of 6.14%, 6.12% and 6.12%, respectively. The per share weighted average fair value at the dates of grant for options awarded during 1998, 1997 and 1996 was $2.78, $3.10 and $2.83, respectively.
Net Income Per Share of Beneficial Interest Net Income ------------------------------------------- (in thousands) Basic Diluted Year ended July 31, 1998 $ 83,904 $1.41 $1.41 Year ended July 31, 1997 76,465 1.31 1.30 Year ended July 31, 1996 70,510 1.25 1.25
The Trust has a Dividend Reinvestment and Share Purchase Plan (the "Plan") whereby shareholders may invest cash distributions and make optional cash payments to purchase Shares of the Trust without payment of any brokerage commission or service charge. The price per share of the additional shares to be purchased with invested cash distributions is the midpoint between the day's high and low sales prices on the New York Stock Exchange, less 5%. 15 The Trust has made loans to officers, trustees and employees primarily for the purpose of purchasing its Shares. These loans are demand and term notes bearing interest at rates ranging from 5% to 9.75%. Interest is payable quarterly. NOTE I - NET INCOME PER SHARE OF BENEFICIAL INTEREST On January 31, 1998 the Trust adopted Financial Accounting Standard No. 128 "Earnings Per Share". All per share data has been restated to conform to the provisions of FAS 128. The following table sets forth the computation of average shares outstanding and basic earnings and diluted earnings per share (Amounts in Thousands, Except Per Share Amounts):
Year Ended July 31, 1998 1997 1996 -------- -------- -------- Numerators - ---------- Net Income $ 90,573 $ 77,037 $ 70,521 Less preferred stock dividend requirement (5,850) (461) -- -------- -------- -------- Net income available to shares of beneficial interest $ 84,723 $ 76,576 $ 70,521 ======== ======== ======== Denominators - ------------ Weighted average shares outstanding for Basic EPS 59,365 58,461 56,484 Effects of Dilutive Securities - Options 409 274 158 -------- -------- -------- Adjusted Weighted Average Shares Outstanding - For Diluted EPS 59,774 58,735 56,642 ======== ======== ======== Basic EPS $ 1.43 $ 1.31 $ 1.25 Diluted EPS $ 1.42 $ 1.30 $ 1.25
NOTE J - LEASE AGREEMENTS The Trust has entered into leases, as lessee, in connection with ground leases for shopping centers which it operates, an office building which it sublets and administrative office space for the Trust. These leases are accounted for as operating leases. The minimum annual rental commitments during the next five fiscal years and thereafter are approximately as follows (Amounts in Thousands):
Year Ending July 31, Amount - -------------------- ------ 1999 $ 1,093 2000 1,074 2001 1,070 2002 1,109 2003 1,140 Thereafter 19,237 ------- Total $24,723 =======
For the years ended July 31, 1998 and 1996, the lease for office space included contingent rentals for real estate tax escalations and operating expense in the amount of $10,000 and $100,000, respectively. There were no contingent rentals for the year ended July 31, 1997. In addition, ground leases provide for fixed rent escalations and renewal options. NOTE K - RENTAL INCOME UNDER OPERATING LEASES Minimum future rentals to be received during the next five fiscal years and thereafter with initial or remaining noncancellable lease terms in excess of one year are approximately as follows (Amounts in Thousands):
Year Ending July 31, Amount - -------------------- ------ 1999 $128,162 2000 111,972 2001 94,189 2002 80,958 2003 67,270 Thereafter 372,028 -------- Total $854,579 ========
The above table assumes that all leases which expire are not renewed, therefore neither renewal rentals nor rentals from replacement tenants are included. Minimum future rentals do not include contingent rentals, which may be received under certain leases on the basis of percentage of reported tenants' sales volume accounted for under EITF 98-9 (See Summary of Significant Accounting Policies), increases in Consumer Price Indices, common area maintenance charges and real estate tax reimbursements. Contingent rentals included in income for the years ended July 31, 1998, 1997 and 1996 amounted to approximately $34,421,000, $28,933,000 and $26,173,000, respectively. 16 NOTE L - PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The Trust acquired 14 shopping centers and five apartment complexes during the year ended July 31, 1998. The aggregate acquisition cost of these properties included existing mortgages and $105 million in cash. In addition, the Trust completed the merger with Excel Realty Trust during September, 1998 (See Note Q). The pro forma financial information for the years ended July 31, 1998 and 1997 shown below is based on the historical statements of the Trust after giving effect to the aforementioned acquisition of 19 properties and the merger with Excel Realty Trust as if such acquisitions took place on August 1, 1997 and 1996, respectively. The purchase price allocations related to the Excel merger are preliminary and are subject to adjustment based on the results of the various appraisals and analyses of fair values. The pro forma financial information is presented for informational purposes only and may not be indicative of results that would have actually occurred had the acquisitions taken place at the dates indicated or of what may occur in the future. (Amounts in Thousands, Except Per Share Data)
Year Ended July 31, 1998 1997 - ------------------- ---- ---- Pro forma total revenues $ 411,737 $ 392,259 Pro forma net income $ 153,857 $ 141,692 Pro forma net income per share of beneficial interest Basic $ 1.52 $ 1.41 Diluted $ 1.49 $ 1.38
NOTE M - QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Amounts in Thousands, Except Per Share Data)
Earnings Per Share Net ---------------------- Year Ended July 31, Revenue Income Basic Diluted 1998 - ---- First $59,507 $21,537 $ .34 $ .34 Second 61,845 22,525 .36 .35 Third 63,481 22,899 .36 .36 Fourth 65,426 23,612 .37 .37 1997 - ---- First $47,783 $19,076 $ .33 $ .33 Second 51,147 19,092 .33 .32 Third 52,066 19,088 .32 .32 Fourth 55,825 19,781 .33 .33
NOTE N - SUPPLEMENTAL CASH FLOW INFORMATION The Trust entered into the following non-cash investing and financing activities (Amounts in Thousands):
Year Ended July 31, 1998 1997 - ------------------- ---- ---- Mortgages payable assumed in the acquisition of properties $51,900 $17,500 Mortgages receivable in connection with the sale of properties $ -- $ 700
State and local income taxes paid for the year ended July 31, 1998 and 1997 were $156,000 and $872,000, respectively. Interest paid for the years ended July 31, 1998 and 1997 was $34,876,000 and $24,642,000, respectively. NOTE O - RETIREMENT SAVINGS PLAN The Trust has a Retirement Savings Plan (the "Savings Plan"). Participants in the Savings Plan may elect to contribute a portion of their earnings to the Savings Plan and the Trust may, at the discretion of the Board of Trustees, make a voluntary contribution to the Savings Plan. For the years ended July 31, 1998, 1997 and 1996, the Trust's expense for the Savings Plan was $317,000, $250,000 and $228,000, respectively. 17 NOTE P - FINANCIAL INSTRUMENTS The estimated fair values of the Trust's financial instruments are as follows (Amounts in Thousands):
At July 31, 1998 1997 - ----------- ---- ---- Corre- Carrying Fair Carrying Fair sponding Amounts Value Amounts Value Footnote ------- ----- ------- ----- -------- Assets: Cash and cash equivalents $ 26,284 $ 26,284 $ 42,781 $ 42,781 A Marketable securities 1,787 1,787 2,034 2,034 B Mortgages and notes receivable 13,875 14,100 23,107 24,200 C Other receivables 1,376 1,376 1,464 1,464 D Liabilities: Mortgages payable 114,099 115,700 65,573 67,500 E Notes payable 462,789 501,800 412,634 429,200 F Other liabilities 37,520 37,520 35,359 35,359 G
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable: Cash and cash equivalents and other receivables and payables: The carrying amount approximates fair value because of the short maturity of those instruments. Marketable securities: Fair value is based on quoted market prices. Mortgages and Notes receivable: The fair value is estimated based on discounting the future cash flows at a year-end risk adjusted lending rate that the Trust would utilize for loans of similar risk and duration. Mortgages payable and Notes payable: The fair value is estimated based on discounting future cash flows at a year-end adjusted borrowing rate which reflects the risks associated with mortgages and notes of similar risk and duration. NOTE Q - SUBSEQUENT EVENTS Subsequent to July 31, 1998 the Trust purchased an apartment complex containing 278 units and a single tenant retail property containing approximately 34,000 gross leasable square feet. The properties are located in North Carolina and Pennsylvania. The aggregate purchase price for such properties was approximately $14.2 million. On August 11, 1998 the Trustees declared a cash distribution to shareholders of record of the shares of beneficial interest as of September 1, 1998 in the amount of $.375 per share (approximately $22.5 million) payable on September 11, 1998. On August 11, 1998 the Trustees declared a cash distribution to shareholders of record of the Series A Cumulative Preferred Shares as of September 1, 1998 in the amount of $9.75 per share ($.975 per depositary share, approximately $1.5 million) payable on September 15, 1998. On September 25, 1998, New Plan Realty Trust, a Massachusetts business trust (the "Trust"), Excel Realty Trust, Inc., a Maryland corporation ("Excel"), and ERT Merger Sub, Inc., a Maryland corporation and a wholly-owned subsidiary of Excel ("Sub"), voted to accept an Agreement and Plan of Merger dated as of May 14, 1998 providing for the merger of the Sub with and into the Trust and the Trust surviving as a wholly-owned subsidiary of Excel. Subsequently Excel declared a 20% stock dividend and then issued one share of Excel for each of the Trust's outstanding shares of beneficial interest. After the merger, the combined company, which was renamed New Plan Excel Realty Trust, Inc. ("New Plan Excel"), has approximately 93 million common shares outstanding. Holders of the Trust's shares upon consummation of the merger hold approximately 65% of the outstanding common stock of New Plan Excel. The Board of Directors of New Plan Excel consists of the nine (9) current members of the Trust's Board and six (6) members currently on Excel's Board. The dividend policy of New Plan Excel for the first year following the merger is $1.60 per share with anticipated minimum increases of $0.0025 per share per quarter until the current quarterly dividend (expressed as an annual rate) is $1.67 per share. Holders of the Trust's Series A Cumulative Step Up Premium Rate Preferred Shares received an equal amount of Excel's Series D Cumulative Voting Step Up Premium Rate Preferred Stock ("Excel Series D Preferred Stock") with substantially identical terms, except that holders of the Excel Series D Preferred Stock will have the right to vote with the holders of the common stock of New Plan Excel on all matters and for two additional directors of New Plan Excel if the distributions on the Excel Series D Preferred Stock are in arrears for six or more quarterly periods. In addition, an application will be made to list the Excel Series D Preferred Stock on the New York Stock Exchange. The merger will, for financial accounting purposes, be accounted for as an acquisition of Excel by New Plan using the purchase method of accounting. The transaction was completed on September 28, 1998. 18 NEW PLAN EXCEL REALTY TRUST INC. UNAUDITED PRO FORMA OPERATING AND FINANCIAL INFORMATION The following tables set forth summary consolidated pro forma operating and financial information of New Plan Excel Realty Trust, Inc. for the year ended July 31, 1998 as if the merger of New Plan and Excel and each respective entity's property acquisitions during its current fiscal year had occurred on July 31, 1998 for balance sheet data and August 1, 1997 for income statement data. Information with respect to Excel is as of June 30, 1998 for balance sheet data and for the year ended June 30, 1998 for income statement data. The pro forma data included herein may not be indicative of the actual results or financial position had the merger of New Plan and Excel and the property acquisitions occurred on the dates indicated. The merger of New Plan and Excel has been accounted for as an acquisition of Excel by New Plan using the purchase method of accounting. The pro forma adjustments related to the merger are based on preliminary estimates of value. Actual adjustments will be based on the results of various appraisals and analyses of fair values. 19 NEW PLAN EXCEL REALTY TRUST, INC. PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS - UNAUDITED (In Thousands)
New Plan Excel Historical Historical Pro Forma July 31, June 30, Combined Pro Forma 1998 (2A) 1998 (2A) Adjustments Totals --------- --------- ----------- ------ ASSETS Real estate, net $ 1,315,760 $ 902,133 $ 289,873(2B) $ 2,507,766 Cash 26,284 63,472 (12,200)(2C) 77,556 Accounts receivable, net 15,401 2,974 -- 18,375 Notes receivable - affiliates -- 66,616 -- 66,616 Notes receivable - other 13,878 30,975 -- 44,853 Other assets 13,202 21,153 10,556(2D) 44,911 ----------- ----------- ----------- ----------- Total assets $ 1,384,525 $ 1,087,323 $ 288,229 $ 2,760,077 =========== =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgages and other notes payable $ 576,888 $ 380,761 $ 9,083(2E) $ 966,732 Capital leases -- 27,229 -- 27,229 Accounts payable, accrued expenses and other liabilities 43,110 18,755 -- 61,865 ----------- ----------- ----------- ----------- Total liabilities 619,998 426,745 9,083 1,055,826 ----------- ----------- ----------- ----------- Minority interest in partnership -- 41,249 -- 41,249 ----------- ----------- ----------- ----------- Stockholders' Equity: Preferred stock 72,775 28 (72,774)(2F) 29 Beneficial interests 759,853 -- (759,853)(2F) -- Common stock -- 234 646(2F) 880 Additional paid-in capital -- 661,260 1,068,934(2F) 1,730,194 Accumulated distributions in excess of net income (66,608) (42,193) 42,193(2F) (66,608) Loans receivable - purchase of shares (2,306) -- -- (2,306) Unrealized gain on securities 813 -- -- 813 ----------- ----------- ----------- ----------- Total stockholders' equity 764,527 619,329 279,146 1,663,002 ----------- ----------- ----------- ----------- Total liabilities and stockholders' equity $ 1,384,525 $ 1,087,323 $ 288,229 $ 2,760,077 =========== =========== =========== ===========
The accompanying notes and management's assumptions are an integral part of this statement. 20 NEW PLAN EXCEL REALTY TRUST, INC. PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME - UNAUDITED FOR THE YEAR ENDED JULY 31, 1998 (In Thousands, Except Per Share Amounts)
New Plan New Plan Property Excel Historical Acquisitions Historical Excel Property Year Ended Aug. 1, 1997 Year Ended Acquisitions July 31, 1998 to July 31, New Plan June 30, July 1, 1997 to (3A) 1998 Pro Forma 1998 (3A) June 30, 1998 ---- ---- ----- --------- ------------- Revenues: Rental $246,309 $ 12,894 $259,203 $113,069 $ 19,075 Interest and other 3,950 (266) 3,684 22,231 36 -------- --------- -------- -------- -------- Total revenue 250,259 12,628 262,887 135,300 19,111 -------- -------- -------- -------- -------- Expenses: Property expenses 88,438 4,507 92,945 22,265 4,185 Interest 36,815 5,999 42,814 29,042 3,196 Depreciation and amortization 31,622 1,749 33,371 15,111 2,215 General and administrative 2,770 -- 2,770 6,313 488 -------- -------- -------- -------- -------- Total expenses 159,645 12,255 171,900 72,731 10,084 -------- -------- -------- -------- -------- Income before real estate sales, minority interest and other 90,614 373 90,987 62,569 9,027 Minority interest -- -- -- (1,558) -- Gains on sales of securities and other (41) -- (41) (2,229) -- Gain (loss) on sale of real estate -- -- -- 516 -- -------- -------- -------- -------- -------- Net income $ 90,573 $ 373 $ 90,946 $ 59,298 $ 9,027 ======== ======== ======== ======== ======== Net income applicable to common shares Basic $84,723 $ 85,096 $ 44,673 Diluted $84,723 $ 85,096 $ 46,231 Basic net income per common share $ 1.43 $ 1.43 $ 2.06 ======= ======== ======== Diluted net income per common share $ 1.42 $ 1.42 $ 1.95 ======= ======== ======== Merger Excel Legacy Excel Pro Forma Combined Pro Spin-off (3K) Pro Forma Adjustments Forma Results ------------- --------- ----------- ------------- Revenues: Rental $ (3,703) $128,441 $ 243(3B) $ 387,887 Interest and other (2,101) 20,166 -- 23,850 --------- -------- -------- --------- Total revenue (5,804) 148,607 243 411,737 --------- -------- -------- --------- Expenses: Property expenses -- 26,450 259(3C) 119,654 Interest (2,016) 30,222 (2,502)(3D) 70,534 Depreciation and amortization (652) 16,674 7,495 (3E) 57,540 General and administrative (1,154) 5,647 310(3F) 8,727 ---------- -------- -------- --------- Total expenses (3,822) 78,993 5,562 256,455 ---------- -------- -------- --------- Income before real estate sales, minority interest and other (1,982) 69,614 (5,319) 155,282 Minority interest -- (1,558) -- (1,558) Gains on sales of securities and other -- (2,229) -- (2,270) Gain (loss) on sale of real estate -- 516 -- 516 --------- -------- -------- --------- Net income $ (1,982) $ 66,343 $ (5,319) $ 151,970 ========== ======== ========= ========= Net income applicable to common shares Basic $ 51,718 $ 131,495 Diluted $ 53,276 $ 133,053 Basic net income per common share $ 2.21 $ 1.50 ======== ========= Diluted net income per common share $ 2.09 $ 1.47 ======== =========
21 NEW PLAN EXCEL REALTY TRUST, INC. PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME - UNAUDITED FOR THE YEAR ENDED JULY 31, 1998 (In Thousands, Except Per Share Amounts) (CONTINUED)
New Plan New Plan Property Excel Property Historical Acquisitions Excel Acquisitions Year Ended Aug. 1, 1997 Historical July 1, 1997 July 31, 1998 to July 31, New Plan Year Ended to June 30, (3A) 1998 Pro Forma June 30, 1998 1998 ------------- ------------ --------- ------------- -------------- Historical basic weighted average number of common shares outstanding 59,365 21,657 Historical diluted weighted average number of common shares outstanding 59,774 23,703 Pro forma basic weighted average number of common shares outstanding 59,365 1,775(3G) Pro forma diluted weighted average number of common shares outstanding 59,774 1,775(3G)
Excel Excel Merger Legacy Pro Pro Forma Combined Pro Spin-off Forma Adjustments Forma Results -------- ----- ----------- ------------- Historical basic weighted average number of common shares outstanding Historical diluted weighted average number of common shares outstanding Pro forma basic weighted average number of common shares outstanding 23,432 87,483 Pro forma diluted weighted average number of common shares outstanding 25,478 90,348
The accompanying notes and management's assumptions are an integral part of this statement. 22 NEW PLAN EXCEL REALTY TRUST, INC. NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION - UNAUDITED (In thousands, except per share amounts) 1. Summary of Accounting Treatment: The exchange of New Plan Shares of Beneficial Interest for Excel Common Stock in connection with the Merger is being accounted for as a reverse merger for financial reporting purposes as if New Plan has acquired Excel. As such, the assets and liabilities of Excel have been adjusted to fair value in connection with the application of purchase accounting. 2. Adjustments to Pro Forma Consolidated Condensed Balance Sheets (A) Certain reclassifications have been made to the historical balance sheets of New Plan and Excel in order to conform to the desired pro forma combined condensed balance sheet presentation. (B) Represents adjustments to record the Merger in accordance with the purchase method of accounting based upon an assumed purchase price of Excel stock of $905,175. The purchase price was calculated assuming a market value of New Plan Shares of Beneficial Interest of $24.20 per share times the outstanding shares of Excel Common Stock of 28,118,668 after the 20% stock dividend to the current holders of Excel Common Stock. In addition, the Excel Preferred A Stock of 2,126,380 shares has been valued at $28.75 per share and the Excel Preferred B Stock of 630,000 shares has been valued at $24.90 per 1/10 of a share. All share prices were determined by taking the average of the closing stock prices 10 days before and after the announced merger date of May 14, 1998. The total purchase price is as follows:
Shares Total Security Outstanding Value Per Share Consideration - -------- ----------- --------------- ------------- Common Stock 28,118,668 $ 24.20 $ 680,472 Series A preferred stock 2,126,380 $ 28.75 61,133 Series B preferred stock to depositary shares 630,000 $ 24.90 156,870 ---------- Total consideration 898,475 Merger and the Other Transaction costs (see below) 6,700 ---------- Total purchase price $905,175 ==========
Estimated fees and expenses related to the Merger are as follows: Advisory fees $ 7,200 Accounting and legal 2,000 Other costs 3,000 ------- Total 12,200 Less Excel expenses 5,500 ------- New Plan transaction costs $ 6,700 =======
23 NEW PLAN EXCEL REALTY TRUST, INC. NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION - UNAUDITED (Continued) (In thousands, except per share amounts) The adjustment to reflect investment in real estate: Purchase price (see above) $ 905,175 Less historical book value of Excel equity (619,329) Transaction costs to be paid by Excel and expensed thereby reducing the historical book value of Excel 5,500 Adjustments to reflect certain assets and liabilities of Excel at fair value: Other assets (see Note (D)) $ (10,556) Mortgages and other notes payable (see Note (E)) 9,083 --------- (1,473) Adjustment required to reflect investment in real estate, net $ 289,873 ========= (C) To reflect the decrease in cash due to the estimated Merger costs $ (12,200) ========= (D) Adjustments to other assets: To eliminate Excel's asset related to the straight-lining of rent related to leases $ (2,427) To eliminate Excel's asset of deferred financing costs (2,912) To eliminate Excel's asset of deferred leasing costs (1,083) To eliminate Excel's assets of organizational costs and goodwill (37) To adjust Excel's historical cost in ERT Development Corporation to estimated fair market value of $17,257 17,015 --------- $ 10,556 ========= (E) To record a premium required to adjust mortgages and other notes payable to fair value using estimated market rates ranging from 6.75% to 7.5% on an instrument by instrument basis $ 9,083 ========= (F) To adjust stockholders' equity to reflect the issuance of Excel's common stock to owners of New Plan's shares of beneficial interest as follows:
Cumulative Additional Distributions Preferred Beneficial Common Paid-in in Excess of Stock Interests Stock Capital Net Income ----- --------- ----- ------- ---------- Exchange of New Plan Shares of Beneficial Interest for Excel Common Stock $ -- $ (759,853) $ 599 $ 759,254 $ -- Exchange of New Plan Preferred Stock for Excel Preferred Stock (72,774) -- -- 72,774 -- Excel's historical Stockholders' equity (28) -- (234) (661,260) 42,193 Value of Excel acquisition 28 -- 281 898,166 -- ----------- ----------- ----------- ----------- ----------- $ (72,774) $ (759,853) $ 646 $ 1,068,934 $ 42,193 =========== =========== =========== =========== ===========
The historical cost of the other assets, including all accounts and notes receivable, and liabilities of Excel are estimated to be their fair market value. 24 NEW PLAN EXCEL REALTY TRUST, INC. NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION - UNAUDITED (Continued) (In thousands, except per share amounts) 3. Adjustments To Pro Forma Consolidated Condensed Statements of Income (A) Certain reclassifications have been made to the historical statements of income of New Plan and Excel in order to conform to the desired pro forma combined condensed statements of income presentation. The Consolidated Condensed Statements of Income include pro forma adjustments for real estate acquisitions that both companies have made within the past twelve months. The cash used to acquire real estate by New Plan has been assumed to come from available cash in savings and from new debt issues. The new debt issued by New Plan was assumed to have an average interest rate of 6.8%. Depreciation expense on the New Plan acquisitions was based on an estimated useful life of 40 years, using the straight line method and allocating the cost between land and building at 20% and 80%, respectively. The cash used to acquire real estate by Excel has been assumed to come from approximately $223 million in equity offerings and the issuance of $39 million in debt. The following adjustments have been made to convert the operations of Excel, which has reported operations on a calendar year basis, to a year ended June 30, 1998 (this approximates the July 31 year end of New Plan).
Add: Six Months Less: Year Ended, Ended Six Months Ended Year Ended Dec. 31, 1997 June 30, 1998 June 30, 1997 June 30, 1998 ------------- ------------- ------------- ------------- Revenues: $ 83,112 $ 63,486 $ 33,529 $ 113,069 Rental revenue 22,346 10,021 10,136 22,231 --------- --------- --------- --------- Interest and other 105,458 73,507 43,665 135,300 --------- --------- --------- --------- Total revenue Expenses: Property expenses 14,023 13,689 5,447 22,265 Interest 23,991 14,886 9,835 29,042 Depreciation and amortization 11,621 8,248 4,758 15,111 General and administrative 5,046 3,614 2,347 6,313 --------- --------- --------- --------- Total expenses 54,681 40,437 22,387 72,731 --------- --------- --------- --------- Income before real estate sales, minority interest and other 50,777 33,070 21,278 62,569 Minority interest (816) (812) (70) (1,558) Real estate gains on sale/impairments 523 286 293 516 Other (1,522) (707) -- (2,229) --------- --------- --------- --------- Net income $ 48,962 $ 31,837 $ 21,501 $ 59,298 ========= ========= ========= ========= Basic net income per share $ 2.06 $ 0.98 $ 0.95 $ 2.06 ========= ========= ========= ========= Diluted net income per share $ 1.97 $ 0.93 $ 0.93 $ 1.95 ========= ========= ========= =========
25 NEW PLAN EXCEL REALTY TRUST, INC. NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION - UNAUDITED (Continued) (In thousands, except per share amounts) (B) To recognize revenue from straight-lining rent related to Excel's leases which will be reset in connection with the Merger $ 243 (C) To reflect the decrease in amortization of Excel's deferred leasing costs $ (259) (D) To reflect the following adjustments to interest expense: (1) To recognize the elimination of amortization of deferred loan costs $ (763) (2) To reflect the amortization of the premium required to adjust Excel's mortgages and other notes payable to fair value (1,739) -------- Total adjustment $ (2,502) ======== (E) To reflect the increase in depreciation as a result of recording Excel's real estate assets at fair value versus historical cost, utilizing an estimated useful life of 40 years and allocating the cost between land and buildings at 20% and 80%, respectively Pro forma depreciation $ 23,840 Excel's historical depreciation (14,782) Pro forma depreciation on property acquisitions (2,215) Pro forma depreciation from Legacy spin-off 652 -------- Total adjustment $ 7,495 ======== (F) To reflect the increase in general and administrative costs mainly due to increased salary costs under new contractual agreements $ 310 (G) To increase the weighted average shares outstanding for Excel for the issuance of common stock and common stock equivalents for the purchase of real estate by Excel. These shares have been accounted for on a pro forma basis to be outstanding during the entire period presented Basic 1,775 Diluted 1,775 (H) The pro forma weighted average number of common shares outstanding for the periods are computed based on the historical weighted average shares outstanding of New Plan and 1.2 times the pro forma weighted average shares outstanding of Excel after giving effect to the issuance of common stock equivalents for the purchase of real estate as noted in item (G) above (I) Includes pro forma effects of the acquisition of real estate properties by New Plan (J) Reflects the decrease in net income applicable to common shares due to the assumed issuance of Excel preferred securities on July 1, 1997 (K) In March 1998, Excel spun off 100% of the shares of Excel Legacy Corporation to its shareholders. This entry reflects the effect of this transaction as if it had occurred July 1, 1997
26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. Date: October 13, 1998 NEW PLAN REALTY TRUST By: /S/ STEVEN F. SIEGEL -------------------------------- Name: Steven F. Siegel -------------------------------- Title: Senior Vice President and General Counsel -------------------------------- 27 EXHIBIT INDEX
Exhibit No. Description 2.1 Agreement and Plan of Merger, dated May 14, 1998, as amended as of August 7, 1998, among Excel Realty Trust, Inc., ERT Merger Sub, Inc. and New Plan Realty Trust (incorporated by reference to Exhibit 2.1 to the Registrant's Registration Statement on Form S-4 (No. 333-61131) filed with the Securities and Exchange Commission on August 11, 1998). 23.1 Consent of PricewaterhouseCoopers LLP. 99.1 Press Release, dated September 25, 1998, announcing stockholder approval of the Merger and the payment of a 20% stock dividend to holders of Excel common stock. 99.2 Press Release, dated September 28, 1998, announcing the consummation of the Merger.
EX-23.1 2 EXHIBIT 23.1 1 Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the registration statements of New Plan Realty Trust on Forms S-3 (File Nos. 333-15635, 033-61383, and 033-53311) of our report dated September 9, 1998, except for Note Q for which date is September 28, 1998, on our audits of the consolidated financial statements of New Plan Realty Trust, as of July 31, 1998 and 1997 and for the years ended July 31, 1998, 1997 and 1996, which report is included in this Current Report on Form 8-K. PricewaterhouseCoopers LLP New York, New York October 13, 1998 EX-99.1 3 EXHIBIT 99.1 1 EXHIBIT 99.1 SHAREHOLDERS APPROVE THE MERGER OF NEW PLAN AND EXCEL REALTY TRUST, CREATING ONE OF THE NATION'S LARGEST SHOPPING CENTER COMPANIES SAN DIEGO--(BUSINESS WIRE)--Sept. 25, 1998--Shareholders today approved the merger of New Plan Realty Trust (NYSE:NPR - news; NYSE - NPR) and Excel Realty Trust (NYSE - XEL) at special meetings held simultaneously in New York City and San Diego. The merger, which is being consummated at a formal closing on Monday, Sept. 28, creates New Plan Excel Realty Trust (NYSE - NXL), one of the largest community shopping center companies in the nation. The merged company has a total capitalization of over $3 billion and its 88 million outstanding common shares will trade on the New York Stock Exchange under the ticker symbol NXL. With headquarters in New York, New Plan Excel is a company that owns and manages 297 retail properties with over 38 million square feet of retail space in 31 states. New Plan Excel's multifamily residential holdings include 54 properties with 13,000 apartment units in 14 states. William Newman, chairman of New Plan Excel, expressed his appreciation over the strong vote of confidence shown by shareholders. Significant majorities of voting shareholders of both companies cast their ballots in favor of the merger, he said. Arnold Laubich, chief executive of the company, and Gary Sabin, president, said the vote will have an energizing effect on the company and management's quest for growth. Pursuant to the merger, immediately following the shareholder meetings on Sept. 25, 1998, Excel paid the previously-announced 20% stock dividend on shares of Excel common stock. Each share of New Plan beneficial interest will be converted into one share of New Plan Excel common stock, and each share of New Plan Series A Preferred Stock will be converted into one share of New Plan Excel Series D Preferred Stock. Shareholders of New Plan will be asked to exchange their shares for certificates of New Plan Excel Realty Trust, on a share for share basis. Shares of the New Plan Excel common stock, Series A Preferred Stock, and Series B Preferred Stock will trade on the New York Stock Exchange under the symbols NXL, NXL PrA, and NXL PrB, respectively. New Plan Excel will have 750 employees and, in addition to its principal offices in New York and San Diego, will have 25 offices coast-to-coast. EX-99.2 4 EXHIBIT 99.2 1 EXHIBIT 99.2 NEW PLAN REALTY TRUST AND EXCEL REALTY TRUST, INC. COMPLETE MERGER NEW YORK--(BUSINESS WIRE)--Sept. 28, 1998--New Plan Excel Realty Trust, Inc. (NYSE:NXL - news) announced today it has completed the merger between Excel Realty Trust, Inc. (NYSE:XEL - news) and New Plan Realty Trust (NYSE:NPR - news) effective today. As previously announced, the merger was approved by the stockholders of both companies on September 25, 1998. The merger created New Plan Excel Realty Trust, Inc., one of the largest community shopping center companies in the nation with a total capitalization of over $3 billion and 38 million square feet of retail space in 31 states. Shares of the New Plan Excel Common and Preferred Stock will trade on the NYSE under the symbols NXL, NXL PrA and NXL PrB, respectively, beginning tomorrow September 29, 1998. New Plan Excel will have 750 employees and, in addition to its headquarters in New York will have 25 offices coast-to-coast. -----END PRIVACY-ENHANCED MESSAGE-----