-----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, GUZ2NncKntUEFTWRPBCo9me4P0O/x792IpCdptfyEYkwMCu99DZ78OlFguHWMslK 63EOfOBzSNJ2as/W6oKgLw== 0000898430-97-001969.txt : 19970520 0000898430-97-001969.hdr.sgml : 19970520 ACCESSION NUMBER: 0000898430-97-001969 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAAGEN ALEXANDER PROPERTIES INC CENTRAL INDEX KEY: 0000913292 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 954444963 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12588 FILM NUMBER: 97599358 BUSINESS ADDRESS: STREET 1: 3500 SEPULVEDA BLVD CITY: MANHATTAN BEACH STATE: CA ZIP: 90266 BUSINESS PHONE: 3105464520 MAIL ADDRESS: STREET 1: 3500 SEPULVEDA BLVD CITY: MANHATTAN BEACH STATE: CA ZIP: 90266 10-Q 1 FORM 10-Q FOR PERIOD ENDING 3/31/97 THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T. ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________to_________ Commission file number 1-12588 ALEXANDER HAAGEN PROPERTIES, INC. (Exact name of registrant as specified in charter) Maryland 95-4444963 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 3500 Sepulveda Boulevard Manhattan Beach, California 90266 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 546-4520 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. YES [X] NO [ ]. As of May 7, 1997, 12,024,522 shares of Common Stock, Par Value $.01 Per Share, were outstanding. ================================================================================ ALEXANDER HAAGEN PROPERTIES, INC. FORM 10-Q INDEX PAGE ---- PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 1997 (unaudited) and December 31, 1996 3 Consolidated Statements of Operations (unaudited) for the three months ended March 31, 1997 and 1996 4 Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 1997 and 1996 5 Notes to Consolidated Financial Statements (unaudited) 6 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations 8 PART II OTHER INFORMATION 12 SIGNATURES 13 i ALEXANDER HAAGEN PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31, 1997 1996 ---------- ------------- (UNAUDITED) ASSETS Rental properties $ 665,327 $ 659,565 Accumulated depreciation and amortization (108,328) (104,330) --------- --------- Rental properties, net 556,999 555,235 Cash and cash equivalents 5,308 5,941 Tenant receivables, net 5,894 5,987 Other receivables 3,612 3,650 Receivable from management company 428 1,055 Investment in management company 621 621 Restricted cash 3,188 3,252 Deferred charges, net 18,155 18,365 Other assets 1,427 770 --------- --------- TOTAL $ 595,632 $ 594,876 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Secured debt $ 247,531 $ 242,641 7 1/2% Convertible subordinated debentures 138,599 138,599 7 1/4% Exchangeable subordinated debentures 30,000 30,000 Accrued distributions 5,872 7,039 Accrued interest 3,471 5,490 Accounts payable and other accrued expenses 6,471 5,340 Accrued construction costs 3,309 1,207 Tenant security and other deposits 4,831 4,287 --------- --------- Total liabilities 440,084 434,603 --------- --------- MINORITY INTERESTS Operating Partnership 40,429 41,640 Other minorities 1,899 2,007 --------- --------- Total minority interests 42,328 43,647 --------- --------- STOCKHOLDERS' EQUITY Common stock ($.01 par value, 50,000,000 shares authorized; 12,024,522 and 12,024,378 shares issued and outstanding at March 31, 1997 and December 31, 1996, respectively) 120 120 Additional paid-in capital 174,782 174,792 Accumulated distributions and deficit (61,682) (58,286) --------- --------- Total stockholders' equity 113,220 116,626 --------- --------- TOTAL $ 595,632 $ 594,876 ========= =========
See Notes to Consolidated Financial Statements. 3 ALEXANDER HAAGEN PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 1996 -------- -------- REVENUES: Minimum rents $15,926 $15,216 Recoveries from tenants 4,987 4,529 Percentage rents 271 238 Other income 999 895 ------- ------- Total revenues 22,183 20,878 ------- ------- EXPENSES: Interest 8,897 8,854 Depreciation and amortization 4,315 4,437 Property Operating Costs: Common Area 3,349 3,179 Property taxes 2,076 1,813 Leasehold rentals 403 407 Marketing 112 188 Other operating 452 348 Non-recurring provision for unbilled deferred rent - 6,900 General and administrative 1,238 1,164 ------- ------- Total expenses 20,842 27,290 ------- ------- INCOME (LOSS) FROM OPERATIONS 1,341 (6,412) EQUITY IN INCOME OF MANAGEMENT COMPANY - - ------- ------- INCOME (LOSS) BEFORE MINORITY INTERESTS 1,341 (6,412) MINORITY INTERESTS: Operating Partnership (332) 848 Other minorities (76) (68) ------- ------- NET INCOME (LOSS) $ 933 $(5,632) ======= ======= NET INCOME (LOSS) PER SHARE $0.08 $(0.47) ======= ======= Weighted average shares 12,024 12,024 outstanding ======= =======
See Notes to Consolidated Financial Statements 4 ALEXANDER HAAGEN PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ 933 $(5,632) Adjustment to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of rental properties 4,315 4,437 Amortization of deferred financing costs 554 523 Non-recurring provision for unbilled deferred rent - 6,900 Minority interests in operations 408 (780) Equity in income of management company - - Net changes in operating assets and liabilities 61 (359) ------- ------- Net cash provided by operating activities 6,271 5,089 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Construction and Development Costs (4,599) (7,239) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on mortgage financing (610) (550) Borrowings on secured line of credit 8,000 9,500 Repayment of secured line of credit (2,500) (1,500) Decrease in restricted cash 63 948 Distributions paid to shareholders (4,329) (4,329) Distributions paid to minority interests (2,895) (554) Other (34) - ------- ------- Net cash (used by) provided by financing activities (2,305) 3,515 ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (633) 1,365 CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD 5,941 3,687 ------- ------- CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 5,308 $ 5,052 ======= =======
See Notes to Consolidated Financial Statements 5 ALEXANDER HAAGEN PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying financial statements and related notes of Alexander Haagen Properties, Inc. (the "Company") are unaudited; however, they have been prepared in accordance with generally accepted accounting principles for interim financial reporting and the instructions to Form 10-Q and the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles have been condensed or omitted pursuant to such rule. In the opinion of management, all adjustments considered necessary for fair presentation of the Company's financial position, results of operations and cash flows have been included. These financial statements should be read in conjunction with the Company's Form 10-K for the year ended December 31, 1996. 2. INVESTMENT IN MANAGEMENT COMPANY Equity in Income (Loss) of Management Company represents the Company's 95% economic interest in Haagen Property Management, Inc. ("HPMI"). In conjunction with the Initial Public Offering of the Company's common stock and Debentures in December 1993 (the "IPO"), HPMI assumed all of the property management functions for the Company's properties. Executive and property management fees for the three months ended March 31, 1997 and 1996 totaled $997,000 and $948,000, respectively, and are included in general and administrative expenses. In addition, HPMI provides leasing, legal and construction services for the properties owned by the Company, such fees for the three months ended March 31, 1997 and 1996 of $716,000 and $885,000, respectively, were capitalized and are being amortized over the useful lives of the related leases and/or properties. As the OP owns a 95% economic interest in but does not control HPMI, the investment is accounted for on an equity basis. 3. DEVELOPMENT PROPERTIES Certain of the Properties had not completed their respective leasing plans at the date of the IPO (the "Development Properties"). To facilitate inclusion of the Development Properties in the Company's initial portfolio, the partners of certain Predecessor Affiliates that transferred the Development Properties to the Company had the right to receive additional OP Units. In general, the number of additional OP Units issued was based on the increase in net annualized cash flow from new leases signed through March 31, 1996 and in occupancy and paying rent by June 30, 1996. Such increase in cash flow was not fully realized until the third quarter of 1996. On August 12, 1996, the Independent members of the Board of Directors approved the issuance of 3,242,379 OP Units to the Predecessor Affiliates. The market capitalization of the OP was thereby increased by $41.7 million based upon the stock price as of August 12, 1996. The Predecessor Affiliates' interest in the OP was thereby increased from 8% to approximately 26% effective July 1, 1996. As a result of the issuance in the third quarter of the 3,242,379 OP Units, minority interest was increased and additional paid-in capital decreased by approximately $31.5 million. The number of OP Units issued and outstanding as of March 31, 1997 was 4,286,456. 6 4. UNBILLED DEFERRED RENTS During the first quarter of 1996 the Company reassessed the recoverability of straight-line contractual rent increases as a result of the continuing mergers and consolidations within the retail industry and the financial difficulties of certain retailers. Accordingly, during the first quarter the Company recorded a non-recurring non-cash charge of $6.9 million to increase the reserve against the receivable for straight-line rents. Additionally, the Company fully reserved against future unbilled deferred rents effective January 1, 1996. The company believes this to be an appropriate and conservative approach to account for future contractual rent increases in the current retail environment. 5. RENTAL PROPERTIES The Company regularly reviews long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of expected future cash flow is less than the carrying amount of the asset, the Company recognizes an impairment loss. 6. DISTRIBUTIONS Approximately 76% of the distributions to stockholders for the year ended December 31, 1996 represented a return of capital. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion should be read in conjunction with the accompanying consolidated financial statements and notes thereto. HISTORICAL RESULTS OF OPERATIONS Comparison of the three months ended March 31, 1997 to the three months ended March 31, 1996. Revenues increased by $1.3 million to $22.2 million for the three months ended March 31, 1997 from $20.9 million for the three months ended March 31, 1996. The revenue increase was primarily a result of the lease-up of the Development Properties, principally Media City Center, Empire Center and Baldwin Hills Crenshaw Plaza. Interest expense remained constant at $8.9 million for the three months ended March 31, 1997 and March 31, 1996. An increase due to borrowings on the Company's line of credit to finance construction and redevelopment activity at various properties was offset by a reduction from a partial loan repayment in connection with a property sale in 1996. Property operating costs increased by $0.5 million to $6.4 million for the three months ended March 31, 1997 from $5.9 million for the three months ended March 31, 1996. The increase is a result of increased property taxes and an overall inflationary increase in operating costs at the Company's properties. During the first quarter of 1996 the Company reassessed the recoverability of straight-line contractual rent increases as a result of the continuing mergers and consolidations within the retail industry and the financial difficulties of certain retailers. Accordingly, the Company recorded a non- recurring non-cash charge of $6.9 million to increase the reserve against the receivable for straight-line rents. Additionally, the Company fully reserved against unbilled deferred rents effective with the first quarter of 1996. The company believes this to be an appropriate and conservative approach to account for the straight-lining of contractual rent increases in the current retail environment. General and administrative expenses remained constant at approximately $1.2 million for the three months ending March 31, 1996 and 1997. Income from operations increased by $7.7 million from a loss of $6.4 million for the three months ended March 31, 1996 to income of $1.3 million for the three months ended March 31, 1997 for the reasons stated above. 8 Selected Property Financial Information Net operating income (defined as revenues less property operating costs) for the Company's properties is as follows:
THREE MONTHS ENDED MARCH 31, 1997 1996 ------- ------- Stabilized Properties (33 in 1997 and 35 in 1996): Regional Malls $ 4,697 $ 3,943 Power Centers 4,216 3,792 Community Centers 4,114 4,248 Single Tenants 1,931 2,002 Redevelopment Properties: Covina Town Square 544 685 Medford Center 212 203 Other income 77 70 ------- ------- Net Operating Income $15,791 $14,943 ======= =======
The following summarizes the percentage of leased GLA (excluding non-owned GLA and GLA leased but not yet constructed) as of:
March 31, 1997 December 31, 1996 -------------- ----------------- Stabilized Properties (33): Regional Malls 90.5% 92.5% Power Centers 91.7 95.4 Community Centers 94.8 95.9 Single Tenants 100.0 100.0 Redevelopment Properties: Covina Town Square 88.9 88.3 Medford Center 97.8 97.0 Aggregate Portfolio 94.2% 95.8% ===== =====
During the first quarter of 1997 the Company signed leases for approximately 242,000 square feet, including 115,000 square feet at its Re- Development Properties. Such signed leases resulted in an increase in the overall rent per square foot of the Company's portfolio to $10.87 per square foot at March 31, 1997 from $10.61 per square foot at December 31, 1996. In the first quarter of 1997 the non-owned IKEA store and several other tenants in Empire Center (Fontana, California) vacated their premises. The leased space of Empire Center decreased to 66.2% at March 31, 1997 from 90.3% at December 31, 1996. Leased space at the Company's aggregate portfolio decreased to 94.2% at March 31, 1997 from 95.8% at December 31, 1996. Certain of the Properties had not completed their respective leasing plans at the date of the IPO (the "Development Properties"). To facilitate inclusion of the Development Properties in the Company's initial portfolio, the partners of certain Predecessor Affiliates that transferred the Development Properties to the Company had the right to receive additional OP Units. In general, the number of additional OP Units issued was based on the increase in net annualized cash flow from new leases signed through March 31, 1996 and in occupancy and paying rent by June 30, 1996. Such increase in cash flow was not fully realized until the third quarter of 1996. 9 On August 12, 1996, the Independent members of the Board of Directors approved the issuance of 3,242,379 OP Units to the Predecessor Affiliates. The market capitalization of the OP was thereby increased by $41.7 million based upon the stock price as of August 12, 1996. The Predecessor Affiliates' interest in the OP was thereby increased from 8% to approximately 26% effective July 1, 1996. The number of OP Units issued and outstanding as of March 31, 1997 was 4,286,458. Funds from Operations The Company considers funds from operations ("FFO") to be an alternative measure of the performance of an equity REIT since such measure does not recognize depreciation and amortization expenses as operating expenses. FFO has been defined by the National Association of Real Estate Investment Trusts ("NAREIT") as net income plus depreciation and amortization of real estate, less gains on sales of properties. Management concurs with NAREIT in believing that reductions for the depreciation and amortization of real estate and its related costs are not meaningful in evaluating income-producing real estate. The Company computes FFO on both a primary and a fully diluted basis and considers Operating Partnership Units as the equivalent of shares for the purpose of these computations. The fully diluted basis assumes the conversion of the convertible and exchangeable debentures into shares of common stock. In computing fully-diluted FFO the Company adds back the amortization of deferred financing costs related to the outstanding debentures, principally representing the underwriting discount on the convertible debentures. The following table summarizes the Company's computation of FFO and provides certain additional disclosures (dollars in thousands, except per share amounts):
THREE MONTHS ENDED MARCH 31 1997 1996 ------ -------- FUNDS FROM OPERATIONS Net income (loss) $ 933 $(5,632) Adjustments to reconcile net income (loss) to funds from operations: Depreciation and Amortization: Buildings and improvements 2,917 3,101 Tenant improvements and allowances 1,071 1,088 Leasing costs 314 234 Non-recurring provision for unbilled deferred rent - 6,900 Minority Interests 259 (927) ------ ------- Funds from Operations, primary 5,494 4,764 Debenture interest expense 3,142 3,142 Amortization of deferred financing costs-debentures 325 326 ------ ------- Funds from operations, fully diluted $8,961 $ 8,232 ====== ======= SUPPLEMENTAL DISCLOSURES Capital Expenditures: Expansion of the Company's portfolio $5,713 $ 2,245 Releasing and maintenance of portfolio 49 72 ------ ------- $5,762 $ 2,317 ====== ======= Capitalized leasing costs: Expansion of the Company's portfolio $ 501 $ 856 Releasing and maintenance of portfolio 134 137 ------ ------- $ 635 $ 993 ====== =======
10 The Company considers any space that was vacant or unbuilt at the date of its initial public offering to be expansion of its portfolio. Funds from operations, on a primary basis, increased to $5.5 million for the three months ended March 31, 1997, as compared to $4.8 million for the same period in 1996. On a fully diluted basis, assuming conversion of the debentures, funds from operations increased to $9.0 million from $8.2 million. The increase in funds from operations is principally a result of the reasons stated above under Results of Operations. During the first quarter of 1996 the Company recorded a non-recurring non-cash charge of $6.9 million to increase the reserve against the receivable for straight-line rents. The non-recurring charge was not included in the computation of FFO as the Company considers it to be a significant non-recurring event that if deducted would materially distort the comparative measurement of Company performance. Additionally, the Company fully reserved against straight-line rents effective in the first quarter of 1996. Funds from operations do not represent cash flows from operations as defined by Generally Accepted Accounting Principles and should not be considered as an alternative to net income as an indicator of the Company's operating performance or to cash flows as a measure of liquidity. CASH FLOWS Net cash provided by operating activities increased $1.2 million from the $5.1 million for the three months ended March 31, 1996 to $6.3 million for the three months ended March 31, 1997, due, principally, to the reasons stated above under results of operations. Net cash used by investment activities decreased to $4.6 million for the three months ended March 31, 1997 from $7.2 million for the three months ended March 31, 1996. Net cash used by financing activities increased to $2.3 million for the three months ended March 31, 1997 from $3.5 million provided by financing activities in the three months ended March 31, 1996. The decrease in cash used by investment activities was a result of decreased development activity at the Company's properties. The principal cause of the decrease in cash provided by financing activities was the result of a decrease in borrowings on the Company's Credit Facility and an increase in distributions to Minority Interests as a result of the issuance of additional OP Units discussed above. LIQUIDITY SOURCES AND REQUIREMENTS At March 31, 1997, outstanding debt (excluding the debentures) increased by $4.9 million to $247.5 million from the $242.6 million outstanding at December 31, 1996, as a result of additional borrowings on the Credit Facility to fund development activity. At March 31, 1997 the Company had drawn approximately $46.7 million against its $90 Million Credit Facility. Subsequent to March 31, 1997, the Company has drawn an additional $6.0 million to fund continuing development activity. The Company anticipates investing approximately $33 million in tenant improvements and developments as well as other planned improvements over the next eighteen months which will be spent on various expansion and redevelopment opportunities. The Company anticipates that such capital improvement requirements for the Properties will be funded from its Credit Facility. 11 PART II - OTHER INFORMATION Item 1: Legal Proceedings None Item 2: Changes in Securities None Item 3: Defaults Upon Senior Securities None Item 4: Submission of Matters to a Vote of Security Holders None Item 5: Other Information None Item 6: Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K None 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ALEXANDER HAAGEN PROPERTIES, INC. By: /s/ Stuart J.S. Gulland ----------------------- Stuart J.S. Gulland Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) and Director Dated: May 9, 1997 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 5,308 0 5,894 0 0 0 665,327 108,328 595,632 0 416,130 0 0 120 113,100 595,632 0 22,183 0 6,392 5,961 0 8,897 933 0 0 0 0 0 933 0.08 0.00 Includes depreciation and amortization of $4,315, and $408 allocated to minority interests, respectively.
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