-----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, Wzh5DAvDWvFz46Q6y4H36wBv4OA6jTRCjCsF+BFDD/sKkgaU7Jtj2Z356BJ8ICgC I+fK5cGpN32t3mzbOxauPA== 0000889812-98-000184.txt : 19980202 0000889812-98-000184.hdr.sgml : 19980202 ACCESSION NUMBER: 0000889812-98-000184 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980128 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980130 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KIMCO REALTY CORP CENTRAL INDEX KEY: 0000879101 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 132744380 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10899 FILM NUMBER: 98517969 BUSINESS ADDRESS: STREET 1: 3333 NEW HYDE PARK RD STREET 2: PO BOX 5020 CITY: NEW HYDE PARK STATE: NY ZIP: 11042 BUSINESS PHONE: 5168699000 8-K 1 CURRENT REPORT UNITED STATES 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 January 28, 1998 Date of Report (Date of earliest event reported) Kimco Realty Corporation (Exact name of registrant as specified in its charter) Maryland 1-10899 13-2744380 - ----------------------- ----------------- ------------------ (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) Identification No.) 3333 New Hyde Park Road New Hyde Park, New York 11042-0020 - ------------------------------------- ------------------ (Address of principal executive (zip code) offices) 516/869-9000 ----------------------------------- Registrant's telephone, including area code Not Applicable - -------------------------------------------------------------------------------- (former name or former address, if changed since last report.) 1 of 4 KIMCO REALTY CORPORATION AND SUBSIDIARIES CURRENT REPORT ON FORM 8-K Item 5. Other Events As previously disclosed in Kimco Realty Corporation's Current Report on Form 8-K dated January 13, 1998, Kimco Realty Corporation ("Kimco" or the "Company") and The Price REIT, Inc. ("Price REIT") announced a definitive agreement to merge (the "Merger"). Pursuant to the terms of the Merger, Price REIT will merge into a newly formed wholly-owned subsidiary of Kimco. The transaction is intended, for financial accounting purposes, to be accounted for as a purchase. Under the terms of the Merger, each share of Price REIT common stock will be exchanged for a combination of Kimco common stock and Kimco depositary shares, each depositary share representing a 1/10 of a share interest in a new issue of Kimco 7.5% Class D Cumulative Convertible Preferred Stock having an aggregate value of at least $45. The Merger, which is expected to be completed in mid-1998, is subject to customary closing conditions, including certain regulatory approvals and the approval of the stockholders of both companies. Attached and incorporated by reference herein as Exhibit 99.1, Exhibit 99.2, Exhibit 99.3, Exhibit 99.4, and Exhibit 99.5, respectively, are certain financial information for Price REIT and unaudited pro forma combined financial information for the combined entity giving effect to the Merger. Attached and incorporated herein by reference as Exhibits 15.5 and 23.1, respectively, are copies of an acknowledgment letter and consent of Ernst & Young LLP. Item 7 Financial Statements, Pro Forma Financial Information and Exhibits (c) Exhibits 15.1 Acknowledgment Letter of Ernst & Young LLP 23.1 Consent of Ernst & Young LLP 99.1 The audited consolidated balance sheets of Price REIT as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996 (incorporated by reference from pages 39 to 63 of Price REIT's 1996 Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 0-19628)) 99.2 The unaudited condensed consolidated balance sheet of Price REIT as of September 30, 1997 and the unaudited condensed consolidated statements of income and cash flows of Price REIT for the nine months ended September 30, 1997 and 1996 (incorporated by reference from pages 3 to 15 of Price REIT's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997 (File No. 1-13432)) 99.3 Pro Forma Combined Condensed Consolidated Balance Sheet as of September 30, 1997 and Pro Forma Combined Condensed Consolidated Statements of Income for the year ended December 31, 1996 and the nine months ended September 30, 1997 2 99.4 Pro Forma Combined Funds from Operations for the year ended December 31, 1996 and the nine months ended September 30, 1997 99.5 Pro Forma Condensed Statements of Income of Price REIT for the year ended December 31, 1996 and the nine months ended September 30, 1997 (incorporated by reference from pages 16 to 22 of Price REIT's Current Report on Form 8K/A ) (Amendment No. 1) dated November 13, 1997 (October 8, 1997) (File No. 1-13432)) 3 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. Kimco Realty Corporation ------------------------ Registrant Date: January 28, 1998 By: /s/ Michael V. Pappagallo ----------------------------- Michael V. Pappagallo Chief Financial Officer 4 EX-15.1 2 LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION Exhibit 15.1 Letter Re: Unaudited Interim Financial Information The Board of Directors The Price REIT, Inc. We are aware of the incorporation by reference in this Current Report (Form 8-K) of Kimco Realty Corporation of our report dated October 27, 1997 relating to the unaudited condensed consolidated interim financial statements of The Price REIT, Inc. that is included in its Form 10-Q for the quarter ended September 30, 1997. /s/ Ernst & Young LLP San Diego, California January 28, 1998 EX-23.1 3 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23.1 Consent of Independent Auditors We consent to the incorporation by reference in this Current Report (Form 8-K) of Kimco Realty Corporation of our report dated January 22, 1997, with respect to the consolidated financial statements of The Price REIT, Inc. included in its Annual Report on Form 10-K for the year ended December 31, 1996, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP San Diego, California January 28, 1997 EX-99.1 4 THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF PRICE REIT--DECEMBER 31, 1996, 1995 AND 1994 Consolidated Financial Statements The Price REIT, Inc. December 31, 1996, 1995 and 1994 with Report of Independent Auditors Report of Independent Auditors The Board of Directors and Stockholders The Price REIT, Inc. We have audited the accompanying consolidated balance sheets of The Price REIT, Inc. as of December 31, 1996 and 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit 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 The Price REIT, Inc. at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. San Diego, California January 22, 1997 The Price REIT, Inc. Consolidated Balance Sheets December 31 1996 1995 ---------- ---------- (In Thousands) Assets Rental property, net (Note 2) $380,482 $351,585 Investments in Joint Ventures (Note 3) 19,202 17,568 Cash and cash equivalents 11,369 1,241 Deferred rent receivable 8,489 6,219 Other assets 6,749 5,431 Secured note receivable (Note 4) 1,346 - Investment in Development Company (Note 12) 434 434 ---------- ---------- Total assets $428,071 $382,478 ========== ========== Liabilities and Stockholders' Equity Liabilities: Accounts payable and accrued liabilities $ 4,474 $ 3,408 Senior Notes payable (Note 5) 154,114 99,082 Unsecured line of credit (Note 5) 19,000 56,000 Secured notes payable (Note 5) 11,794 2,750 ---------- ---------- Total liabilities 189,382 161,240 Minority interest 1,707 - Commitments and contigencies (Note 10) - - Stockholders' Equity (Notes 6, 7 and 8): Preferred stock, $.01 par value; 2,000,000 shares authorized, no shares issued or outstanding - - Common stock, $.01 par value; 25,000,000 shares authorized Series A Common Stock, 0 and 44,546 shares issued and outstanding, convertible 1 for 1 to Common Stock - 1 Common Stock, 9,069,249 and 8,256,302 shares issued and outstanding 91 82 Additional paid-in capital 259,518 236,365 Accumulated deficit (22,627) (15,210) ---------- ---------- Total stockholders' equity 236,982 221,238 ---------- ---------- Total liabilities and stockholders' equity $428,071 $382,478 ========== ========== See accompanying notes. The Price REIT, Inc. Consolidated Statements of Income Year ended December 31 1996 1995 1994 -------- -------- -------- (In Thousands, except per share data) Revenue Rental Income $ 51,292 $ 40,152 $ 37,599 Management fees (Note 9) 1,085 1,042 789 Equity in earnings of Joint Ventures 1,556 1,456 584 Dividend from Development Company - 432 536 Interest and other income 392 441 417 -------- -------- -------- 54,325 43,523 39,925 ======== ======== ======== Expenses Rental operations 4,344 3,266 2,978 Real estate taxes 5,565 3,911 3,606 General and administrative (Note 9) 3,550 3,335 3,187 Depreciation 11,876 9,686 9,165 Interest 12,071 6,939 4,085 -------- -------- -------- 37,406 27,137 23,021 -------- -------- -------- Net income $ 16,919 $ 16,386 $ 16,904 ======== ======== ======== Net income per share $ 1.98 $ 1.98 $ 2.07 ======== ======== ======== Weighted average number of shares outstanding 8,560 8,259 8,165 ======== ======== ======== See accompanying notes. The Price REIT, Inc. Consolidated Statements of Stockholders' Equity Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit Total ------ ------ --------- --------- --------- (In Thousands) Balance at January 1, 1994 8,143 $ 81 $231,783 $ (5,603) $226,261 Issuance of Common Stock under dividend reinvestment and share purchase plan 74 1 2,293 - 2,294 Dividends paid - - - (20,859) (20,859) Net income - - - 16,904 16,904 ------ ------ --------- --------- --------- Balance at December 31, 1994 8,217 82 234,076 (9,558) 224,600 Issuance of Common Stock under dividend reinvestment and share purchase plan 56 1 1,589 - 1,590 Exercise of stock options 28 - 700 - 700 Dividends paid - - - (22,038) (22,038) Net income - - - 16,386 16,386 ------- ------ --------- --------- --------- Balance at December 31, 1995 8,301 83 236,365 (15,210) 221,238 Issuance of Common Stock Public offering 690 7 22,159 - 22,166 Offering costs - - (1,389) - (1,389) Issuance of Common Stock under dividend reinvestment and share purchase plan 37 - 1,164 - 1,164 Exercise of stock options 41 1 1,219 - 1,220 Dividends paid - - - (24,336) (24,336) Net income - - - 16,919 16,919 ------- ------ --------- --------- --------- Balance at December 31, 1996 9,069 $ 91 $259,518 $(22,627) $236,982 ======= ====== ========= ========= ========= See accompanying notes. The Price REIT, Inc. Consolidated Statements of Cash Flows Year ended December 31 1996 1995 1994 --------- --------- --------- (In Thousands) Operating activities Net Income $ 16,919 $ 16,386 $ 16,904 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 11,876 9,686 9,165 Amortization of deferred loan fees 543 284 152 Amortization of debt discount 162 32 - Equity in earnings of Joint Ventures (1,556) (1,456) (584) Deferred rent (2,269) (1,806) (2,129) Changes in operating assets and liabilities: Decrease in deferred rent receivable - 68 - Increase in rent receivable and other assets (1,495) (1,313) (1,459) Increase in accounts payable and accrued liabilities 577 920 105 Increase (decrease) in security deposits 28 109 (42) Increase in accured interest payable 462 1,310 72 --------- --------- --------- Net cash provided by operating activities 25,247 24,220 22,184 --------- --------- --------- Investing activities Purchases of rental property (30,600) (61,831) (8,240) Additions to rental property (9,845) (12,401) (2,947) Investments in Joint Ventures (2,000) (1,977) (15,837) Distributions from Joint Ventures 1,867 1,660 555 Secured note receivable (1,347) - - Distributions from Development Company - 113 203 --------- --------- --------- Net cash used in investing activities (41,925) (74,436) (26,266) --------- --------- --------- The Price REIT, Inc. Consolidated Statements of Cash Flows (Continued) Year ended December 31 1996 1995 1994 --------- --------- --------- (In Thousands) Financing activities Proceeds from Senior Notes payable due 2000 - 99,050 - Proceeds from Senior Notes payable due 2006 54,870 - - Payment of debt issuance costs (640) (1,938) - Proceeds from unsecured line of credit 39,000 68,000 19,000 Repayment of unsecured line of credit (76,000) (96,000) - Proceeds from secured notes payable 11,841 - 2,750 Repayment of secured notes payable (2,797) - - Minority interest contributions 1,707 - - Gross proceeds from issuance of Common Stock 23,642 919 329 Issuance costs (1,389) - - Dividends paid, net of dividends reinvested (23,428) (20,667) (18,893) -------------------- --------- Net cash provided by financing activities 26,806 49,364 3,186 -------------------- --------- Increase (decrease) in cash and cash equivalents 10,128 (852) (896) Cash and cash equivalents at beginning of the year 1,241 2,093 2,989 -------------------- --------- Cash and cash equivalents at end of year $ 11,369 $ 1,241 $ 2,093 ==================== ========= Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 11,364 $ 5,759 $ 4,247 =============================== See accompanying notes. The Price REIT, Inc. Notes to Consolidated Financial Statements December 31, 1996 1.Organization and Summary of Significant Accounting Policies Organization The Price REIT, Inc., a Maryland corporation formed in 1991, is a self- administered and self-managed real estate investment trust which is focused on the acquisition, development, redevelopment and management of retail shopping center properties. Consolidation The consolidated financial statements include the accounts of The Price REIT, Inc.; Price/Texas, Inc., a wholly-owned subsidiary; Price/Baybrook, Ltd., a limited partnership between The Price REIT, Inc. and Price/Texas, Inc.; and Smithtown Venture Limited Liability Company ("Smithtown Venture"), an approximate 80% owned joint venture (collectively referred to as the "Company"). All significant intercompany accounts and transactions have been eliminated. The Company acquired its ownership in Smithtown Venture in October 1996. Use of Estimates The preparation of the Company's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the financial statement date and the reported amounts of revenue and expenses during the reporting period. Due to uncertainties inherent in the estimation process, it is reasonably possible that actual results could differ from these estimates. Rental Property and Depreciation Rental property is recorded at cost. At such times where events or circumstances indicate that the carrying amount of property may be impaired, the Company makes an assessment of its recoverability by estimating the future undiscounted cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Company would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. The Price REIT, Inc. 1. Organization and Summary of Significant Accounting Policies (continued) Rental Property and Depreciation (continue) Depreciation is provided using the straight-line method over estimated useful lives as follows: Furniture and fixtures 7 years Land improvements 15 years Buildings 25 years Investments The equity method of accounting is used for investments in joint ventures in which the Company has a financial interest and exercises significant influence. Under this method, the Company recognizes its share of the net earnings or losses of the joint ventures as earned or incurred and reduces or increases the carrying value of the investments by the amount of distributions received or contributions paid. The cost method of accounting is used for the Company's investment in K&F Development Company ("Development Company"). Under this method, the Company recognizes as income, dividends received that are distributed from net accumulated earnings of the Development Company. Cash Equivalents The Company considers highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. The Company has no requirements for compensating balances. The Company maintains its operating cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company also maintains a money market mutual fund which invests primarily in U.S. Treasury obligations. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. Deferred Loan Fees Deferred loan fees are amortized, using the straight-line method, over the term of the related loan and are reflected as a component of interest expense. The Price REIT, Inc. 1. Organization and Summary of Significant Accounting Policies (continued) Financial Instruments Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," requires that the Company disclose estimated fair values for its financial instruments, as well as the methods and significant assumptions used to estimate fair values. The Company believes that the carrying values reflected in the balance sheets at December 31, 1996 and 1995 reasonably approximate the fair values for cash and cash equivalents, receivables and all liabilities. In making such assessments, the Company used estimates and market rates for similar instruments. Minority Interest Minority interest represents the approximate 20% ownership of Smithtown Venture not owned by the Company. Revenue Recognition Rental income is recorded on a straight-line basis over the term of the leases. Deferred rent receivable represents the excess of rental revenue recognized on a straight-line basis over cash received under the applicable lease provisions. Income Taxes The Company has met all conditions necessary to qualify as a real estate investment trust under the Internal Revenue Code. To qualify as a real estate investment trust, the Company is required to pay dividends of at least 95% of its ordinary taxable income each year and meet certain other criteria. As a qualifying real estate investment trust, the Company will not be taxed on income distributed to its shareholders. Since the Company distributed all of its taxable income to stockholders for the years ended December 31, 1996, 1995 and 1994, the accompanying financial statements contain no provision for income taxes. Taxable income differs from net income for financial reporting purposes principally due to differences in the timing of recognition of depreciation expense and rental revenue. The reported amounts of the Company's net assets as of December 31, 1996 and 1995 were less than its tax basis for Federal tax purposes by approximately $272,000 and $451,000, respectively. The Price REIT, Inc. 1. Organization and Summary of Significant Accounting Policies (continued) Net Income Per Share Net income per share is calculated using the weighted average number of shares outstanding. The assumed exercise of outstanding stock options, using the treasury stock method, is not materially dilutive for the earnings per share computation. Reclassification Certain prior year amounts have been reclassified to conform to the current year presentation. 2.Rental Property Rental property as of December 31, 1996, geographically by state, is as follows: Total California Arizona Connecticut --------------------------------------------- (In Thousands) Land $ 136,148 $ 63,754 $ 21,662 $ 7,713 Land improvements 40,907 15,578 6,264 4,201 Buildings 245,038 111,737 31,543 15,952 --------------------------------------------- 422,093 191,069 59,469 27,866 Accumulated depreciation (41,611) (21,612) (5,951) (4,705) --------------------------------------------- $ 380,482 $ 169,457 $ 53,518 $ 23,161 ============================================= Net rentable square feet 4,858 2,022 855 332 ============================================= Maryland New York Virginia Texas Oklahoma ------------------------------------------------- Land $ 2,582 $ 10,321 $ 12,575 $ 13,174 $ 4,367 Land improvements 3,409 2,270 9,185 - - Buildings 6,858 22,637 17,063 26,814 12,434 ------------------------------------------------- 12,849 35,228 38,823 39,988 16,801 Accumulated depreciation (1,607) (2,394) (4,366) (914) (62) ------------------------------------------------- $ 11,242 $ 32,834 $ 34,457 $ 39,074 $ 16,739 ================================================= Net rentable square feet 210 246 323 636 234 ================================================= The Price REIT, Inc. 2. Rental Property (continued) Rental property as of December 31, 1995, geographically by state, is as follows: Total California Arizona Connecticut ---------------------------------------------- (In Thousands) Land $ 127,625 $ 63,736 $ 21,662 $ 7,713 Land improvements 40,833 15,568 6,199 4,201 Buildings 213,190 110,400 30,825 15,952 ---------------------------------------------- 381,648 189,704 58,686 27,866 Accumulated depreciation (30,063) (16,128) (4,288) (3,787) ---------------------------------------------- $ 351,585 $ 173,576 $ 54,398 $ 24,079 ============================================== Net rentable square feet 4,393 2,016 840 332 ============================================== Maryland New York Virginia Texas ---------------------------------------------- Land $ 2,582 $ 10,321 $ 12,575 $ 9,036 Land improvements 3,411 2,270 9,184 - Buildings 6,858 15,246 17,063 16,846 ---------------------------------------------- 12,851 27,837 38,822 25,882 Accumulated depreciation (1,106) (1,599) (3,071) (84) ---------------------------------------------- $ 11,745 $ 26,238 $ 35,751 $ 25,798 ============================================== Net rentable square feet 210 246 323 426 ============================================== Rental property owned through the Company's investments in joint ventures is described in Note 3. The Company's shopping centers are generally leased under noncancellable operating leases with remaining terms ranging from 1 to 25 years. Certain of the leases contain up to seven five-year renewal options. The leases generally contain provisions for increases in rents based on the Consumer Price Index, or a predetermined fixed amount, and require the tenant to reimburse the Company for substantially all operating expenses of the properties. Certain of the leases provide for additional rental payments based on gross tenant revenues in excess of specified amounts. During the year ended December 31, 1996, 1995 and 1994, the Company earned additional rents of approximately $418,000, $372,000 and $225,000, respectively, relating to these leases. The Price REIT, Inc. 2. Rental Property (continued) Future minimum rental income due under the terms of noncancellable operating leases is as follows (in thousands): 1997 $ 42,279 1998 41,812 1999 40,789 2000 39,722 2001 38,431 Thereafter 287,290 The following tenants account for greater than 10% of total revenues: Year ended December 31 1996 1995 1994 ------ ------ ------ (In Thousands) The Home Depot $8,955 $7,401 $6,119 Price/Costco 5,029 5,268 5,985 Acquisitions of Shopping Centers In November 1996, the Company acquired a 234,000 square foot shopping center in Oklahoma City, Oklahoma for $16,700,000 (Note 5). In July 1996, the Company acquired a 210,000 square foot shopping center near Dallas, Texas for $12,650,000. In January 1996, the Company acquired a 9.7 acre land parcel adjacent to the Company's shopping center near Houston, Texas for $1,250,000. In December 1995, the Company acquired a 172,000 square foot shopping center in Oxnard (Ventura County), California for $10,332,000 and a 279,000 square foot shopping center in La Mirada (Los Angeles County), California for $25,824,000. In November 1995, the Company acquired a 426,000 square foot shopping center near Houston, Texas for $25,675,000. The Price REIT, Inc. 2. Rental Property (continued) Acquisitions of Shopping Centers (continued) In December 1994, the Company acquired a 143,000 square foot shopping center in Phoenix, Arizona for $8,240,000. During 1995, the Company began redevelopment and expansion activities to increase the center by approximately 85,000 square feet of new space. Smithtown Venture The Company acquired its interest in Smithtown Venture from Development Company for $250,000. Prior to its ownership acquisition, the Company had advanced $4,550,000 to Smithtown Venture for development of a shopping center in Long Island, New York. Condensed financial information of Smithtown Venture, upon acquisition by the Company on October 2, 1996, is as follows (in thousands): Rental property under development $6,059 -------- Company advances $4,550 Members' capital 1,509 ------ $6,059 ====== In connection with the development of the shopping center, Smithtown Venture entered into a 49-year ground lease, with four ten-year renewal options, which provides for monthly payments. While the shopping center is under development, the lease payments are being capitalized to rental property. Future minimum lease payments, excluding renewal options, are as follows (in thousands): 1997 $ 1,067 1998 1,400 1999 1,400 2000 1,400 2001 1,400 Thereafter 82,653 The Price REIT, Inc. 3.Investment in Joint Ventures Centrepoint Associates In April 1994, the Company acquired a 50% general partnership interest in Centrepoint Associates for $11,388,000. The general partnership interest was acquired from a partnership in which Price/Costco and Messrs. Kornwasser and Friedman were the general partners. The joint venture owns and operates a 236,000 square foot power center in Tempe, Arizona, with an additional 149,000 square feet of adjacent retail space, constructed and completed in 1995. During the years ended December 31, 1996 and 1995 and for the period from April 15, 1994 through December 31, 1994, the Company contributed cash of approximately $271,000, $1,186,000 and $4,449,000, respectively, to the joint venture, to fund construction costs and acquisitions. In accordance with the original purchase agreement, certain development contingencies required Price/Costco to advance the Company approximately $130,000 during 1994 and the Company was required to make net payments to Price/Costco totaling $791,000 during 1995 resulting in a net additional cost to the Company of $661,000. As a result of these payments, the recorded amount of the Company's investment in the joint venture was $661,000 greater than the amount of its capital account as reflected in the joint venture's accounting records. The Company is amortizing the excess cost over 15 years. In December 1995, the joint venture purchased two properties located in the Phoenix metropolitan area. One of the properties is located in Glendale, Arizona, which was purchased for $6,724,000, and consists of an existing 85,000 square foot shopping center with potential to expand by approximately 20,000 additional square feet. The other property is located in Goodyear, Arizona, which was purchased for $4,232,000, and contains approximately 40 acres of vacant land for future development. In connection with these purchases, the joint venture obtained a $10,500,000 loan which is due in December 1997. Hayden Plaza North Associates In April 1996, the Company formed a partnership with Kimco Realty Corporation ("Kimco"), a retail real estate investment trust, to purchase a 191,000 square foot shopping center in Phoenix, Arizona at a cost of $3,490,000. The Company holds a 50% general partnership interest. The acquisition was completed in May 1996. The Price REIT, Inc. 3.Investment in Joint Ventures (continued) Condensed combined financial information of the joint ventures is as follows: December 31 1996 1995 --------------------- (In Thousands) Rental property, net $45,648 $41,590 Other assets 3,125 2,038 --------------------- $48,773 $43,628 ===================== Liabilities $11,701 $10,989 The Company's capital 18,596 16,907 Other partner's capital 18,476 15,732 --------------------- $48,773 $43,628 ===================== Year ended December 31 1996 1995 --------------------- (In Thousands) Revenue $ 6,723 $ 5,201 Expenses (3,538) (2,248) --------------------- Net income $ 3,185 $ 2,953 ===================== The accounting policies of the joint ventures are substantially the same as the Company's. 4.Secured Note Receivable In connection with the development of a shopping center in Long Island, New York, Smithtown Venture made a loan to the ground lessor for the payoff of an existing mortgage on the property. The secured note receivable bears interest at a fixed rate of 7.41% and is due in monthly principal and interest payments through October 2026. The Price REIT, Inc. 5.Notes Payable Notes payable consists of the following: December 31 1996 1995 --------------------- (In Thousands) Senior Notes payable due 2000 $ 99,242 $ 99,082 Senior Notes payable due 2006 54,872 - --------------------- 154,114 99,082 Unsecured line of credit 19,000 56,000 Secured notes payable 11,794 2,750 --------------------- $184,908 $157,832 ===================== Senior Notes Payable In November 1996, the Company issued unsecured 7.50% Senior Notes in the aggregate principal amount of $55,000,000 which are due November 2006. Interest on the 7.50% Senior Notes is payable semi-annually in arrears on May 5 and November 5. The notes were priced at an aggregate amount of $54,870,000 and have an effective interest rate of 7.53%. In November 1995, the Company issued unsecured 7.25% Senior Notes in the aggregate principal amount of $100,000,000 which are due November 2000. Interest on the 7.25% Senior Notes is payable semi-annually in arrears on May 1 and November 1. The notes were priced at an aggregate amount of $99,050,000 and have an effective interest rate of 7.48%. As of December 31, 1996 and 1995, the unamortized discount of senior notes payable was $886,000 and $918,000, respectively. Amortization of the discount during the year ended December 31, 1996 and 1995, in the amount of $162,000 and $32,000 is reported as a component of interest expense and an increase to Senior Notes payable. The Senior Notes payable contain certain restrictive financial covenants relating to debt-to-asset ratios, cash flow coverage ratio and distribution limitations. The Price REIT, Inc. 5. Notes Payable (continued) Unsecured Line of Credit In September 1993, the Company obtained a revolving credit facility from a group of banks for up to $75 million in unsecured advances through September 1996. In May 1994, the credit facility was modified to increase the commitment amount to $100 million. In November 1995, the credit facility was modified in various respects including a reduction in the borrowing capacity to $75 million, amendment of the interest rate, extension of the maturity to October 1997, and the incorporation of certain additional financial covenants. In October 1996, the credit facility was further modified to provide for an interest rate reduction. Advances under the credit facility, at the Company's option, bear interest at either LIBOR plus 1.25% or a Base Rate, as defined, plus .50%. The effective rate of interest as of December 31, 1996 and 1995 was 6.63% and 7.05%, respectively. Interest on the out-standing balance is payable no less than quarterly. The agreement requires the Company to meet various financial covenant ratios, including minimum net operating income and net worth levels, as defined, and the Company is precluded from paying dividends in excess of 95% of its annual net income plus depreciation. The Company is required to pay a commitment fee of .25% per annum on the unused portion of the unsecured line of credit under its current borrowings. Secured Notes Payable At December 31, 1996, the secured notes payable bear interest at fixed rates of 9.0% and 9.25% and are secured by a shopping center in Oklahoma City, Oklahoma. The notes provide for monthly payments of principal and interest with all principal due in June 2013 and December 2014. Principal maturities of all notes payable as of December 31, 1996 are summarized as follows (in thousands): 1997 $ 19,299 1998 328 1999 359 2000 100,393 2001 430 Thereafter 64,985 ----------- $ 185,794 =========== The Price REIT, Inc. 5. Notes Payable (continued) The Company incurred $12,540,000, $7,354,000 and $4,471,000 of interest costs which included amortization of loan discount and fees, of which $469,000, $415,000 and $234,000 were capitalized to rental property for the years ended December 31, 1996, 1995 and 1994, respectively. 6. 1996 Stock Offering On September 9, 1996, the Company completed a public offering of 690,000 shares of Common Stock at an offering price of $32.125 per share (the "Stock Offering"). The Company used the net proceeds of approximately $21 million for repayment of indebtedness under the Company's unsecured line of credit and for general corporate purposes. Expenses of the Stock Offering were approximately $1,389,000 and were charged against the gross proceeds of the Stock Offering. 7. Dividends The Company paid quarterly dividends to stockholders as follows: Year ended December 31 1996 1995 1994 ----------------------------------- Series A Common Stock First $ 0.6667 $ 0.6286 $ 0.6000 Second N/A 0.6286 0.6000 Third N/A 0.6381 0.6190 Fourth N/A 0.6476 0.6190 ----------------------------------- Total $ 0.6667 $ 2.5429 $ 2.4380 =================================== Common Stock First $ 0.7000 $ 0.6600 $ 0.6300 Second 0.7000 0.6600 0.6300 Third 0.7000 0.6700 0.6500 Fourth 0.7000 0.6800 0.6500 ----------------------------------- Total $ 2.8000 $ 2.6700 $ 2.5600 =================================== Taxable portion - ordinary dividend 78.36% 82.00% 86.92% Return of capital portion 21.64% 18.00% 13.08% ----------------------------------- 100.00% 100.00% 100.00% =================================== The Price REIT, Inc. 7. Dividends (continued) Common Stock The Company had previously issued two series of common stock equity, Common Stock and Series A Common Stock. On May 23, 1996, the Company's stockholders approved an amendment to the Company's charter to provide that all outstanding shares of Series A Common Stock be converted into shares of Common Stock; eliminate the provision which entitled holders of Common Stock to receive an annualized quarterly per share dividend equal to 105% of the annualized quarterly per share dividend on the Series A Common Stock and changed the name of the Company's Series A Common Stock to Common Stock. There were 38,266 shares of Series A Common Stock that were converted into Common Stock. 8. Stock Options/Dividend Reinvestment Plan In 1991, the Company adopted a stock option plan for certain of its employees. The options generally vest 20% upon grant and 20% per year over the subsequent four years. Vested options expire ten years from the date of vesting. Unvested options expire at termination of employment. In 1993, the Company adopted an incentive stock option plan for certain of its officers and other key employees. The options generally vest 20% upon grant and 20% per year over the subsequent four years. The options are exercisable upon vesting and expire ten years from the date of grant. Unvested options expire at termination of employment. In 1996, the Company adopted a stock option plan for non-employee directors of its Board of Directors. The options are fully vested and exercisable on the date of grant. The Price REIT, Inc. 8. Stock Options/Dividend Reinvestment Plan (continued) Stock options outstanding are as follows (in thousands, except per share data): Stock Options -------------------------------- Non- Total Price Incentive Incentive Exercise Range Shares Shares Value Per Share ---------------------------------------------- Outstanding at January 1, 1994 128 399 $ 16,643 $25.00-$32.50 Granted on February 14, 1994 - 27 905 33.50 -------------------------------- Outstanding at December 31, 1994 128 426 17,548 25.00-33.50 Exercised on June 30, 1995 (28) - (700) 25.00 Expired on July 1, 1995 (17) - (506) 29.75 Granted on December 11, 1995 - 148 4,237 28.63 -------------------------------- Outstanding at December 31, 1995 83 574 20,579 28.63-33.50 Granted on January 29, 1996 31 49 2,360 29.50 Exercised on February 29, 1996 (41) - (1,220) 29.75 Expired on March 31, 1996 (2) - (60) 29.75 Granted on August 1, 1996 12 - 354 29.50 Granted on December 18, 1996 - 34 1,224 36.00 Granted on December 31, 1996 12 - 462 38.50 -------------------------------- Outstanding at December 31, 1996 95 657 $ 23,699 $28.63-$38.50 ================================ At December 31, 1996, 1995 and 1994, 423,100, 325,200 and 253,000 stock options, respectively, were exercisable. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The new accounting standards prescribed by SFAS No. 123 are optional, and the Company has elected to account for its stock option plans under the previous accounting standards as prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The effect of applying the SFAS No. 123 fair value method to the Company's stock based awards would result in net income and net income per share that are not materially different from amounts reported. The Price REIT, Inc. 8. Stock Options/Dividend Reinvestment Plan (continued) In February 1994, the Company adopted a dividend reinvestment and share purchase plan (the "Plan"). This Plan gives the holders of shares of common stock the opportunity to purchase additional common stock shares through reinvestment of distributions or volun-tary cash investments. At the Company's option, the common stock shares purchased under the Plan can be newly issued or purchased on the open market. Concurrent with the adoption of this Plan, the Company filed a Form S-3 Registration Statement with the Securities and Exchange Commission to register 500,000 common stock shares that are eligible to be issued under this Plan. During the years ended December 31, 1996 and 1995, 37,000 and 56,000 shares, respectively, were issued under the Plan. Through December 31, 1996, a total of 167,000 shares have been issued under the Plan. 9. Related Party Transactions Mr. Sol Price previously provided office space to the Company's corporate headquarters at no cost. Effective December 1995, the Company has agreed to pay Mr. Price $7,200 per year for office space provided. 1996 Management fees revenue includes $817,000 earned from Price Enterprises, Inc. owned rental properties and $92,000 earned from K&F affiliated companies. Development fees totaling $142,000 were paid to Development Company and capitalized to rental property. Leasing commissions totaling $250,000 were paid to Development Company and capitalized to other assets. Other income includes $30,000 of consulting fee income received from Price Enterprises, Inc. 1995 Management fees revenue includes $785,000 earned from Price Enterprises, Inc. owned rental properties and $128,000 earned from K&F affiliated companies. General and administrative expense includes $114,000 of rent expense paid to a partnership in which Messrs. Joseph Kornwasser and Jerald Friedman are partners. The Price REIT, Inc. 9. Related Party Transactions (continued) 1995 (continued) Development fees totaling $379,000 were paid to Development Company and capitalized to rental property. Leasing commissions totaling $489,000 were paid to Development Company and capitalized to other assets. Other income includes $164,000 of consulting fee income received from Price Enterprises, Inc. for various consulting services. 1994 Management fees revenue includes $617,000 earned from Price Enterprises, Inc. owned rental properties and $134,000 earned from K&F affiliated companies. General and administrative expense includes $139,000 of rent expense paid to a partnership in which Messrs. Kornwasser and Friedman are partners. Development fees totaling $207,000 were paid to Development Company and capitalized to rental property. Leasing commissions totaling $364,000 were paid to Development Company and capitalized to other assets. 10. Commitments and Contingencies The Company sponsors a 401(k) deferred compensation plan. Employees may contribute up to 15% of their wages subject to Internal Revenue Code limits. The plan provides for discretionary matching and profit sharing contributions by the Company. The Company may match contributions up to 2.5% of an employee's annual compensation for annual compensation below $50,000 or up to 2.0% for annual compensation equal to or above $50,000. During the years ended December 31, 1996, 1995 and 1994, the Company contributed $23,000, $23,000 and $17,000, respectively, to the plan. The plan is fully funded. The Price REIT, Inc. 10. Commitments and Contingencies (continued) Certain of the Company's properties were acquired from The Price Company or its successor, Price/Costco. The Price Company has indemnified the Company, with the exception of the Company's 50% interest in the Tempe, Arizona property, with respect to the presence of any hazardous material (as defined under various environmental laws) on properties purchased from The Price Company in the event such hazardous materials were determined to be present on the date of the purchase. The Company is not aware of any environmental issues with respect to its properties which would require a material expenditure by the Company, regardless of whether the Company might ultimately be indemnified by The Price Company. 11. Quarterly Financial Data (Unaudited) Summarized quarterly financial data for the years ended December 31, 1996, 1995 and 1994 is as follows: Earnings Revenues Net Income Per Share --------------------------------- (In Thousands, except per share data) 1996 ---- First $13,430 $ 4,058 $ 0.49 Second 12,883 4,135 0.50 Third 13,362 4,103 0.48 Fourth 14,650 $,623 0.51 1995 ---- First $10,366 $ 4,008 $ 0.49 Second 10,405 4,091 0.50 Third 10,579 4,082 0.49 Fourth 12,173 4,205 0.50 1994 ---- First $ 9,216 $ 3,938 $ 0.48 Second 9,653 4,148 0.51 Third 9,828 4,477 0.55 Fourth 11,228 4,341 0.53 The Price REIT, Inc. 12. Subsequent Events On January 22, 1997, the Company completed a public offering of 1,600,000 shares of Common Stock at an offering price of $37.625 per share. The Company plans to use the net proceeds of approximately $57 million for repayment of indebtedness under the Company's unsecured line of credit and to fund its future acquisition and development activities. On January 16, 1997, the Company acquired a 134,000 square foot shopping center in Wichita, Kansas for $9.8 million. Effective January 1, 1997, the Company acquired the assets and assumed the liabilities of the Development Company. EX-99.2 5 THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS OF PRICE REIT AS OF DECEMBER 31, 1996 AND 1995 PART I - FINANCIAL INFORMATION Item 1 - Financial Statements - ----------------------------- The Price REIT, Inc. Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 1997 1996 --------- --------- ASSETS (In Thousands) Rental property, net $534,467 $380,482 Investment in joint ventures 21,201 19,202 Cash and cash equivalents 15,097 11,369 Deferred rent receivable 9,506 8,489 Secured note receivable 1,313 1,346 Other assets 10,773 7,183 --------- --------- Total assets $592,357 $428,071 ========= ========= LIABILITIES & STOCKHOLDERS' EQUITY LIABILITIES Accounts payable and accrued liabilities 12,674 4,474 Senior Notes payable 204,038 154,114 Unsecured line of credit 19,000 19,000 Secured notes payable 26,301 11,794 --------- --------- Total liabilities 262,013 189,382 Minority interest 2,293 1,707 STOCKHOLDERS' EQUITY Preferred stock, $.01 par value; 2,000,000 shares authorized, no shares issued or outstanding - - Common stock, $.01 par value, 25,000,000 shares authorized: 11,692,793 and 9,069,249 shares issued and outstanding 117 91 Additional paid-in capital 354,624 259,518 Accumulated deficit (26,690) (22,627) --------- --------- Total stockholders' equity 328,051 236,982 --------- --------- Total liabilities and stockholders' equity $592,357 $428,071 ========= ========= See notes to condensed consolidated financial statements. 3 The Price REIT, Inc. Condensed Consolidated Statements of Income (Unaudited) Three months ended Nine months ended September 30, September 30, 1997 1996 1997 1996 -------- -------- -------- -------- (In Thousands, except per share data) REVENUE Rental income $17,696 $12,620 $48,450 $37,453 Management fees 82 270 226 809 Equity in earnings of joint ventures 391 411 1,276 1,149 Interest and other income 294 61 1,090 265 Net gain from sale of rental property 2,787 - 2,787 - -------- -------- -------- -------- Total revenue 21,250 13,362 53,829 39,676 -------- -------- -------- -------- EXPENSES Rental operations 1,489 1,037 4,075 3,300 Real estate taxes 1,843 1,311 5,172 3,755 General and administrative 885 824 2,815 2,485 Depreciation 4,252 3,031 11,201 8,823 Interest 4,002 3,056 10,667 9,017 -------- -------- -------- -------- Total expenses 12,471 9,259 33,930 27,380 -------- -------- -------- -------- NET INCOME 8,779 4,103 19,899 12,296 ======== ======== ======== ======== Net income per share $0.78 $0.48 $1.85 $1.47 ------ ------ ------ ------ Dividends paid per share of Common Stock $0.725 $0.70 $2.18 $2.10 ------ ------ ------ ------ Weighted average number of shares outstanding 11,240 8,505 10,742 8,392 ------ ------ ------ ------ See notes to condensed consolidated financial statements. 4 The Price REIT, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 1997 1996 --------- -------- (In Thousands) OPERATING ACTIVITIES Net income $19,899 $12,296 Adjustments to reconcile net income to net cash provided by operating activities: Net gain on sale of rental property (2,787) - Depreciation 11,201 8,823 Amortization of loan fees and discount 623 512 Equity in earnings of joint ventures (1,276) (1,149) Deferred rent (1,017) (1,774) Changes in operating assets and liabilities: Other assets (4,860) (915) Accounts payable and accrued liabilities 8,198 2,047 --------- --------- Net cash provided by operating activities 29,981 19,840 INVESTING ACTIVITIES Purchases of rental property (145,475) - Additions to rental property (19,186) (15,780) Payment received on secured note receivable 33 - Investments in joint ventures (2,456) (6,339) Distributions from joint ventures 2,134 1,443 Gross proceeds from sale of rental property 17,400 - --------- --------- Net cash used in investing activities (147,550) (20,676) FINANCING ACTIVITIES Proceeds from Senior Notes payable 49,779 - Proceeds from unsecured line of credit 90,000 22,000 Repayment of unsecured line of credit (90,000) (26,000) Repayment of secured notes payable (238) - Minority interest contribution 585 - Gross proceeds from issuance of common stock 97,890 23,598 Common stock issuance costs (3,452) (1,381) Dividends paid, net of dividends reinvested (23,267) (17,338) --------- -------- Net cash provided by financing activities 121,297 879 --------- -------- Increase in cash and cash equivalents 3,728 43 Cash and cash equivalents at beginning of period 11,369 1,241 --------- -------- Cash and cash equivalents at end of period $15,097 $1,284 ========= ======== 5 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $6,160 $6,963 ========= ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Common Stock issued in accordance with the dividend reinvestment plan $694 $673 ======== ======== In conjunction with the acquisition of the Farmington, Connecticut property, a non-recourse loan of $14.7 million was assumed. See notes to condensed consolidated financial statements. 6 The Price REIT, Inc. Notes to Condensed Consolidated Financial Statements September 30, 1997 (Unaudited) NOTE 1 - BASIS OF PRESENTATION - ------------------------------ The accompanying unaudited condensed consolidated financial statements of The Price REIT, Inc. (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and nine-month periods ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. The preparation of the Company's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the financial statement date and the reported amounts of revenue and expenses during the reporting period. Due to uncertainties inherent in the estimation process, it is reasonably possible that actual results could differ from these estimates. NOTE 2 - PROPERTY ACQUISITIONS - ------------------------------ PURCHASE OF SHOPPING CENTERS AND UNDEVELOPED LAND On January 29, 1996, the Company purchased a 9.7 acre parcel of undeveloped land that is adjacent and contiguous to the Webster, Texas center for $1.25 million. The Company intends to use such land for expansion of the center and development for new tenants. The Company financed this acquisition with operating cash. 7 In July 1996, the Company acquired a 210,000 square foot shopping center in Mesquite, Texas (Dallas area) at a cost of $12.7 million. The Company financed this acquisition with borrowings under its unsecured line of credit (the "Line of Credit"). On November 20, 1996, the Company acquired a 234,000 square foot shopping center in Oklahoma City, Oklahoma. The purchase price was $16.7 million, of which $11.8 million was evidenced by the assumption of two non-recourse loans (subject to customary exceptions) secured by the property. The balance of the purchase price was financed with $4.9 million of operating cash. On January 16, 1997, the Company acquired Westgate Market, a 134,000 square foot shopping center in Wichita, Kansas for $9.8 million. The Company financed this acquisition with borrowings under its Line of Credit. On March 19, 1997, the Company acquired Broadmoor Village Shopping Center, a 62,000 square foot shopping center in Garland, Texas for $4.75 million. The Company financed this acquisition with operating cash. On March 20, 1997, the Company acquired Richardson Plaza Shopping Center, a 116,000 square foot shopping center in Richardson, Texas for $8.5 million. The Company financed this acquisition with operating cash. On March 28, 1997, the Company acquired City Place Market, an 84,000 square foot shopping center in Dallas, Texas for $8.75 million. The Company financed this acquisition with operating cash. On March 31, 1997, the Company acquired Wendover Ridge Retail Center, a 41,000 square foot shopping center in Greensboro, North Carolina for $4.975 million. The Company financed this acquisition with operating cash. On April 1, 1997, the Company acquired Arboretum Crossing, a 187,000 square foot shopping center in Austin, Texas for $23.4 million. The Company financed this acquisition with borrowings of $14 million under its Line of Credit and $9.4 million of operating cash. On May 14, 1997, the Company acquired Smoketown Stations Center, a 483,000 square foot shopping center in Woodbridge, Virginia 8 for $46.5 million. The Company financed this acquisition with borrowings under its Line of Credit. On August 28, 1997, the Company acquired West Farms Shopping Center, a 185,000 square foot shopping center in Farmington, Connecticut for $20 million. As of September 30, 1997, the shopping center was 99% leased and is anchored by The Sports Authority, T.J. Maxx, Linen N Things and Petco. The acquisition was financed through the assumption of an existing $14.7 million non-recourse loan secured by the property and $5.3 million of proceeds from the sale of the Cerritos property. HAYDEN PLAZA NORTH JOINT VENTURE ACQUISITION On April 23, 1996, the Company formed a partnership (the "Partnership") with Kimco Realty Corporation ("Kimco"), a major New York-based retail real estate investment trust, to purchase a 191,000 square foot shopping center in Phoenix, Arizona at a cost of $3,490,000. The acquisition was completed by the Partnership on May 3, 1996. The Company holds a 50% interest in the Partnership and Kimco holds the remaining 50% interest. The Company's 50% share of the acquisition cost was funded by borrowings of $1 million under the Line of Credit and $750,000 of operating cash. The operations of the Partnership are accounted for under the equity method of accounting. CENTREPOINT ASSOCIATES JOINT VENTURE ACQUISITION On March 21, 1997, Centrepoint Associates (the "Joint Venture"), a partnership in which the Company owns a 50% interest, acquired a parcel of property containing 25,000 rentable square feet of buildings ("Talavi III") within an existing shopping center in Glendale, Arizona. The Joint Venture currently owns three additional parcels within this existing shopping center: two parcels containing 85,000 rentable square feet of buildings and a vacant pad parcel for future development. Talavi III was purchased for $3 million. The Joint Venture financed this acquisition with borrowings under a $13.5 million line of credit obtained from Wells Fargo Bank ("Wells Fargo Line"). The Wells Fargo Line is secured by the new Talavi III acquisition and a 236,000 square foot power center located in Tempe, Arizona which is owned by the Joint Venture. As of September 30, 1997, the Joint Venture owned several shopping center properties located in Glendale and Tempe, 9 Arizona which contain an aggregate of 495,000 square feet of building area and a 40 acre vacant land parcel in Goodyear, Arizona for future development. The operations of the Joint Venture are accounted for under the equity method of accounting. SMITHTOWN VENTURE On October 2, 1996, the Company purchased an approximate 80% ownership interest in Smithtown Venture LLC ("Smithtown Venture"). The remaining approximate 20% ownership was held by King Kullen Grocery Co., Inc. ("King Kullen"), a major Long Island, New York grocery chain. Smithtown Venture is currently constructing a power center located in Commack, New York (Long Island) which is anticipated to contain 270,000 leasable square feet of space when completed on land which is subject to a forty-nine year ground lease with four ten year renewal options. The shopping center is anchored by King Kullen, Borders Books & Music, HomePlace, Babies "R" Us (Toys "R" Us) and The Sports Authority. In addition, Target plans to open a 125,000 square foot store on a contiguous parcel of land. As of September 30, 1997, all anchor tenants except Babies "R" Us have opened for business. The center is in its final construction phase and the Company expects that it will be completed by the end of the fourth quarter of 1997, although no assurance can be given that it will be completed on schedule. The construction cost is estimated at $23 million. The Company's share of construction and development costs will be funded by borrowings under the Company's Line of Credit and operating funds to the extent such funds are available. As of September 30, 1997, the Company has cumulatively funded $18,931,000 for its share of the Smithtown Venture construction costs. On March 26, 1997, King Kullen was granted a put option to reduce its capital interest in the joint venture from approximately 20% to 10%. On April 23, 1997, King Kullen elected to exercise its put option to reduce its equity interest in Smithtown Venture from approximately 20% to 10%. The Company paid King Kullen $1,232,000 pursuant to the put option agreement. The Company presently holds an ownership interest of 90% in Smithtown Venture and King Kullen holds the remaining interest of 10%. PRICE/FRY LLC JOINT VENTURE In February 1997, Price/Baybrook, Ltd. (a wholly-owned subsidiary of the Company) formed a joint venture with I-10/Fry Road 27, Ltd. and I-10/Park Row 40, Ltd. (the "Outside 10 Partners") to develop an approximately 470,000 square foot retail power center in Houston, Texas. The joint venture agreement provides for the Outside Partners to contribute the land with a net fair market value of $4.225 million and Price/Baybrook, Ltd. to contribute $4.225 million as needed to fund development costs. After Price/Baybrook, Ltd. has funded its share of capital, it is anticipated that the joint venture will seek construction financing to complete the center. The development will be located on 47 acres of land at the intersection of Interstate 10 and Fry Road in the western part of Houston. The Company will be the managing partner with a 50% joint venture interest, and the remaining 50% will be owned by the Outside Partners. The new power center will be anchored by Home Depot, which purchased approximately ten acres from the joint venture for the construction of a 106,000 square foot store and a 30,000 square foot garden center. The sale of land to Home Depot was completed on July 31, 1997. The joint venture intends to develop the balance of the 470,000 square foot center, with multiple national value retailers and an entertainment component. The Home Depot construction is near completion, with opening anticipated by mid-January 1998, and it is anticipated that the balance of the center will be completed in phases over the next two years. There can be no assurance, however, that construction of Home Depot or the balance of the center will commence or be completed on schedule. The operations of the joint venture will be accounted for under the equity method of accounting. PRICE REIT RENAISSANCE PARTNERSHIP On August 29, 1997, the Company formed a limited partnership (the "Limited Partnership") with Altamonte Joint Venture ("Altamonte") to acquire the Renaissance Centre, a 271,000 square foot shopping center in Altamonte Springs (Orlando), Florida. The Company acquired a 99% interest in the Limited Partnership for $33.5 million. The Company is the managing General Partner with a 99% interest and Altamonte, a limited partner holding the remaining 1% interest. As of September 30, 1997, the Center was 99% leased and is anchored by Uptons, Michael's, Ross Stores, General Cinema, Blockbuster and Portfolio Home Furnishing. The Company's share of the acquisition was financed with borrowings of $13 million under its Line of Credit and $20.5 million of operating cash. 11 K & F DEVELOPMENT COMPANY Effective January 1, 1997, the Company acquired the assets and assumed the liabilities of its affiliate K & F Development Company (the "Development Company") and elected certain of the officers of the Development Company to serve as officers of the Company. The Company acquired the assets pursuant to a distribution to the Company as owner of 100% of the non-voting preferred stock of the Development Company. NOTE 3 - PROPERTY DISPOSITIONS - ------------------------------ On July 9, 1997, the Company sold its Cerritos, California property for $17.4 million in a transaction designed to enable the sale to qualify as a tax- deferred exchange under Section 1031 of the Internal Revenue Code (the "Code"). The Company used the sale proceeds to acquire the Farmington, Connecticut property on August 28, 1997 and the Minnetonka, Minnesota property on October 8, 1997. The Company realized a gain on sale of the Cerritos shopping center in the amount of $3,643,000. This gain was partially offset by an impairment loss of $856,000 relating to the sale of property in Copiague, New York which closed on October 22, 1997. NOTE 4 - NOTES PAYABLE - ---------------------- SENIOR NOTES PAYABLE In November 1995, the Company issued unsecured 7.25% Senior Notes in the aggregate principal amount of $100 million which are due November 2000. Interest on the 7.25% Senior Notes is payable semi-annually in arrears on May 1 and November 1. The notes were priced at an aggregate amount of $99,050,000 and have an effective interest rate of 7.48%. On November 5, 1996, the Company completed an underwritten public offering ("1996 Offering") of $55 million aggregate principal amount of the Company's Senior Notes at an interest rate of 7.50%. The 7.50% Senior Notes were priced at an aggregate of $54,870,000. The net proceeds from the 1996 Offering were used to repay $50 million of indebtedness outstanding under the Company's Line of Credit. The remaining net proceeds were used for general corporate purposes. The 7.50% Senior Notes provide for semi-annual payment of interest only due on May 5 and November 5 of each year until the maturity date 12 of November 5, 2006 at which time the principal is due. On June 19, 1997, the Company issued unsecured 7.125% Senior Notes in the aggregate principal amount of $50 million which are due June 15, 2004 pursuant to its $175 million shelf registration statement. Interest on the 7.125% Senior Notes is payable semi-annually in arrears on June 15 and December 15. The notes were priced at an aggregate amount of $49,778,000 and have an effective interest rate of 7.21%. The Company used the net proceeds to repay indebtedness under the Line of Credit. UNSECURED LINE OF CREDIT On July 1, 1997, the Company amended its $75 million Line of Credit (i) to modify certain restrictive covenants, including the secured and unsecured debt incurrence restrictions, (ii) to provide the Company with an option, subject to consent of its lenders and certain other conditions, to increase the availability under the Line of Credit to $100 million and (iii) to extend the maturity to June 30, 2000 with a Company option, subject to consent of its lenders and certain other conditions, to extend it one additional year to June 30, 2001. The agreement requires the Company to maintain certain minimum net operating income and net worth levels, as defined, and provides that the Company will not pay dividends in excess of 95% of its annual net income plus depreciation. The Company is required to pay a commitment fee of 0.25% per annum of the unused portion of the Line of Credit. On October 23, 1996 the Company modified its Line of Credit to reduce the LIBOR interest rate margin from 1.4% to 1.25%. The effective rate of interest at September 30, 1997 from the borrowings under the Line of Credit was 6.9375%. Interest on the outstanding balance of the Line of Credit is payable periodically, but at least quarterly. The Company typically funds short-term financing for its acquisition and development activities through its $75 million Line of Credit. On January 22, 1997, the Company used the net proceeds from sale of Common Stock to repay $19 million of indebtedness under the Line of Credit. During the second quarter of 1997, the Company borrowed $60 million to purchase the Austin and Woodbridge properties. The Company borrowed an additional $11 million to replenish operating funds. On June 20, 1997, the Company used the net proceeds from the sale of Senior Notes to 13 repay $50 million of indebtedness outstanding under the Company's Line of Credit. On August 11, 1997, the Company used the net proceeds from the sale of common stock to repay $21 million of indebtedness outstanding under the Company's Line of Credit. On August 28, 1997, the Company borrowed $13 million to purchase the Renaissance Center. On September 28, 1997, The Company borrowed an additional $6 million to replenish operating funds. At September 30, 1997, the outstanding balance under the Line of Credit was $19 million. NOTE 5 - COMMON STOCK - --------------------- On January 22, 1997, the Company issued and sold 1,600,000 shares of Common Stock at a price to the public of $37.625 per share pursuant to its $175 million shelf registration statement. The Company used the net proceeds of approximately $57 million for repayment of indebtedness under the Company's Line of Credit, to fund its property acquisition activities and for general corporate purposes. On August 11, 1997, the Company issued and sold 1,000,000 shares of Common Stock at a price to the public of $37.50 per share pursuant to its $175 million shelf registration statement. The Company used the proceeds of $37.5 million for repayment of indebtedness under the Company's Line of Credit, to fund its property acquisition activities and for general corporate purposes. NOTE 6 - NET INCOME PER SHARE - ----------------------------- Net income per share was calculated by dividing net income by the weighted average number of shares outstanding. The assumed exercise of outstanding stock options, using the treasury stock method, is not materially dilutive to the earnings per share computation. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. The Company has not yet determined what the impact of Statement 128 will be on the calculation of fully diluted earnings per share. NOTE 7 - SUBSEQUENT EVENTS - -------------------------- On October 8, 1997, the Company completed the acquisition of the Ridgedale Festival Shopping Center in Minnetonka (Minneapolis), 14 Minnesota. The purchase price was $11.9 million. Ridgedale shopping center contains 120,000 rentable square feet, is anchored by Office Max, Toys `R' Us, Golfsmith, and Schmidt Music and was 100% leased. The Company financed this acquisition with the proceeds from the tax-deferred sale of the Cerritos property. On October 17, 1997, the Company acquired the Cordata Centre located in Bellingham, Washington. The purchase price was $20.25 million. The center contains 174,000 rentable square feet and is anchored by Costco (not part of purchase), Office Depot, Bon Marche Home, T.J. Maxx, Drug Emporium, Future Shop, and other retail tenants. The Company financed the acquisition with borrowings of $18 million under the Line of Credit and the remainder from operating cash. On October 22, 1997, the Company completed the sale of approximately nine acres of land in its Copiague, New York shopping center for $10.25 million. The land was sold to Dayton Hudson Corp. which intends to develop a 133,000 square foot Target store within the center. The Company used the sale proceeds to repay borrowings under its Line of Credit. On October 31, 1997, the Company acquired a 97,000 square foot shopping center in Piscataway, New Jersey. The purchase price was $15.1 million. The center is 100% leased and anchored by Shop Rite Supermarket, Applebee's, Lauriat's and other retail tenants. The Company financed this acquisition by the assumption of a $11.4 million non-recourse loan secured by the property maturing in August 2000, and the remainder with borrowings under its Line of Credit. EX-99.3 6 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET Exhibit 99.3 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1997 ------------------------------- (Unaudited) The following unaudited Pro Forma Combined Condensed Consolidated Balance Sheet gives effect to the proposed Merger as if the Merger had occurred on September 30, 1997, under the purchase method of accounting in accordance with Accounting Standards Board Opinion No. 16. In addition, the Kimco Pro Forma Balance Sheet column at September 30, 1997 assumes the completion, as of September 30, 1997,of the acquisition of eight shopping center properties (See Note 1 to the unaudited Pro Forma Combined Condensed Consolidated Balance Sheet). The unaudited Pro Forma Combined Condensed Consolidated Balance Sheet is presented for comparative purposes only and is not necessarily indicative of what the actual combined financial position of Kimco and Price REIT would have been at September 30, 1997, nor does it purport to represent the future combined financial position of Kimco and Price REIT. This information should be read in conjunction with the audited consolidated financial statements and other financial information contained in Kimco's Annual Report on Form 10-K and Price REIT's Annual Report on Form 10-K for the year ended December 31, 1996, respectively, including the notes thereto, and the unaudited condensed consolidated financial statements contained in Kimco's Quarterly Report on Form 10-Q and Price REIT's Quarterly Report on Form 10-Q for the period ended September 30, 1997, including the notes thereto, and in each case incorporated by reference herein. KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1997 ------------ (Unaudited) (000's)
Kimco Price Reit Pro Forma Pro Forma Pro Forma Historical Adjustments Results ----------- ----------- ----------- ----------- Assets: Real estate, net of accumulated depreciation $ 1,184,936 $ 534,467 $ 215,019 $ 1,934,422 Investment in retail store leases 16,409 -- -- 16,409 Cash and cash equivalents 55,042 15,097 (6,000) 64,139 Other assets 92,118 42,793 -- 134,911 ----------- ----------- ----------- ----------- $ 1,348,505 $ 592,357 $ 209,019 $ 2,149,881 =========== =========== =========== =========== Liabilities: Notes payable $ 410,250 $ 223,038 $ -- $ 633,288 Mortgages payable 122,121 26,301 -- 148,422 Other liabilities, including minority interests in partnerships 72,451 14,967 2,179 89,597 ----------- ----------- ----------- ----------- 604,822 264,306 2,179 871,307 ----------- ----------- ----------- ----------- Stockholders' Equity: Preferred stock 900 -- 476 1,376 Common stock 404 117 2 523 Paid-in capital 857,569 354,624 179,672 1,391,865 Cumulative distributions in excess of net income (115,190) (26,690) 26,690 (115,190) ----------- ----------- ----------- ----------- 743,683 328,051 206,840 1,278,574 ----------- ----------- ----------- ----------- $ 1,348,505 $ 592,357 $ 209,019 $ 2,149,881 =========== =========== =========== ===========
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET --------------------- 1. Basis of Presentation - ------------------------ The Kimco Pro Forma Balance Sheet at September 30, 1997 represents the historical condensed consolidated balance sheet adjusted to give effect to the purchase of eight shopping center properties acquired by the Company in October, November and December 1997 as if these properties had been acquired at September 30, 1997. Information related to these properties is included in the Kimco Current Report on Form 8-K dated January 15, 1997. 2. Reclassification - ------------------- Certain amounts reflected in the historical financial statements of both companies have been reclassified to conform to the Pro Forma Combined Condensed Consolidated Balance Sheet presentation. 3. Pro Forma Adjustments - ------------------------ (i) Real estate net of accumulated depreciation - The adjustment to Real estate, net of accumulated depreciation reflects the increase in book value of Price REIT's real estate assets based upon the Kimco purchase price (assuming Kimco common stock is valued at $35 per share) and an exchange ratio of one share of Price REIT common stock for one share of Kimco common stock and 0.4 depositary shares, each depositary share (the "Kimco Class D Depositary Shares") representing 1/10 of a share of a new issue of Kimco 7.5% Class D Cumulative Convertible Preferred Stock, par value $1.00 per share, liquidation preference $250.00 per share (the "Kimco Class D Preferred Stock") as follows: (000's) ------- Issuance of 11,886,444 shares of Kimco common stock (assumed value of $35 per share) based on an exchange ratio of one for one $416,026 and Issuance of 475,458 shares of Kimco Class D Preferred Stock (represented by 4,754,580 Kimco Class D Depositary Shares) based on an exchange ratio of 0.04 shares of Kimco Class D Preferred Stock (represented by .4 Kimco Class D Depositary Shares) for one share of Price REIT common stock in exchange for 11,886,444 shares of Price REIT common stock 118,865 Assumption of Price REIT liabilities 2,179 Merger costs 6,000 see (ii) --------- Purchase price 543,070 Less: Historical book basis of Price REIT's net assets acquired (328,051) --------- Real estate, net of accumulated depreciation Pro Forma adjustment $215,019 ======== (ii) Cash and cash equivalents - The adjustment to cash and cash equivalents reflects the estimated fees and other expenses relating to the Merger, including, but not limited to, investment banking fees, legal and accounting fees, printing, filing and other related costs. (iii) Stockholders' equity - The adjustments to stockholders' equity reflect the issuance of 11,886,444 shares of Kimco common stock, par value $.01 per share, and 475,458 shares of Kimco Class D Preferred Stock, (represented by 4,754,580 Kimco Class D Depositary Shares) based on the exchange ratio of one share of Price REIT common stock for one share of Kimco common stock and 0.04 shares of Kimco Class D Preferred Stock (represented by 0.4 Kimco Class D Depositary Shares) as follows:
Cumulative Distributions Common Preferred Paid-in in Excess of Stock Stock Capital Net Income (000's) (000's) (000's) (000's) --------- --------- --------- ------------- Issuance of Kimco common stock $ 119 $ -- $ 415,907 $ -- Issuance of Kimco Class D Preferred Stock -- 476 118,389 -- Price REIT's historical Stockholders' equity (117) -- (354,624) (26,690) --------- --------- --------- ------------- Stockholders' equity Pro Forma adjustments $ 2 $ 476 $ 179,672 $ 26,690 ========= ========= ========= =============
KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997 ----------------------------- (Unaudited) The following unaudited Pro Forma Combined Condensed Consolidated Statements of Income for the year ended December 31, 1996 and the nine months ended September 30, 1997 give effect to the proposed Merger as if the Merger had occurred as of January 1, 1996 under the purchase method of accounting in accordance with Accounting Standards Board Opinion No. 16. In addition, the Kimco Pro Forma Statements of Income columns for the year ended December 31, 1996 and the nine months ended September 30, 1997 assumes the completion, as of January 1, 1996, of the acquisition of 14 shopping center properties as previously reported in the Current Report on Form 8-K dated January 15, 1997, incorporated by reference herein. The Price REIT Pro Forma Statements of Income columns for the year ended December 31, 1996 and the nine months ended September 30, 1997 assumes the completion, as of January 1, 1996 of the acquisition of 12 shopping center properties as previously reported in the Current Report on Form 8-K/A dated November 13, 1997, incorporated by reference herein. (See Note 1 to the unaudited Pro Forma Combined Condensed Consolidated Statements of Income). The unaudited Pro Forma Combined Condensed Consolidated Statements of Income are presented for comparative purposes only and are not necessarily indicative of what the actual combined operating results of Kimco and Price REIT would have been for the year ended December 31, 1996 and the nine months ended September 30, 1997, nor does it purport to represent the future combined operating results of Kimco and Price REIT. This information should be read in conjunction with the audited consolidated financial statements and other financial information contained in Kimco's Annual Report on Form 10-K and Price REIT's Annual Report on Form 10-K for the year ended December 31, 1996, respectively, including the notes thereto, and the unaudited condensed consolidated finanical statements contained in Kimco's Quarterly Report of Form 10-Q and Price REIT's Quarterly Report on Form 10-Q for the period ended September 30, 1997, respectively, including the notes thereto, and in each case incorporated by reference herein. KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 --------------- (Unaudited) (000's except per share data)
Price Reit 1997 Property Acquisition Merger Combined Kimco Price Reit Pro Forma Price Reit Pro Forma Pro Forma Pro Forma Historical Adjustments Pro Forma Adjustments Results ----------- ----------- ----------- ----------- ----------- ----------- Revenues from rental property $ 187,804 $ 51,292 $ 24,364 $ 75,656 $ -- $ 263,460 ----------- ----------- ----------- ----------- ----------- ----------- Rental property expenses- Rent 1,455 -- -- -- -- 1,455 Real estate taxes and operating and maintenance 46,625 9,909 5,439 15,348 -- 61,973 Interest 31,282 12,071 8,868 20,939 -- 52,221 Depreciation and amortization 29,985 11,876 5,536 17,412 (1,769) 45,628 ----------- ----------- ----------- ----------- ----------- ----------- 109,347 33,856 19,843 53,699 (1,769) 161,277 ----------- ----------- ----------- ----------- ----------- ----------- Income from rental property 78,457 17,436 4,521 21,957 1,769 102,183 Income from investment in retail store leases 3,632 3,632 ----------- ----------- ----------- ----------- ----------- ----------- 82,089 17,436 4,521 21,957 1,769 105,815 Management fee income 3,448 1,085 -- 1,085 -- 4,533 General and administrative expenses (10,334) (3,550) -- (3,550) 1,200 (12,684) Other income (expenses), net 3,584 1,948 -- 1,948 -- 5,532 ----------- ----------- ----------- ----------- ----------- ----------- Income before gain on sale of shopping center 78,787 16,919 4,521 21,440 2,969 103,196 Gain on sale of shopping center property 802 -- -- -- -- 802 ----------- ----------- ----------- ----------- ----------- ----------- Net income $ 79,589 $ 16,919 $ 4,521 $ 21,440 $ 2,969 $ 103,998 =========== =========== =========== =========== =========== =========== Net income applicable to common shares $ 63,453 $ 16,919 $ 4,521 $ 21,440 ($ 5,946) $ 78,947 =========== =========== =========== =========== =========== =========== Net income per common share $1.77 $1.98 $2.50 $1.65 ===== ===== ===== ===== Historical weighted average number of shares outstanding 35,906 8,560 8,560 ====== ===== ===== Pro forma weighted number of shares outstanding 47,792 ======
KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 --------------------- (Unaudited) (000's, except per share data)
Price Reit 1997 Property Acquisition Merger Combined Kimco Price Reit Pro Forma Price Reit Pro Forma Pro Forma Pro Forma Historical Adjustments Pro Forma Adjustments Results ----------- ----------- ----------- ----------- ----------- ----------- Revenues from rental property $ 153,701 $ 48,450 $ 13,302 $ 61,752 $ -- $ 215,453 ----------- ----------- ----------- ----------- ----------- ----------- Rental property expenses- Rent 2,527 -- -- -- -- 2,527 Real estate taxes and operating and maintenance 37,418 9,247 2,656 11,903 -- 49,321 Interest 24,439 10,667 6,990 17,657 -- 42,096 Depreciation and amortization 23,522 11,201 2,992 14,193 (2,328) 35,387 ----------- ----------- ----------- ----------- ----------- ----------- 87,906 31,115 12,638 43,753 (2,328) 129,331 ----------- ----------- ----------- ----------- ----------- ----------- Income from rental property 65,795 17,335 664 17,999 2,328 86,122 Income from investment in retail store leases 2,705 -- -- -- -- 2,705 ----------- ----------- ----------- ----------- ----------- ----------- 68,500 17,335 664 17,999 2,328 88,827 Management fee income 2,755 226 -- 226 -- 2,981 General and administrative expenses (8,526) (2,815) -- (2,815) 900 (10,441) Other income (expenses), net 3,750 2,366 -- 2,366 -- 6,116 ----------- ----------- ----------- ----------- ----------- ----------- Income before gain on sale of shopping center 66,479 17,112 664 17,776 3,228 87,483 Gain on sale of shopping center property 244 2,787 -- 2,787 -- 3,031 ----------- ----------- ----------- ----------- ----------- ----------- Net income $ 66,723 $ 19,899 $ 664 $ 20,563 $ 3,228 $ 90,514 =========== =========== =========== =========== =========== =========== Net income applicable to common shares $ 52,896 $ 19,899 $ 664 $ 20,563 $ (3,458) $ 70,001 =========== =========== =========== =========== =========== =========== Net income per common share $1.45 $1.85 $1.91 $1.45 ===== ===== ===== ===== Historical weighted average number of shares outstanding 36,375 10,742 10,742 ====== ====== ====== Pro forma weighted number of shares outstanding 48,261 ======
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME ------------------- 1. Basis of Presentation - ------------------------ The Kimco Pro Forma Statements of Income for the year ended December 31, 1996 and the nine months ended September 30, 1997 reflect the historical results of Kimco adjusted to give effect, as of January 1, 1996 to the purchase of 14 shopping center properties acquired by the Company throughout 1997 as previously reported in the Current Report on Form 8-K dated January 15, 1997 and incorporated by reference herein. The Price REIT Pro Forma Statements of Income for the year ended December 31, 1996 and the nine months ended September 30, 1997 reflect the historical results of Price REIT adjusted to give effect, as of January 1, 1996 to the purchase of 12 shopping center properties acquired by Price REIT throughout 1997 as previously reported in the Current Report on Form 8-K/A dated November 13, 1997, and incorporated by reference herein. 2. Reclassification - ------------------- Certain amounts reflected in the historical financial statements of both companies have been reclassified to conform to the presentation of the unaudited Pro Forma Combined Condensed Statements of Income. 3. Pro Forma Adjustments - ------------------------ Depreciation and amortization - The adjustment to depreciation and amortization results from the net increase in real estate owned as a result of recording Price REIT's real estate assets at fair value versus historical cost. Depreciation is computed on the straight-line method based upon an estimated useful life of 39 years and an allocation of the stepped-up basis to land and building of 20% and 80%, respectively. Calculation of depreciation of real estate owned for the year ended December 31, 1996 and the nine months ended September 30, 1997 is as follows:
Year Ended Nine Months Ended December 31, 1996 September 30, 1997 (000's) (000's) ----------------- ------------------ Depreciation expense based upon an estimated useful life of 39 years $15,374 $11,530 Less: Pro Forma Price REIT depreciation of real estate owned based upon an estimated useful life of (17,143) (13,858) 15 to 25 years ----------------- ------------------ Depreciation and amortization Pro Forma adjustment ($1,769) ($2,328) ================= ==================
General and administrative - The adjustment to general and administrative expenses reflects the net estimated reduction of those costs which are anticipated to be eliminated or reduced as a result of the Merger, as follows:
Year Ended December 31, Nine Months Ended 1996 September 30, 1997 (000's) (000's) ------------------------ ------------------ Net reduction in salary and benefit costs $550 $413 Net reduction in duplication of public company expenses 500 375 Net reduction in directors and officers insurance and directors fees 150 112 ------------------------ ------------------ General and administrative Pro Forma adjustment $1,200 $900 ======================== ==================
Weighted average number of common shares outstanding - The pro forma weighted average number of common shares outstanding for the year ended December 31, 1996 and the nine months ended September 30, 1997 are computed as follows:
Year Ended December 31, Nine Months Ended 1996 September 30, 1997 (000's) (000's) ------------------------ ------------------ Kimco's historical weighted average number of shares outstanding 35,906 36,375 Issuance of Kimco common stock at an exchange ratio of one for one for all Price REIT common stock outstanding in connection with the Merger 11,693 11,693 Add: Conversion of Price REIT stock options to Kimco common stock in connection with the Merger 193 193 ------------------------ ------------------ Pro Forma weighted average number of Kimco common shares outstanding 47,792 48,261 ======================== ==================
EX-99.4 7 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED FUNDS FROM OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997 Exhibit 99.4 KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED FUNDS FROM OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997 ------------------------------------ The following unaudited Pro Forma Combined Funds from Operations for the year ended December 31, 1996 and the nine months ended September 30, 1997 give effect to the proposed Merger as if the Merger had occurred January 1, 1996. In addition, the Kimco Pro Forma columns for the year ended December 31, 1996 and the nine months ended September 30, 1997 assumes the completion, as of January 1, 1996, of the acquisition of 14 shopping center properties as previously reported in the Current Report on Form 8-K dated January 15, 1997, incorporated by reference herein. The Price REIT Pro Forma columns for the year ended December 31, 1996 and the nine months ended September 30,1997 assume the completion, as of January 1, 1996, of the acquisition of 12 shopping center properties as previously reported in the Current Report on Form 8-K/A dated November 13, 1997, incorporated by reference herein. Most industry analysts and equity real estate investment trusts ("REIT"), including the Company, generally consider Funds from Operations to be an appropriate supplemental measure of the performance of an equity REIT. Funds from Operations is defined as net income applicable to common shares before depreciation and amortization, extraordinary items, gains or losses on sales of real estate, plus Funds from Operations of unconsolidated joint ventures determined on a consistent basis. Funds from Operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and, therefore, should not be considered an alternative to net income as a measure of results of operations, or for cash flows from operations calculated in accordance with generally accepted accounting principles as a measure of liquidity. KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED FUNDS FROM OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 --------------- (Unaudited) (000's except per share data)
Price Reit 1997 Property Acquisition Kimco Price Reit Pro Forma Price Reit Pro Forma Pro Forma Funds from Operations Pro Forma Historical Adjustments Pro Forma Adjustments Results ----------- ----------- ----------- ----------- ----------- ----------- Net Income $ 79,589 $ 16,919 $ 4,521 $ 21,440 $ 2,969 $ 103,998 Depreciation & amortization 29,985 11,876 5,536 17,412 (1,769) 45,628 Gain on Sale of Shopping Center Property (802) -- -- -- -- (802) Funds from Joint Venture Operations 1,146 661 -- 661 -- 1,807 Preferred Stock Dividends (16,136) -- -- -- (8,915) (25,051) ----------- ----------- ----------- ----------- ----------- ----------- Funds from Operations $ 93,782 $ 29,456 $ 10,057 $ 39,513 ($ 7,715) $ 125,580 =========== =========== =========== =========== =========== =========== Per Common Share $2.61 $3.44 $4.62 $2.63 ===== ===== ===== ===== Historical weighted average number of shares outstanding 35,906 8,560 8,560 ====== ===== ===== Pro forma weighted number of shares outstanding 47,792 ======
KIMCO REALTY CORPORATION AND SUBSIDIARIES PRO FORMA COMBINED FUNDS FROM OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 --------------------- (Unaudited) (000's, except per share data)
Price Reit 1997 Property Acquisition Merger Combined Kimco Price Reit Pro Forma Price Reit Pro Forma Pro Forma Funds from Operations Pro Forma Historical Adjustments Pro Forma Adjustments Results ----------- ----------- ----------- ----------- ----------- ----------- Net Income $ 66,723 $ 19,899 $ 664 $ 20,563 $ 3,228 $ 90,514 Depreciation & amortization 23,522 11,201 2,992 14,193 (2,328) 35,387 Gain on Sale of Shopping Center Property (244) (2,787) -- (2,787) -- (3,031) Funds from Joint Venture Operations 850 537 -- 537 -- 1,387 Preferred Stock Dividends (13,827) -- -- -- (6,686) (20,513) ----------- ----------- ----------- ----------- ----------- ----------- Funds from Operations $ 77,024 $ 28,850 $ 3,656 $ 32,506 $ (5,786) $ 103,744 =========== =========== =========== =========== =========== =========== Per Common Share $2.12 $2.69 $3.03 $2.15 ===== ===== ===== ===== Historical weighted average number of shares outstanding 36,375 10,742 10,742 ====== ====== ====== Pro forma weighted number of shares outstanding 48,261 ======
EX-99.5 8 PRO FORMA CONDENSED STATEMENTS OF INCOME OF PRICE REIT FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997 The Price REIT, Inc. Pro Forma Condensed Statement of Income For the Year Ended December 31, 1996 (Unaudited) The following unaudited pro forma condensed statement of income for the year ended December 31, 1996 has been presented as if the Piscataway Towne Center, Cordata Centre and Ridgedale Festival Shopping Center and the 1997 Acquired Properties were acquired on January 1, 1996. The 1997 Acquired Properties include Westgate Market, Broadmoor Village, Richardson Plaza, Cityplace Market, Wendover Ridge Center, Arboretum Crossing Center, Smoketown Stations Center, Renaissance Centre, and West Farms Shopping Center, that were previously presented in the Company's Current Report on Form 8-K dated April 16, 1997 (and Amendment No. 1 thereto), Current Report on Form 8-K dated May 28, 1997 (and Amendment No. 1 thereto) and Current Report on Form 8-K dated September 12, 1997 (and Amendment No.1 thereto) filed with the Securities and Exchange Commission. The unaudited pro forma condensed statement of income should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1996, Current Report on Form 8-K dated April 16, 1997 (and Amendment No. 1 thereto), Current Report on Form 8-K dated May 28, 1997 (and Amendment No. 1 thereto) and Current Report on Form 8-K dated September 12, 1997 (and Amendment No.1 thereto). In management's opinion, all adjustments necessary to reflect the above acquisitions and related significant transactions have been made. The unaudited pro forma condensed statement of income is not necessarily indicative of what actual results of operations would have been had the acquisitions and related transactions actually occurred as of January 1, 1996, nor does it purport to represent the results of operations of the Company for future periods. 16 The Price REIT, Inc. Pro Forma Condensed Statement of Income For the Year Ended December 31, 1996 (Unaudited)
Pro Forma Adjustments --------------------------------------- Ridgedale The 1997 Piscataway Festival The Company Acquired Towne Cordata Shopping Company Historical Properties Center Centre Center Pro Forma ------------------------------------------------------------------------------------------- (In thousands, except per share amounts) Revenue Rental income $51,292 $18,039(a) $2,083(a) $2,347(a) $1,895 (a) $ 75,656 Other income 3,033 - - - - 3,033 --------------------------------------------------------------------------------------------- 54,325 18,039 2,083 2,347 1,895 78,689 Expenses Rental operations 9,909 4,032(b) 441(b) 345(b) 621 (b) 15,348 General and administrative 3,550 - - - - 3,550 Depreciation 11,876 4,169(c) 434(c) 590(c) 343 (c) 17,412 Interest 12,071 6,022(d) 1,478(d)(e) 1,368(d) - 20,939 -------------------------------------------------------------------------------------------- 37,406 14,223 2,353 2,303 964 57,249 -------------------------------------------------------------------------------------------- Net Income (loss) $16,919 $ 3,816 $ (270) $ 44 $ 931 $21,440 ============================================================================================ Per Share Data Net income per $ 1.92 share $ 1.98 ======= ====== Weighted average number of shares 11,160(f) outstanding 8,560 ====== ====== Other Data Number of properties at 36 end of period 24 ====== ======
17 See accompanying pro forma adustments. The Price REIT, Inc. Pro Forma Adjustments to Condensed Statement of Income For the Year Ended December 31, 1996 (Unaudited) (In Thousands) (a) Record the rental income of the 1997 Acquired Properties, Piscataway Towne Center, Cordata Centre and Ridgedale Festival Shopping Center (the"Properties"). (b) Record the rental operating expenses of the Properties less property management fees (as the Company self-manages its properties) as follows: Ridgedale 1997 Piscataway Festival Acquired Towne Cordata Shopping Properties Center Centre Center ---------------------------------------- Rental operations $4,522 $ 515 $ 395 $ 683 Less: management fees (490) (74) (50) (62) ---------------------------------------- $4,032 $ 441 $ 345 $ 621 ======================================== (c) Record the additional depreciation expense to be recognized for the acquisition of the Properties under the straight-line method as follows:
1997 Acquired Piscataway Ridgedale Festival Properties Towne Center Cordata Centre Shopping Center --------------- -------------- --------------- -------------- Years Cost Deprec. Cost Deprec. Cost Deprec. Cost Deprec. ------- ---------------- -------------- ---------------- -------------- Land - $ 50,440 $ - $ 4,832 $ - $ 6,310 $ - $ 3,808 $ - Land improvements 15 10,465 623 906 60 1,230 82 714 48 Buildings 25 99,248 3,546 9,362 374 12,710 508 7,378 295 --------------- -------------- --------------- -------------- $160,153 $ 4,169 $15,100 $ 434 $20,250 $ 590 $11,900 $ 343 ================ =============== ================ ===============
(d) Record the additional interest expense resulting from the acquisitions of the 1997 Acquired Properties, Piscataway Towne Center and Cordata Centre with the proceeds from the unsecured line of credit, using the Company's weighted average interest rate on its unsecured line of credit for the year ended December 31, 1996 of 7.6%. (e) Record the additional interest expense resulting from the assumption of the $11,400 million secured loan on the Piscataway Towne Center. The interest rate on the loan is 10.5%. (f) Includes the issuance of 1.6 million shares of common stock sold on January 22, 1997 and the issuance of 1.0 million shares of common stock sold on August 5, 1997. 18 The Price REIT, Inc. Pro Forma Condensed Statement of Income For the Nine Months Ended September 30, 1997 (Unaudited) The following unaudited pro forma condensed statement of income for the nine months ended September 30, 1997 has been presented as if the Piscataway Towne Center, Cordata Centre and Ridgedale Festival Shopping Center and the 1997 Acquired Properties were acquired on January 1, 1997. The 1997 Acquired Properties include Westgate Market, Broadmoor Village, Richardson Plaza, Cityplace Market, Wendover Ridge Center, Arboretum Crossing Center, Smoketown Stations Center, Renaissance Centre and West Farms Shopping Center that were previously presented in the Company's Current Report on Form 8-K dated April 16, 1997 (and Amendment No. 1 thereto), Current Report on Form 8-K dated May 28, 1997 (and Amendment No. 1 thereto) and Current Report on Form 8-K dated September 12, 1997 (and Amendment No. 1 thereto) filed with the Securities and Exchange Commission. The unaudited pro forma condensed statement of income should be read in conjunction with the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997, Current Report on Form 8-K dated April 16, 1997 (and Amendment No. 1 thereto), Current Report on Form 8-K dated May 28, 1997 (and Amendment No. 1 thereto) and Current Report on Form 8-K dated September 12, 1997 (and Amendment No. 1 thereto). In management's opinion, all adjustments necessary to reflect the above acquisitions and related significant transactions have been made. The unaudited pro forma condensed statement of income is not necessarily indicative of what actual results of operations would have been had the acquisitions and related transactions actually occurred as of January 1, 1997, nor does it purport to represent the results of operations of the Company for future periods. 19 The Price REIT, Inc. Pro Forma Condensed Statement of Income For the Nine Months Ended September 30, 1997 (Unaudited)
Pro Forma Adjustments ----------------------------------------------------------------- Ridgedale The 1997 Piscataway Festival The Company Acquired Towne Cordata Shopping Company Historical Properties Center Centre Center Pro Forma ----------------------------------------------------------------------------------------- (In thousands, except per share amounts) Revenue Rental income $48,450 $8,613(a) $ 1,551(a) $ 1,824(a) $ 1,314(a) $61,752 Other income 5,379 - - - - 5,379 ----------------------------------------------------------------------------------------- 53,829 8,613 1,551 1,824 1,314 67,131 Expenses Rental operations 9,247 1,639(b) 327(b) 260(b) 430 (b) 11,903 General and Administrative 2,815 - - - - 2,815 Depreciation 11,201 1,966(c) 326(c) 443(c) 257 (c) 14,193 Interest 10,667 4,920(d) 1,098(d)(e) 972(d) - 17,657 ----------------------------------------------------------------------------------------- 33,930 8,525 1,751 1,675 687 46,568 ----------------------------------------------------------------------------------------- Net income $19,899 $ 88 $ (200) $ 149 $ 627 $20,563 loss) ========================================================================================= Per Share Data Net income per $ 1.85 share ======= $ 1.76 Weighted average ======= number of shares outstanding 10,742 ====== 11,684(f) Other Data ======= Number of properties at end of period 32 35 ====== =======
See accompanying pro forma adjustments. 20 The Price REIT, Inc. Pro Forma Adjustments to Condensed Statement of Income For the Nine Months Ended September 30, 1997 (Unaudited) (In Thousands) (a) Record the rental income less amount included in the Company historical of the 1997 Acquired Properties, Piscataway Towne Center, Cordata Centre, and Ridgedale Festival Shopping Center (the "Properties"). (b) Record the rental operating expenses of the Properties less property management fees (as the Company self-manages its properties) net of amount included in the Company historical as follows: Ridgedale 1997 Piscataway Festival Acquired Towne Cordata Shopping Properties Center Centre Center --------------------------------------------- Rental operations $1,845 $384 $ 298 $ 474 Less: management fees (206) (57) (38) (44) --------------------------------------------- $1,639 $327 $ 260 $ 430 ============================================= (c) Record the additional depreciation expense to be recognized for the acquisition of the Properties under the straight-line method as follows:
1997 Acquired Piscataway Ridgedale Festival Properties Towne Center Cordata Centre Shopping Center ----------------------------------------------------------------------------------- Years Cost Deprec. Cost Deprec. Cost Deprec. Cost Deprec. -------- ----------------------------------------------------------------------------------- Land - $50,440 $ - $ 4,832 $ - $ 6,310 $ - $ 3,808 $ - Land improvements 15 10,465 523 906 45 1,230 62 714 36 Buildings 25 99,248 2,977 9,362 281 12,710 381 7,378 221 ----------------------------------------------------------------------------------- $160,153 3,500 $15,100 $ 326 $ 20,250 443 $11,900 $ 257 ======== ============================================================= Less amount included in the Company historical (1,534) ------- $1,966 =======
(d) Record the additional interest expense resulting from the acquisitions of the 1997 Acquired Properties, Piscataway Towne Center and Cordata Centre with the proceeds from the unsecured line of credit, using the Company's weighted average interest rate on its unsecured line of credit for the nine months ended September 30, 1997 of 7.2%. 21 The Price REIT, Inc. Pro Forma Adjustments to Condensed Statement of Income (Continued) For the Nine Months Ended September 30, 1997 (Unaudited) (In Thousands) (e) Record the additional interest expense resulting from the assumption of the $11,400 million secured loan on the Piscataway Towne Center. The interest rate on the loan is 10.5%. (f) Includes the issuance of 1.6 million shares of common stock sold on January 22, 1997 and the issuance of 1.0 million shares of common stock sold on August 5, 1997. 22 -----END PRIVACY-ENHANCED MESSAGE-----