10-K 1 0001.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . ------------------ ----------------------- Commission file number 001-12844 JDN REALTY CORPORATION (Exact Name of Registrant as Specified in its Charter) Maryland 58-1468053 (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 359 East Paces Ferry Road, Suite 400, Atlanta, GA 30305 (Address of Principal Executive Offices) (Zip Code) (404) 262-3252 Registrant's Telephone Number, Including Area Code Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, $.01 Par Value New York Stock Exchange Preferred Stock, $.01 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the shares of common stock of the Registrant (based on the closing price of these shares on the New York Stock Exchange on March 16, 2001) held by non-affiliates was approximately $389,583,373. The number of shares outstanding of the Registrant's common stock, $0.01 par value, was 32,876,234 on March 16, 2001. Documents Incorporated By Reference ----------------------------------- Portions of the Registrant's definitive Proxy Statement relating to the 2001 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K. TABLE OF CONTENTS
Form 10-K Item No. Report Page -------- ----------- Forward-Looking Statements in Form 10-K....................................... 1 PART I 1. Business...................................................................... 2 2. Properties.................................................................... 19 3. Legal Proceedings............................................................. 24 4. Submission of Matters to a Vote of Security Holders........................... 26 PART II 5. Market for Registrant's Common Equity and Related Shareholder Matters................................................. 27 6. Selected Financial Data....................................................... 28 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 30 7A. Quantitative and Qualitative Disclosures about Market Risk.................... 46 8. Financial Statements and Supplementary Data................................... 46 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................... 46 PART III 10. Directors and Executive Officers of the Registrant............................ 47 11. Executive Compensation........................................................ 47 12. Security Ownership of Certain Beneficial Owners and Management.................................................................. 47 13. Certain Relationships and Related Transactions................................ 47 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................................... 48 FINANCIAL INFORMATION Financial Statements F-1 Financial Statement Schedules F-23
FORWARD-LOOKING STATEMENTS IN FORM 10-K Management has included herein certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used, statements which are not historical in nature, including the words "anticipate," "estimate," "should," "expect," "believe," "intend" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are, by their nature, subject to known and unknown risks and uncertainties. Forward- looking statements include statements regarding future shopping center property sales, future development activities with certain tenants, and projected capital requirements for, number of, and timing of shopping centers to be delivered from development pipeline. Among the factors that could cause actual results to differ materially from those anticipated are the following: changes in the composition of senior management and the Board of Directors; the ability to attract and retain key employees; business conditions and the general economy, especially as they affect interest rates and value-oriented retailers; the federal, state and local regulatory environment; the ability to refinance maturing debt obligations on acceptable terms; the availability of debt and equity capital with acceptable terms and conditions including, without limitation, the availability of bank credit to fund development activities; the ability to sell operating shopping center properties and parcels of land on schedule and upon economically favorable terms; the availability of partners for joint venture projects and the ability to negotiate favorable joint venture terms; the availability of new development opportunities; changes in the financial condition or corporate strategy of or business relations with primary retail tenants; the outcome and timing of any resolution and costs of pending litigation and investigations; the ability to fund, complete and lease existing development and redevelopment projects on schedule and within budget; the ability to maintain or obtain all necessary licenses, permits and approvals required to conduct its business; tax legislation affecting the development business of JDN Realty Corporation and JDN Development Company, Inc.; and the ability of JDN Realty Corporation to maintain its qualification as a REIT. Other risks, uncertainties and factors that could cause actual results to differ materially from those projected are detailed from time to time in press releases and reports filed by JDN Realty Corporation with the Securities and Exchange Commission, including Forms 8-K, 10-Q and 10-K. For examples, see "Risk Factors" under Part I, Item 1 of this report. 1 PART I Item 1. Business ----------------- BACKGROUND JDN Realty Corporation is a real estate company specializing in the development and asset management of shopping centers. When referred to herein, the term "Company" represents JDN Realty Corporation and its wholly owned or majority-owned subsidiaries, other than JDN Development Company, Inc. ("JDN Development"). As of December 31, 2000, the Company and JDN Development owned and operated, either directly or indirectly through affiliated entities, 111 shopping center properties containing approximately 11.9 million square feet of gross leasable area ("Company GLA") located in 19 states, with the highest concentrations in Georgia, Tennessee and Florida. The principal tenants of the Company's and JDN Development's properties include Lowe's, Wal-Mart, and TJX Companies. As of December 31, 2000, the Company and JDN Development, either directly or indirectly through affiliated entities or joint ventures, had 25 projects under construction. JDN Realty Corporation was incorporated under Maryland law in 1993 and has elected to be treated as a real estate investment trust ("REIT") for federal income tax purposes. JDN Development was formed in December 1994 to engage primarily in the development of shopping center properties. In order to comply with federal income tax law requirements, JDN Development was initially structured such that the Company owned 99% of the economic interest while the remaining 1% economic interest was owned by a former executive officer of the Company. Recent legislation amending the tax laws applicable to REITs permitted a change in the ownership structure of JDN Development. Effective January 1, 2001, the Company effected this change by acquiring 100% of the ownership of JDN Development. As a result of this acquisition, effective January 1, 2001 the Company has changed its accounting for JDN Development from the equity method to the consolidated method. In addition, the Company and JDN Development elected taxable REIT subsidiary status for JDN Development. See "Federal Income Tax Legislative Developments" below. Because it is not a REIT, JDN Development may engage in certain activities in which the Company cannot, such as sales of all or portions of development projects and third-party fee development. While taxable REIT subsidiaries may engage in a variety of activities unrelated to real estate, the Company does not expect the activities of JDN Development to expand significantly beyond the development activities in which JDN Development has historically engaged. As of December 31, 2000, the Company had invested $4.0 million in JDN Development in the form of equity capital, $134.6 million in the form of secured notes receivable and $58.9 million in the form of unsecured advances. As of December 31, 2000, the Company guaranteed one loan of JDN Development in the amount of $3.3 million. This loan was secured by property owned by JDN Development and was paid in full in February 2001. UNDISCLOSED TRANSACTIONS, LEASE DISCREPANCIES AND MANAGEMENT CHANGES Undisclosed Compensation Arrangements, Related Party Transactions and Unauthorized Benefits In February 2000, the Company announced that it had discovered undisclosed compensation arrangements and related party transactions with two executive officers of the Company and JDN Development. The undisclosed compensation arrangements were in the form of payments by the Company or JDN Development for the purchase of land on behalf of an entity owned by these officers and in the form of payments of fees and commissions to this entity. The undisclosed related party transactions consisted of sales of land by JDN Development to entities in which these officers directly or 2 indirectly held interests. In addition, the Company discovered that these officers received unauthorized benefits from or through JDN Development, which included unauthorized receipt of commissions and fees related to real estate transactions consummated by JDN Development, unauthorized site improvements to land owned by these officers and the unauthorized conveyance of one parcel of land to these officers. Discrepancies in Leases with and Land Sales to Tenants In April 2000, the Company announced the discovery of discrepancies in cost and other information underlying certain leases and real estate sales agreements with the Company's two largest tenants, Lowe's and Wal-Mart (collectively, the "Major Anchor Tenants"). The Company determined that these discrepancies may have affected the negotiation of rental rates and purchase prices paid by the Major Anchor Tenants in transactions with the Company and JDN Development. After further investigation and discussions with the Major Anchor Tenants, the Company, JDN Development and the Major Anchor Tenants entered into an Estoppel and Release on May 23, 2000 which contained a financial settlement and reaffirmed the terms of all existing leases without modification, restatement or adjustment and reaffirmed all previously consummated real estate sales transactions without modification, restatement or adjustment. Management Changes In February 2000, J. Donald Nichols resigned as Chief Executive Officer of the Company and as President of JDN Development. Also in February 2000, Jeb L. Hughes, Senior Vice President of JDN Development, and C. Sheldon Whittelsey, IV, Vice President of the Company and JDN Development, resigned from all of their positions with the Company and JDN Development. In March 2000, W. Fred Williams was hired to serve as President and Director of JDN Development. In April 2000, William J. Kerley resigned from the position of Chief Financial Officer of the Company, and John D. Harris, Jr., the Company's Controller, was appointed Secretary, Treasurer, and Interim Chief Financial Officer. In April 2000, Mr. Nichols resigned from his remaining positions with the Company and JDN Development and Craig Macnab, a member of the Company's Board of Directors, was hired to serve as Chief Executive Officer of the Company. In August 2000, Mr. Harris was appointed Chief Financial Officer and Michael A. Quinlan, former Controller of JDN Development, was appointed Controller of the Company. Also in August 2000, Elizabeth L. Nichols resigned her position as Director of the Company and subsequently resigned from the position of President in September 2000. In October 2000, W. Fred Williams resigned his positions as President and Director of JDN Development. Lee S. Wielansky was hired to serve as President and Chief Executive Officer of JDN Development in November 2000. Bank Credit Agreements As a result of the undisclosed compensation and related party transactions, from April 14, 2000 to May 23, 2000, the Company was deemed to be in default under the credit agreements related to its primary line of credit and term loan. On May 23, 2000, the Company and the bank groups entered into amendments to its line of credit and term loan (the "Secured Credit Agreements"), which cured all existing defaults. Under the Secured Credit Agreements, loans outstanding were converted from unsecured to secured, the interest rates increased to LIBOR plus 2.50% (which was later reduced to LIBOR plus 2.25% after certain post-closing conditions were met), the maximum amount available under the line of credit decreased from $200 million to $175 million and the maturity dates changed to June 2001. On March 29, 2001, the Company closed a Third Amended and Restated Master Credit Agreement with Fleet National Bank as Agent (the "2001 Credit Agreement"), replacing the existing Secured Credit Agreements. The 2001 Credit Agreement provides for maximum borrowings of $300.0 million, comprised of a $150.0 million revolving credit facility and a $150.0 million term loan. Loans 3 made pursuant to the 2001 Credit Agreement will initially bear interest at LIBOR plus 2.00% and will range from LIBOR plus 1.75% to LIBOR plus 2.25% based on Company leverage and credit quality. The 2001 Credit Agreement matures December 31, 2002. DESCRIPTION OF BUSINESS Development The Company's primary business has historically been to develop shopping centers anchored by retailers such as, for example, the Major Anchor Tenants. Through December 31, 2000, the Company, its predecessors and JDN Development had developed or jointly developed 189 shopping center projects, of which 107 were built on assignment from Wal-Mart and 34 were built on assignment from Lowe's. The Company and JDN Development have also historically developed for other retailers such as Kohl's, Kroger and PetsMart. Currently, the Company and JDN Development are involved in development activities with 10 different secondary anchor tenants such as Best Buy and Bed, Bath and Beyond. The Company and JDN Development expect to continue to pursue development opportunities with retailers with which they have traditionally worked while broadening the tenant and product mix to include grocers and grocery anchored shopping centers. Management intends to become more selective in the development projects it approves with a focus on location in high barrier-to-entry markets with demographic attributes that allow for net operating income growth over time. Management believes that this focus on location combined with developing for retailers who are leaders in their local markets will enable the Company to achieve favorable rates of return on its investments in shopping center properties. After obtaining an assignment from a retailer in a particular market, JDN Development generally: . Obtains an option on the proposed site; . Develops a site plan, taking into account the physical constraints of the property and the physical requirements of shopping center retailers, that can be translated into economic terms to set rental rates for anchor tenants; . Performs preliminary demographic, traffic and economic studies on the proposed site; . Obtains preliminary approval from its Investment Committee; . Contacts other major shopping center retailers that management believes would be interested in the same market to determine their interest in leasing space at the proposed site; . Estimates costs by evaluating soil, water, sewer, environmental and traffic factors, as well as any other costs associated with the proposed site; . Reviews the local rental market to determine demand for and pricing of local tenant space; . Contacts potential outparcel users for the site to determine demand for and pricing of outparcels; . Performs financial analyses to confirm that the development meets internal return on investment criteria; and . After final approval from the Investment Committee and a commitment from a significant shopping center retailer, the Company and JDN Development form a partnership that purchases, either directly or indirectly through an affiliated entity, the site and oversee construction of the shopping center. The Company and JDN Development have historically concentrated their development activities in the Southeast as a result of attractive shopping center development opportunities with major anchor retailers. The Company and JDN Development expect to continue to pursue development opportunities within the Southeast based on assignments from major retailers. In addition, the Company intends to develop, acquire and own shopping centers in other locations with demonstrated growth potential or 4 population density with high barriers-to-entry for other shopping center developers. JDN Development has pursued development opportunities with its own development staff and with selected local developers in the Midwest, Southwest, Northeast and California as the result of increased tenant interest and opportunities in these markets. JDN Development's indirectly wholly owned subsidiary, Goldberg Property Associates, Inc. ("Goldberg"), a real estate development, brokerage and property management company in Denver, Colorado, provides JDN Development with additional development opportunities, regional knowledge of the intermountain states and opportunities to develop for additional regional retailers. Goldberg currently has begun construction on two projects, with additional projects in various stages of pre-development. During 2000, the Company and JDN Development completed projects which added approximately 957,000 square feet of Company GLA to the Company's operating portfolio of shopping centers and cost approximately $96.8 million. As of December 31, 2000, the Company, either directly or indirectly through JDN Development and joint ventures, had begun construction of a total of 25 projects which are expected to add approximately 2.1 million square feet of Company GLA to the Company's operating portfolio of shopping center properties. During 2000, the Company approved one shopping center project and to date, in 2001, has approved one additional project. Historically, the Company and JDN Development have approved multiple projects in any given year. Management anticipates, however, that a reduction in the number of approved projects, based on its more selective focus, may also reduce development activity and the number of completed projects delivered in future periods. This reduction could mean slower or flat growth in the operating portfolio as well as net operating income and funds from operations. Asset Management The Company's objective is to maximize long-term value of its portfolio of operating shopping centers. Management believes that this objective is best accomplished through aggressive leasing and property management efforts, through redevelopment and expansions of selected shopping centers, and through disposition of assets not meeting location, demographic and credit standards necessary for maximizing long-term value. The Company's asset management team seeks to attract quality retail and service tenants, maintain high occupancy rates, and establish a portfolio consisting of high quality assets located in fundamentally sound markets that have high barriers-to-entry. Leasing and Property Management The leasing staff seeks a complementary mix of financially qualified tenants. Prior to entering into leases, the Company's leasing professionals analyze the financial condition of each retail prospect, evaluate the prospect's business plan and suitability as a tenant in a particular center and make recommendations to management. In management's judgement, this process maximizes rental revenue and reduces the risk of tenant turnover. After leasing space, the Company's property management department seeks to maximize the portfolio returns by increasing revenues through renewals of existing tenant leases and reducing operating expenses. During 2000, on a "same property" basis, the Company experienced the following results: . Net operating income decreased 0.1% for the year ended December 31, 2000 as compared to the year ended December 31, 1999, primarily as a result of an increase in operating costs. . At December 31, 2000, the Company's properties were 95.8% leased as compared to 94.4% at December 31, 1999. This increase primarily relates to the releasing of a portion of a vacant anchor space at one of the Company's shopping center properties. . Annualized base rent per leased square foot increased 0.5% to $7.69 as of December 31, 2000 from $7.65 as of December 31, 1999 due to an increase in effective rent upon turnover or renewal of space. 5 As of December 31, 2000, the Company's and JDN Development's overall operating portfolio of 111 shopping center properties was 95.6% leased. Redevelopment and Expansion The Company's business strategy also includes the selective redevelopment, retenanting and expansion of shopping centers to increase cash flows and property values while simultaneously earning a risk adjusted return on incremental investment. The Company has historically been active in its tenant expansion plans as changing demographics and increased sales warrant expansion or relocation. Redevelopment projects have included the addition of anchor tenants, changes in the tenant mix and the reconfiguration of shopping centers. The Company and JDN Development have worked closely with several anchor tenants to enlarge their stores and enhance merchandising capabilities. During 2000, the Company and JDN Development completed the redevelopment of two shopping centers. In Milwaukee, Wisconsin, JDN Development relocated a 21,090 square foot Walgreen's out of an existing predominantly vacant mall to an outparcel and replaced the mall with a 205,757 square foot Wal-Mart. In Eastman, Georgia, the Company relocated a 3,600 square foot Movie Gallery into a 4,800 square foot freestanding store and expanded a Food Lion into a 35,560 square foot store. Also during 2000, the Company completed two expansions. In Warner Robins, Georgia the Company added a non-owned Wal-Mart, a TJ Maxx, 14,400 square feet of small tenant shops and an office supply retailer scheduled to open in 2001. In Greensboro, North Carolina, the Company added an Old Navy and Dick's Sporting Goods to an existing shopping center. Dispositions The disposition strategy of the Company is designed to generate capital to be used to fund profitable development activities and to dispose of shopping center properties the returns and growth potential of which fall below management's objective. The asset management and dispositions teams analyze properties for potential dispositions, focus on selling assets that do not fit the overall Company strategy and replace them with assets located in high barrier-to-entry, high growth markets with an emphasis on high rates of profitability. The Company has utilized different strategies for dispositions in the past, which have included selling all or portions of shopping centers for cash and through the use of tax-deferred exchanges ("1031 Exchanges") under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"). Management intends to continue to explore different disposition strategies as a means of executing the overall disposition strategy. During 2000, the Company and JDN Development sold the following shopping center properties: 6 Disposition Company Location Date GLA Proceeds -------------------------------------------------------------------------------- Cordele, Georgia (1) 01/19/00 149,704 $ 9,653,075 Gallipolis, Ohio (1) 01/19/00 179,958 13,128,872 Wallace, North Carolina 02/10/00 118,993 4,230,000 Cheraw, South Carolina 02/10/00 45,100 2,520,000 Cordele, Georgia 05/22/00 26,350 2,100,000 Milwaukee, Wisconsin (3) 05/25/00 30,000 2,550,000 Canton, GA (1) (3) 06/05/00 199,026 13,739,296 Cumming, Georgia (1) 06/06/00 202,847 12,857,579 Buford, Georgia (1) 06/28/00 205,330 13,606,552 Newnan, Georgia (1) 07/11/00 204,170 13,743,777 Wilmington, North Carolina 08/23/00 169,437 8,900,000 Wilmington, North Carolina (2) 09/08/00 - 800,000 Rockingham, North Carolina 10/06/00 168,776 6,250,000 Lake City, South Carolina 10/06/00 135,963 5,380,000 Buford, Georgia 10/18/00 29,700 3,400,000 Murfreesboro, Tennessee 11/01/00 71,028 3,500,000 Greensboro, North Carolina (2) 11/17/00 - 1,775,831 Milwaukee, Wisconsin (3) 12/15/00 15,120 2,500,000 ----------- --------------- Totals 1,951,502 $120,634,982 =========== =============== ------------------------------------------------------------ (1) Sale of only the Wal-Mart at this location. (2) Sale of vacant land only. (3) Owned by JDN Development As of December 31, 2000, the Company and JDN Development were negotiating the sale of 23 shopping center properties (the "Marketed Properties"), 11 of which were subject to definitive agreements at that date, for an estimated aggregate purchase price of approximately $134.3 million. The aggregate net book value of the Marketed Properties is approximately $114.2 million and represents approximately 16.1% of net operating income for the year ended December 31, 2000. The sale of the Marketed Properties is dependent upon, among other things, the negotiation of transactions with buyers, completion of due diligence and, in some cases, the ability of the purchasers to successfully obtain financing for these transactions. There can be no assurance that any of these properties will be sold when expected or at all. Failure to sell some or all of the Marketed Properties could adversely affect the Company's ability to fund its ongoing development activities. 7 TENANTS As of December 31, 2000, the Company and JDN Development had the following tenants representing more than 10% of Company GLA or annualized base rent. Percent of Percent of Company Annualized Base Tenant GLA Rent -------------------------------------------------------------------------- Lowe's 16.6% 17.5% Wal-Mart 11.4% 5.6% No other tenant accounted for more than 10% of Company GLA or annualized base rent in 2000. The loss of either Major Anchor Tenant or the inability of either of them to pay rent would have a material adverse effect on the Company's financial condition and results of operations. See also "Risk Factors" below and "Recent Developments" above. The tenant base of the Company and JDN Development had the following characteristics as of December 31, 2000: Percent of Percent of Company Annualized Base Tenant GLA Rent --------------------------------------------------------------------- Anchor 53.3% 41.6% Second Anchor 20.5% 23.5% In Line 17.4% 27.8% Outparcel 3.7% 6.7% Other 0.7% 0.4% Unleased 4.4% 0.0% ------------ ------------ Total 100.0% 100.0% ============ ============ National 74.0% 73.0% Regional 9.9% 11.6% Local 11.7% 15.4% Unleased 4.4% 0.0% ------------ ------------ Total 100.0% 100.0% ============ ============ COMPETITION The Company and JDN Development compete with commercial developers, real estate companies and other real estate owners for development opportunities in all of their market areas. Certain of these competitors may have greater amounts of available capital, better access to capital at lower costs, more management and development expertise, better relationships with their key tenant base and other resources than those of the Company or JDN Development. The operations of each shopping center in the Company's portfolio are subject to competition from similar shopping centers in their respective locations. Management believes that the Company and JDN Development are well positioned to compete effectively for development and acquisition opportunities and are generally well positioned to compete in markets in which their shopping center properties are located, although recent developments 8 described in this report could impact the competitive position of the Company and JDN Development in the future. ENVIRONMENTAL MATTERS The Company and JDN Development are subject to numerous federal, state and local environmental regulations that apply to the development, ownership and operation of real property. In developing shopping centers, the Company and JDN Development engage environmental consultants to determine whether flood plains, wetlands or environmentally sensitive areas are part of the property to be developed. If flood plains are identified, any necessary governmental permits or consents are sought and, if required, development and construction is planned so that flood plain areas are preserved or alternative flood plain capacity is created in conformance with federal and local flood plain management requirements. Stormwater discharge from a construction facility is evaluated in connection with the requirements for stormwater permits under the Clean Water Act, which is an evolving program in most states. Management anticipates that, in many cases, general stormwater permits will be applicable to the Company's activities and individual permits will not be required for existing or new developments. Some of the Company's shopping centers contain friable asbestos elbow fitting insulation on mechanical systems throughout the shopping centers and may contain other asbestos containing materials. These materials are inspected for damage or disturbance periodically and adequate remediation is performed in the event of any repairs or renovations on the affected area. Some of the buildings on the Company's properties were built when low concentrations of non-friable asbestos were commonly used in building materials such as roof flashings and vinyl floor tile and may contain non-friable asbestos building materials. Management believes that buildings that contain limited amounts of friable asbestos, which is subject to monitoring by the Company, and materials that contain low concentrations of non-friable asbestos, when properly managed and maintained, generally do not impose any environmental hazard. In 2000, the Company and JDN Development purchased certain land for its development projects, which contained structures with friable asbestos. The Company and JDN Development performed demolition and remediation according to government regulations prior to beginning construction. The Company's properties may also be affected by materials that contain polychlorinated biphenyls ("PCBs"), such as electrical transformers, owned by other parties located on the Company's properties. Management does not believe that the presence of such materials will result in removal costs that would have a material adverse effect on the Company's financial condition or results of operations in the event of any future major repairs or renovation activities. Any one or more of the Company's shopping centers can potentially be negatively impacted, either through physical contamination or by virtue of an adverse effect on property values by the release of hazardous or toxic substances emanating from areas adjacent to or near the centers. Several of the centers are adjacent to or near areas that either contain or have contained above-ground or underground petroleum storage tanks that either have or may have released petroleum products into the soil or groundwater. A number of the Company's shopping center properties at one time contained underground storage tanks that were used to store petroleum products. When necessary, soil and groundwater contaminations have been the subject of remediation efforts as required by law. The general policy of the Company and JDN Development is to obtain a new or updated environmental assessment each time it develops or acquires a property. The Company and JDN Development obtained Phase I environmental assessments of each property on which they began construction during 2000. Because the terms of all agreements for purchase and sale of properties the Company and JDN Development have acquired or will acquire contain or are expected to contain representations related to the sellers' knowledge of existing environmental conditions. Because the terms of the Company's leases with its shopping center tenants do not give the Company control over the day- 9 to-day operational activities of the tenants, no assurance can be given that any lessee of a property owned or to be owned by the Company has not or will not create a hazardous environmental condition. Except as noted below, the Company and JDN Development have not been notified by any governmental authority of any material noncompliance, environmental claim or liability in connection with any of its shopping centers. The Company and JDN Development have not been notified of any claim for personal injury or property damage by a private party in connection with any of its properties as a result of environmental conditions. The Company and JDN Development have entered into a Consent Agreement with the Environmental Protection Agency relating to an alleged violation of a wetlands permit at one of the Company's recently developed properties. Pursuant to the Consent Agreement, the Company and JDN Development have agreed to certain remedial measures none of which Management believes will have a material adverse effect on the Company's financial condition or results of operations. The Company and JDN Development are not aware of any other environmental condition or liability with respect to any of their properties that management believes would have a material adverse effect on the Company's financial condition or results of operations. EMPLOYEES As of March 16, 2001, the Company, JDN Development and their respective subsidiaries employed 122 full-time individuals and four part-time individuals, including executive, administrative and field personnel. Executive Officers of the Registrant are as follows:
Name Age Positions ---- --- --------- Craig Macnab 45 Chief Executive Officer and Director Lee S. Wielansky 49 President and Chief Executive Officer, JDN Development Company, Inc. and Director John D. Harris, Jr. 41 Chief Financial Officer, Senior Vice President, Secretary and Treasurer Andrew E. Rothfeder 32 Senior Vice President and Director of Asset Management Laurie A. Farris 38 Vice President and Director of Acquisitions David L. Henzlik 39 Vice President and Director of Development Leasing, JDN Development Leilani L. Jones 39 Vice President and Director of Property Management and Assistant Secretary Michael A. Quinlan 41 Vice President, Controller and Assistant Secretary
The term of each executive officer runs until his or her successor is elected and qualified at the first meeting of the Board of Directors following the annual meeting or until his or her earlier resignation or removal. The following is a biographical summary of the experience of the executive officers of the Company: Craig Macnab. Mr. Macnab has served as the Company's Chief Executive Officer since April 2000, and as a director since December 1993. From June 1993 to December 1996, Mr. Macnab served as General Partner of MacNiel Advisors, and from January 1997 to March 1999, he served as President of Tandem Capital. Lee S. Wielansky. Mr. Wielansky joined JDN Development in November 2000 as President and Chief Executive Officer. Mr. Wielansky was elected to the Board of Directors of the Company in February 2001. Prior to joining JDN Development, from January 1995 until March 1998, Mr. Wielansky 10 was President and Chief Executive Officer of the Midland Development Group. From March 1998 until November 2000, he served as Managing Director of Regency Realty Corporation. Mr. Wielansky is a Director of Acadia Realty Trust and Director and Vice Chairman of Allegiant Bancorp, Inc. John D. Harris, Jr. Mr. Harris has served as Chief Financial Officer and Senior Vice President since August 2000 and as Secretary and Treasurer of the Company since March 2000. Mr. Harris served as Interim Chief Financial Officer from April 2000 to July 2000. Mr. Harris served as Vice President and Controller of the Company from May 1988 to April 2000. From July 1994 to May 1998, Mr. Harris served as Controller of the Company. Mr. Harris is a certified public accountant. Andrew E. Rothfeder. Mr. Rothfeder served as a leasing agent of the Company since its formation in December 1993 and has served as Vice President and Director of Asset Management of the Company since May 1999. Laurie A. Farris. Ms. Farris has served as Vice President and Director of Acquisitions since joining the Company in June 1997. From August 1991 to June 1997, Ms. Farris served as Vice President, Senior Commercial Real Estate Underwriter and Portfolio Manager of First Union National Bank in Nashville, Tennessee. Ms. Farris is a Certified Commercial Investment Member ("CCIM"). David L. Henzlik. Mr. Henzlik has served as Vice President and Director of Development Leasing, JDN Development since December 1999. From March 1995 to December 1999, Mr. Henzlik served as Vice President and Director of Leasing of the Company. Leilani L. Jones. Ms. Jones has served as Vice President and Director of Property Management of the Company since its formation in December 1993 and as Assistant Secretary of the Company since May 1977. Ms. Jones is a certified Property Manager and a CCIM. Michael A. Quinlan. Mr. Quinlan has served as Vice President, Controller and Assistant Secretary of the Company since July 2000. From October 1997 through June 2000, Mr. Quinlan served as Controller and Assistant Secretary of JDN Development. Prior to joining JDN Development, Mr. Quinlan was an employee of The Rouse Company serving as a Regional Financial Advisor from June 1996 through September 1997 and as a Senior Group Controller from January 1995 through May 1996. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company is in the business of development, redevelopment, management, and acquisition and disposition of shopping centers. The Company considers its activities to be conducted within a single industry segment. See the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report on Form 10-K for certain information required in Item 1. RISK FACTORS As a real estate company specializing in the development and acquisition of retail shopping centers, the Company is subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in certain forward-looking statements contained herein and elsewhere. In addition, because it operates as a REIT, the Company is also subject to certain tax related risks. Among the factors that could cause actual results to differ materially from those indicated and that could cause future results to differ materially from past results are the following: 11 The Company is Dependent on Major Anchor Tenants for Revenues; Major Anchor Tenant Relations Have Been and May be Further Affected by Recent Developments Major Anchor Tenants. As of December 31, 2000, Lowe's and Wal-Mart each leased more than 10% of the gross leaseable area that the Company owned directly, and Lowe's accounted for more than 10% of the Company's total annualized base rent. No other single tenant accounted for more than 10% of the Company's GLA or total annualized base rent in 2000. If the Company were unable to finance, complete and lease or sell development projects to either of the Company's two largest tenants or if the financial condition or corporate strategy of either of these tenants changes, or if the recent developments adversely affect the willingness or interest of the Major Anchor Tenants to do business with the Company, the Company could experience material adverse consequences, such as reduced net income, reduced funds from operations, reduced distributions and violation of covenants in one or more of its debt obligations. In addition, other tenants may not be attracted to the Company's properties without these tenants. The following is a list of examples of changes that could have a material adverse effect on the Company: . The Company could experience a loss of liquidity, either through further restrictions under its existing credit facility, its inability to attract joint venture partners, its inability to sell projects as expected, its inability to access alternative sources of capital, or otherwise, that could cause the Company to become unable to start or complete existing or new development projects; . Either Major Anchor Tenant could become unable to complete and lease existing development and redevelopment projects on schedule and within targeted projections; . Either Major Anchor Tenant could become unable to pay rent as it becomes due; . Either Major Anchor Tenant could fail to renew leases as they expire causing vacancy at certain shopping centers or causing the Company to re-lease the vacant space on less than favorable economic terms; . Either Major Anchor Tenant could discontinue providing or provide significantly fewer assignments of development projects to the Company or either Major Anchor Tenant could provide assignments that are not economically feasible for the Company to pursue, and the Company could be unable to replace the income from these assignments with economically advantageous assignments from other retail anchor tenants; . The Company could become unable to complete new and existing development projects for these tenants as a result of the inability or unwillingness of third-party vendors to provide services to the Company; and . The Company could become unable to obtain funds through joint venture relationships as a result of the inability or unwillingness of potential third-party joint venture partners to enter into joint venture relationships with the Company. Other Tenants. A change in the financial condition or business strategy of another major tenant or a number of smaller tenants may have an adverse impact on the properties affected and on the income that those properties produce. Other Tenant Relations may be Affected by Recent Developments. The Company depends, and will continue to depend upon, its relationships with current and future tenants. Management believes, based on the current level of activity, that it has the ability to maintain current and develop new relationships. However, inability of the Company to maintain current and to develop new tenant relationships, as a result of the events described in "Recent Developments" in Part I, Item 1 of this Report, could have a material adverse effect on the Company. 12 The Company is Dependent on Outside Financing to Support its Business Strategy The Company's strategy includes developing and redeveloping shopping center properties. Because the Company operates in a manner so as to preserve its qualification as a REIT, which requires, among other things, the distribution of at least 95% of its taxable income (or 90% of its taxable income after December 31, 2000) to shareholders each year, the Company is generally not able to fund its development activities with cash from operating activities. The Company must, therefore, rely in part on the availability of debt or equity capital to fund development and redevelopment activities. The Company's existing 2001 Credit Agreement consists of a $150.0 million revolving credit facility and a $150.0 million term loan, as more particularly described under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" in Part II, Item 7 of this report. The 2001 Credit Agreement contains restrictions on the Company's ability to incur additional indebtedness, requires the Company to maintain certain specified financial ratios and obligates the Company to provide certain of its properties as security. The Company may be unable to refinance or repay this indebtedness in full when it matures in December 2002. There can be no assurance that the Company will have access to public or private debt or equity capital markets to fund future growth on acceptable terms. The Company is subject to a variety of risks associated with debt financing. Examples of these risks include the following: . The Company's cash provided by operating activities may be insufficient to meet required payments of principal and interest; . The Company may be unable to pay or refinance indebtedness on its properties; . If prevailing interest rates or other factors at the time of refinancing result in higher interest rates on refinancing, then the Company's interest costs would increase, which may adversely affect the Company's related returns on its development and redevelopment activities, cash provided by operating activities and the ability to make distributions or payments to holders of the Company's securities; . If the Company is unable to secure refinancing of indebtedness on acceptable terms, the Company may be forced to dispose of properties upon disadvantageous terms, which may result in losses to the Company and may adversely affect the Company's funds from operations; . If the Company is unable to obtain secured or unsecured financing on acceptable terms, the Company may not be able to fund its development pipeline, resulting in a loss of future income and asset value to the Company; . If a property or properties are mortgaged to secure payment of indebtedness and the Company is unable to meet mortgage payments, the mortgagee may foreclose upon the property or otherwise compel the Company to transfer the property to the mortgagee, resulting in a loss of income and asset value to the Company; and, . The Company is limited on the amount of total indebtedness it may incur and on the amount of secured indebtedness it may incur by its credit agreements and bond indentures which limits the funds available for the Company's development and redevelopment activities. As a result of its failure to timely file its Annual Report on Form 10-K for the year ended December 31, 1999, the Company's registration statement on Form S-3 as filed with the Securities and Exchange Commission ("SEC") is no longer effective. The inability of the Company to rely on its shelf registration statement may adversely affect the Company's ability to timely access the public debt and equity capital markets. 13 The Company is Dependent on Land Sales and Shopping Center Sales to Support its Growth In addition to outside financing, the Company is dependent upon selling land and shopping center properties to provide funds to invest in its development activities. The closing of real estate transactions requires considerable effort and is dependent upon multiple factors that are not necessarily within the Company's control. Among these factors are the ability of the purchaser to obtain financing, the resolution of issues arising out of due diligence, economic conditions which may make sales prices unattractive to the Company, economic conditions which make real estate unattractive to potential purchasers, and unforeseen delays in the process which cause delays in the closing. Failure to close land sales and shopping center property sales on schedule could adversely affect the Company's ability to continue to fund its development activities. The Company is Subject to Tax-Related Risks Tax Liabilities of Failure to Qualify as a REIT. The Company has elected to be taxed as a REIT for federal income tax purposes. No assurance can be provided, however, that the Company will continue to operate in a manner enabling it to remain so qualified. Qualification as a REIT involves the application of highly technical and complex Code provisions. Also, the determination of various factual matters and circumstances not entirely within the Company's control may impact its ability to qualify as a REIT. In addition, new legislation, regulations, administrative interpretations or court decisions may significantly change the tax laws with respect to the qualification as a REIT or the federal income tax consequences of such qualification. Among the requirements to qualify as a REIT, the Company must distribute at least 95% (or 90% after December 31, 2000) of its taxable income to its shareholders each year. Possible timing differences between the receipt of income, the payment of expenses and the inclusion and deduction of such amounts in determining taxable income could force the Company to reduce its dividends below the level necessary to maintain its qualification as a REIT, which would have material adverse tax consequences. In order to maintain qualification as a REIT, the Company must also satisfy annually two gross income requirements. In addition, at the close of each quarter of the Company's taxable year, the Company must satisfy certain tests under the Code relating to the nature of its assets. As part of these asset tests, except for investments in REITs, qualified REIT subsidiaries and taxable REIT subsidiaries, a REIT cannot own securities of any one issuer in an amount representing more than 10% of the outstanding voting securities of such issuer (or more than 10% of either the voting securities or of the total value of the securities of such issuer after December 31, 2000). The Internal Revenue Service ("IRS") has adopted the Securities and Exchange Commission's position that the term "voting security" should generally be interpreted to include not only the formal legal right to vote for the election of directors pursuant to the law of the state of incorporation but also the de facto power, based on all the surrounding facts and circumstances, to determine, or influence the determination of, the identity of a corporation's directors. As of December 31, 2000, the Company owned 1% of the voting securities and 100% of the non-voting securities of JDN Development. While no assurance can be given that the IRS would not successfully assert that the shares of non-voting securities of JDN Development previously held by the Company did not constitute "voting securities," management of the Company believes that, prior to January 1, 2001, the Company did not have the de facto power to determine, or unduly influence the determination of the identity of the directors of JDN Development. If in any taxable year the Company does not qualify as a REIT, it would be taxed as a "C" corporation and, in computing its taxable income, the Company would not be able to deduct distributions to the holders of the Company's capital stock. In addition, unless entitled to relief under certain statutory provisions, the Company could not elect REIT status for the four taxable years following the year during which qualification was lost. It is not possible to state whether in all circumstances the Company would be entitled to such statutory relief. Failure to qualify as a REIT for even one year could result in the Company incurring substantial indebtedness (to the extent borrowings are feasible) or liquidating 14 substantial investments in order to pay the resulting taxes. In addition, the Company would no longer be required by the Code to make any distributions to its stockholders. As a "C" corporation, future distributions by the Company to its stockholders would be made at the discretion of the Company's Board of Directors, and it is not anticipated that the Company would make any distributions to its stockholders in the foreseeable future. This likely would have a significant adverse affect on the value of the Company's securities. Other REIT Taxes. Although qualified for REIT taxation, certain transactions or other events could lead to the Company being taxed at rates ranging from 4% to 100% on certain income or gains. For example, the Company is subject to a 100% tax on the net income derived from "prohibited transactions." A prohibited transaction is the sale or other disposition of property held primarily for sale to customers in the ordinary course of a trade or business, with the exception of foreclosure property. Whether property is held primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all of the facts and circumstances with respect to the particular transaction. Certain safe harbor rules are provided pursuant to which certain sales will be deemed not to constitute prohibited transactions. Specific requirements must be satisfied in order to bring a sale within the safe harbor. See "Federal Income Tax Considerations" filed as an exhibit to this report. During 2000, the Company sold certain shopping center properties that fell outside the safe harbor rules, and in 2001, the Company intends to sell certain additional shopping center properties that also fall outside the safe harbor rules. The Company, however, believes that, based on all of the facts and circumstances, it will not have held such properties primarily for sale to customers in the ordinary course of a trade or business and, therefore, such property sales would not be considered prohibited transactions. There can be no assurance that the IRS will not disagree with such conclusion. The Outcome of Shareholder Litigation May Adversely Affect the Company's Business and Financial Results Claims have been brought by shareholders against the Company and certain of its directors and current and former executive officers alleging various violations of federal securities laws and state laws. An unfavorable disposition of these claims against the Company and the costs related thereto could have a material adverse effect on the Company's financial condition or cash flows and results of operations, as described in "Legal Proceedings" in Part I, Item 3 of this report. The Company incurred substantial defense costs during 2000, and it is likely that the Company will continue to incur substantial defense costs until the shareholder claims have been resolved. The Company May Become Subject to Regulatory Proceedings As a result of an investigation by a special committee of the Company's Board of Directors into undisclosed compensation arrangements, related party transactions and unauthorized benefits, the Company was unable to file its 1999 Annual Report on Form 10-K report by the required deadline. The SEC initiated a formal order of investigation as of August 2, 2000. Pursuant to this order, the Company has voluntarily provided certain documents and other information to the SEC regarding the compensation arrangements, unauthorized benefits and related party transactions discussed in Part I of this report. By letter dated March 5, 2001, the SEC staff advised the Company that it intended to recommend that the SEC institute a proceeding against the Company. The Company continues to cooperate fully with the SEC staff in order to resolve this matter as expeditiously as practicable. Management of the Company does not expect that the resolution of this matter will have a material adverse effect on the Company's business, financial condition or results of operation. However, the Company is unable to predict with certainty the timing or ultimate outcome of this matter. The Company cannot be certain that it will not be subject to regulatory proceedings initiated by other regulatory agencies, and may experience difficulties in maintaining or obtaining all necessary licenses, permits and approvals required to conduct it business as a result of such proceedings. Regulatory agencies and self-regulatory organizations, such as the New York Stock Exchange, the Internal Revenue Service or state tax authorities, may seek to impose fines, penalties or other remedies against the Company. The imposition of any such fines, penalties or other remedies could have a material adverse effect on the Company. Changes in Key Personnel May Adversely Affect the Company The Company depends on the efforts of its executive officers and other key personnel. The loss of key personnel in the future could have a significant adverse effect on the Company's operations. Similarly, the Company has recently hired new executives and promoted or reassigned other personnel. The inability of these employees to effectively assume their new responsibilities could have an adverse effect on the Company's operations. 15 The Company is Subject to Risks Inherent in Investment in Real Estate Properties General Risks. Real property investments are subject to varying degrees of risk. Among the factors that may affect real estate values and the income generated from real estate investments are the following: . changes in the general economic climate; . local conditions (such as an over supply of or a reduction in demand for shopping center space in an area); . the quality and philosophy of management; . competition from other available space; . the ability of the owner to provide adequate maintenance and insurance; . variable operating costs (including real estate taxes); . costs associated with federal, state and local government laws and regulations (including, for example, environmental, zoning and other land use laws and regulations); . changes in business conditions and the general economy as they affect interest rate levels; . the availability of financing; and . potential liability under and changes in environmental and other laws. Dependence on Rental Income from Real Property. Because rental income from real property represents substantially all of the Company's total revenues, the inability of a significant number of the Company's tenants to meet their obligations to the Company, or the inability of the Company to lease on economically favorable terms a significant amount of space in its properties could adversely affect the Company. In the event of default by a tenant, the Company may experience delays and incur substantial costs in enforcing its rights as landlord. In addition, although circumstances may cause a reduction in income from the investment, there is generally no reduction in certain significant expenditures associated with ownership of real estate (such as mortgage payments, real estate taxes and maintenance costs). Operating Risks. The Company's shopping center properties are subject to all operating risks common to shopping center developments and are particularly subject to the risks of changing economic conditions that affect value-oriented retailers and the retail industry as a whole. Such risks include the following: . competition from other shopping center developments and developers; . excessive building of comparable properties or increases in unemployment in the areas in which the Company's properties are located (either of which might adversely affect occupancy or rental rates); . increases in operating costs due to inflation and other factors (which increases may not necessarily be offset by increased rents); . inability or unwillingness of lessees to pay rent increases; . changes in general economic conditions or consumer preferences that affect the demand for value-oriented retailers or that result in the merger of closings or relocations by such retailers; . the availability of debt and equity capital with favorable terms and conditions; . future enactment of laws regulating public places (including present and possible future laws relating to access by disabled persons); and . limitation by local rental markets of the extent to which rents may be increased to meet increased expenses without decreasing occupancy rates. Any of the above may adversely affect the Company's ability to make distributions or payments to holders of its securities. 16 Illiquidity of Real Estate. Equity real estate investments are relatively difficult to convert to cash and therefore may tend to limit the ability of the Company to react promptly in response to changes in economic or other conditions. Further, restrictions applicable to REITs may affect the Company's ability to sell properties without adversely affecting returns to holders of the Company's securities. Inability to Rent Unleased Space. Many factors, including certain covenants found in some leases with existing tenants that restrict the use of other space at a property, may affect the ability of the Company to rent unleased space. There can be no assurance that any tenant whose lease expires in the future will renew such lease or that the Company will be able to re-lease space on economically advantageous terms. In addition, the Company may incur costs in making improvements or repairs to a property that are required by a new tenant. Effect of Uninsured Loss on Performance. The Company carries comprehensive liability, fire, flood, extended coverage and rental loss insurance with policy specifications and insured limits that are customary for similar properties. Certain types of losses (such as from wars or earthquakes), however, are either uninsurable or insurable only at costs which are not economically justifiable. If an uninsured loss occurs, although the Company would continue to be obligated to repay any recourse mortgage indebtedness on the property, the Company may lose both its invested capital in, and anticipated profits from, the property. Competition. Numerous commercial developers, real estate companies and other owners of real estate (particularly those that operate in the states in which the Company's properties are located) compete with the Company in seeking land for development and tenants for properties. Certain of these competitors may have greater access to capital and other resources than the Company. Potential Environmental Liability and Cost of Remediation. As an owner of real property, the Company may become liable for the costs of removal or remediation of certain hazardous or toxic substances at, under or disposed of in connection with such property. Also, the Company may become liable for certain other potential costs relating to hazardous or toxic substances (including government fines and injuries to persons and adjacent property). Various federal, state and local environmental laws may impose liability without regard to whether the owner knew of, or was responsible for, the presence or disposal of such substances and may impose liability on the owner in connection with the activities of an operator of the property. The costs of any required remediation, removal, fines or personal or property damages and the Company's liability for these costs could exceed the value of the property. In addition, the presence of such substances, or the failure to properly dispose of or remediate such substances, may adversely affect the Company's ability to sell or rent such property or to borrow using such property as collateral, which, in turn, would reduce the Company's revenues. Americans with Disabilities Act. The Company's properties and any additional developments or acquisitions must comply with Title III of the Americans with Disabilities Act ("ADA"). Compliance with the ADA's requirements may require removal of structural, architectural or communication barriers to handicapped access and utilization in certain public areas of the Company's properties. Noncompliance could result in injunctive relief, imposition of fines or an award of damages to private litigants. If the Company must make changes to bring any of its properties into compliance with the ADA, expenses associated with such changes could adversely affect the Company's ability to make expected distributions. The Company believes that its competitors face similar costs to comply with the requirements of the ADA. The Company is Subject to Risks Inherent in Development and Acquisition Activities Developing or expanding existing shopping centers is an integral part of the Company's strategy for maintaining and enhancing the value of its shopping center portfolio. While the Company's policies with respect to its activities are intended to limit some of the risks otherwise associated with those activities (including not commencing construction on a project prior to obtaining a commitment from an anchor tenant), the Company and JDN Development nevertheless will incur certain risks, including risks related to 17 delays in construction and lease-up, costs of materials, financing availability, volatility in interest rates, labor availability and the failure of properties to perform as expected. The Company and JDN Development could also become unable to complete development projects because of the inability or unwillingness of third-party vendors such as contractors to provide services to the Company or JDN Development or the inability of the Company or JDN Development to obtain financing on economically feasible terms. 18 Item 2. Properties The Company's corporate headquarters are located in a building it owns at 359 East Paces Ferry Road, Suite 400, Atlanta, Georgia 30305. JDN Development leases space from the Company at that location. The Company and JDN Development coordinate most of their corporate activities from their headquarters, although the Company and JDN Development also maintain offices in Nashville, Tennessee; Charlotte, North Carolina; Denver, Colorado; Birmingham, Alabama; Morlton, New Jersey; and St. Louis, Missouri. As of December 31, 2000, the Company and JDN Development owned and operated, either directly or indirectly through affiliated entities, 111 shopping center properties totaling approximately 11.9 million square feet of gross leasable area. The following tables set forth information on these properties as of December 31, 2000: 19
Year Built/ Renovated Total Company Percent Location or Expanded GLA (1) GLA Leased Anchor Stores ---------------------------------------------------------------------------------------------------------------------------- ALABAMA Decatur 1965/1996 122,957 122,957 100.0% Food World, Handy TV & Appliance Gadsden 1979 131,046 85,343 97.0% Public Wholesale, Food World(2),Dollar General(Eckerd)(6) Opelika 1993/1995 306,229 306,229 100.0% Wal-Mart, Lowe's, Winn-Dixie, Goody's, CVS Opelika 1999 135,201 135,201 100.0% Lowe's Scottsboro 1999 223,758 40,568 100.0% Wal-Mart(2), Goody's COLORADO Denver 1997 244,644 244,644 100.0% King Soopers, Homeplace, OfficeMax, PetsMart Parker 2000 203,715 0 100.0% Wal-Mart(2) FLORIDA Bradenton 1999 9,611 9,611 100.0% - Brandon 1997 243,207 115,952 100.0% Lowe's(2), The Sports Authority, Linens 'N Things Brandon 1999 51,424 51,424 100.0% Publix Fort Walton Beach 1986 21,902 21,902 73.7% - Gulf Breeze 1998 198,462 29,832 100.0% Wal-Mart(2) Ocala 1984/1991 183,820 183,820 98.1% Wal-Mart, Winn-Dixie Pensacola 2000 55,795 55,795 100.0% Scotty's Tallahassee 1990/1994 265,304 109,055 95.2% Wal-Mart(2), Lowe's GEORGIA Alpharetta 1998 129,044 129,044 100.0% Lowe's Athens 2000 218,883 24,004 95.0% Wal-Mart(2) Buford 1998 362,136 156,806 100.0% Wal-Mart (2), Lowe's Canton 1983 127,800 127,800 92.1% Ingles, Staples Canton (4) 1996 238,032 39,006 92.8% Wal-Mart (2) Cartersville 1984 112,242 112,242 74.5% Ingles, Eckerd Chamblee 1976 175,972 175,972 93.6% Winn-Dixie, CVS Columbus 1999 242,661 119,661 100.0% Target(2), Goody's, Michael's, PetsMart Cumming 1997 631,167 297,220 97.2% Wal-Mart (2), Home Depot(2), Goody's, OfficeMax, Lowe's, PetsMart, Michael's Cumming 2000 8,002 8,002 100.0% - Cumming 1999 27,604 27,604 74.6% Pike Nurseries Douglasville 1999 250,054 117,207 91.6% Lowe's(2), Babies 'R Us, Best Buy Eastman 1990 94,669 53,365 100.0% Wal-Mart(2), Food Lion Fayetteville 1990 156,066 156,066 93.2% Cub Foods(Ingles)(6), Movies 10, CVS Fayetteville 2000 15,646 15,646 100.0% Eckerd Fayetteville 2000 133,662 5,001 100.0% Lowe's(2) Fort Oglethorpe 1973/1992 176,903 176,903 98.0% Kmart, Albertson's, CVS Griffin 1986 172,548 64,773 93.8% Wal-Mart(2), Winn-Dixie LaFayette 1990 78,426 78,426 67.9% Food Lion Lawrenceville 1998 10,128 10,128 100.0% CVS Lawrenceville 1990 89,066 89,066 97.4% Winn-Dixie, Eckerd Lawrenceville 1989/1995 322,262 322,262 96.5% Wal-Mart, Kroger, Georgia Theatre Lilburn 1990 73,953 73,953 100.0% Kroger Lilburn 1997 132,849 132,849 100.0% Lowe's Loganville 1995 91,199 91,199 100.0% Kroger Macon 1999 102,100 102,100 100.0% Kmart Madison 1989 106,102 106,102 93.4% Wal-Mart, Ingles, CVS, Wal-Mart Storage(4) Marietta 1997 151,049 151,049 100.0% Lowe's McDonough 1999 4,670 4,670 100.0% - Newnan 1995 426,732 156,506 100.0% Wal-Mart(2), Lowe's, Upton's(2) Peachtree City 1997 10,800 10,800 100.0% Pike Nurseries Peachtree City 1999 43,619 43,619 96.8% Staples Riverdale 1989 80,190 22,405 94.6% Kroger(2)
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Year Built/ Renovated Total Company Percent Location or Expanded GLA (1) GLA Leased Anchor Stores ----------------------------------------------------------------------------------------------------------- GEORGIA Stockbridge 1988 162,783 162,783 99.1% Kmart, Cub Foods(Ingles)(6) Stockbridge 1997 10,800 10,800 100.0% Pike Nurseries Stone Mountain 1999 131,000 131,000 100.0% Lowe's Suwanee 1997 54,302 43,394 87.1% Pike Nurseries, Eckerd(2) Tucker 1998 265,025 130,382 98.6% Wal-Mart(2), Kroger, Goody's Union City 1986 181,959 100,007 97.1% Wal-Mart(2), Ingles, Drug Emporium Warner Robins (3) 1997 416,528 196,344 98.2% Lowe's, Wal-Mart(2), TJ Maxx Woodstock 1995 170,942 170,942 100.0% Wal-Mart Woodstock 1997 255,860 132,849 100.0% Lowe's, Kmart(2) Woodstock 1997 11,020 11,020 100.0% Pike Nurseries ILLINOIS Decatur 1999 194,782 22,782 64.4% Wal-Mart (2) INDIANA Lafayette 2000 243,853 35,103 25.9% Wal-Mart (2) IOWA Davenport 1999 161,285 136,390 91.4% Borders Books & Music (2), Bed Bath & Beyond, KANSAS Topeka 1976 126,869 126,869 59.9% Bauersfeld's Grocery KENTUCKY Lexington 1998 346,430 29,793 100.0% Lowe's(2), Wal-Mart(2) Lexington 1998 204,836 24,878 83.1% Wal-Mart(2) Richmond 1992 229,317 158,045 100.0% Kmart, Lowe's(2), Food Lion, Rite Aid MICHIGAN Lansing 2000 185,316 50,119 100.0% Gander Mountain, Lowe's(2), Tractor Supply Company MISSISSIPPI Jackson 1996 326,324 107,785 95.2% Target(2), Home Depot(2), Office Depot, PetsMart, Fred's Jackson 1997 182,311 52,628 72.6% Office Depot, Home Depot(2) Oxford 2000 58,666 58,666 100.0% Kroger Tupelo 1999 149,357 41,357 72.9% Home Depot(2), PetsMart NORTH CAROLINA Asheville 1996 190,970 190,970 100.0% Dick's Sporting Goods, Circuit City, Carmike Cinemas, OfficeMax, Michael's, Goody's Fayetteville 1985 204,298 204,298 88.4% Circuit City(Hechinger)(6), Staples(Hechinger)(6), TJ Maxx, General Cinemas Greensboro 1999 244,901 122,651 96.6% BI-LO, PetsMart, Target(2) Hendersonville 1988/1995 170,792 170,792 100.0% Wal-Mart, Ingles Lumberton 1999 148,784 19,784 100.0% Lowe's(2) Rocky Mount 1999 68,060 68,060 100.0% PetsMart, TJ Maxx Winston Salem 1999 261,293 24,567 64.9% Wal-Mart(2), Carmike Cinemas(2) OHIO Burlington 1991/1995 356,181 159,359 100.0% Lowe's, Sam's Club(2), Wal-Mart(2) Gallipolis 1998 205,909 25,951 74.6% Wal-Mart(2) PENNSYLVANIA Monaca 1997/1999 237,960 237,960 98.8% Lowe's, Shop 'N Save, PetsMart Erie 2000 130,851 5,451 100.0% Target(2) SOUTH CAROLINA Charleston 1991 196,053 196,053 100.0% Wal-Mart, Food Lion Sumter 1987 158,294 19,144 100.0% Wal-Mart(2), Kroger(2)
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Year Built/ Renovated Total Company Percent Location or Expanded GLA (1) GLA Leased Anchor Stores ----------------------------------------------------------------------------------------------------------------------------- TENNESSEE Antioch 1990 51,534 51,534 93.8% Food Lion, Walgreen's Arlington 1993 64,225 64,225 100.0% Kroger Chattanooga 1992 214,581 214,581 100.0% Kmart, Albertson's Columbia 1993 68,952 68,952 91.7% Albertson's Farragut 1991 71,315 71,315 93.3% BI-LO Franklin 1983 186,005 18,005 100.0% Big Lots(2) Franklin 2000 223,251 3,501 100.0% Wal-Mart(2) Franklin 1990 54,412 54,412 92.3% Food Lion, Eckerd Goodlettsville 1987 84,683 84,683 85.8% Kroger Hendersonville 1999 133,147 133,147 100.0% Lowe's Murfreesboro 1972/1993 117,750 117,750 95.0% Albertson's Murfreesboro 1998 390,810 108,188 95.0% Target(2),TJ Maxx, Books-a-Million, Toys 'R Us(2), Lowe's(2) Nashville 1998 367,882 367,882 98.5% Wal-Mart, Lowe's TEXAS Ft. Worth 2000 129,924 0 100.0% Home Depot (2) Irving 1999 423,698 203,822 100.0% Kohl's, United Artists, Wal-Mart(2) McKinney 2000 120,712 120,712 79.4% Kohl's Nacogdoches 1999 57,413 57,413 92.7% Goody's, Staples VIRGINIA Chester 1977/1978 116,311 116,311 100.0% Ukrop's, Rite-Aid Lexington 1989/1997 201,229 201,229 98.3% Wal-Mart Lynchburg 1990 320,769 275,769 90.2% Goody's, Movies 10, Staples, Rugged Wearhouse, TJ Maxx, Circuit City, Toys'R Us(2) Midlothian 1985 79,410 79,410 92.2% Food Lion, CVS South Boston 1989/1997 200,405 200,405 100.0% Wal-Mart WISCONSIN Brookfield 1967 190,142 190,142 100.0% Marshall's Mega Store, Burlington Coat Factory, TJ Maxx, OfficeMax Brown Deer 1967 218,016 218,016 96.8% TJ Maxx, Kohl's, OfficeMax, Michael's, Pick 'N Save Storage Brown Deer 1989 143,372 143,372 100.0% Pick 'N Save, Marshall's Mega Store Milwaukee 1962 160,533 160,533 100.0% Kohl's, Pick 'N Save Milwaukee 1951 100,036 54,916 100.0% Movies 10(2),Walgreen's(2), Wal-Mart Storage(4) West Allis (5) 1968 383,967 383,967 88.1% Kohl's, Kohl's Storage, Pick 'N Save Storage, Marshall's Mega Store, Walgreen's, Pick 'N Save TOTAL 18,911,706 11,856,957 95.6% ============================================================================================================================
(1) Total GLA includes anchor stores that are not owned. (2) Anchor store that is not owned. (3) Lowe's store owned by JDN Development. Remainder of center owned by JDN Realty Corporation. (4) Short term license agreement. (5) Property owned by a joint venture which is approximately 82.5% owned by JDN Realty Corporation and approximately 17.5% owned by unaffiliated third parties. (6) Sublease tenant. 22
Percent of Percent of Number of Company Company Annualized Annualized Percent Location Centers GLA GLA Base Rent Base Rent Leased --------------------------------------------------------------------------------------------------- Alabama 5 690,298 5.8% 4,299,375 4.7% 99.6% Colorado 2 244,644 2.1% 3,692,874 4.0% 100.0% Florida 8 577,391 4.9% 4,384,377 4.8% 97.5% Georgia 43 4,290,977 36.2% 36,958,596 40.2% 96.3% Illinois 1 22,782 0.2% 185,851 0.2% 64.4% Indiana 1 35,103 0.3% 118,073 0.1% 25.9% Iowa 1 136,390 1.2% 1,198,435 1.3% 91.4% Kansas 1 126,869 1.1% 439,411 0.5% 59.9% Kentucky 3 212,716 1.8% 1,965,535 2.1% 98.0% Michigan 1 50,119 0.4% 428,526 0.5% 100.0% Mississippi 4 260,436 2.2% 1,764,409 1.9% 88.2% North Carolina 7 801,122 6.8% 6,280,751 6.8% 95.5% Ohio 2 185,310 1.6% 1,292,347 1.4% 96.4% Pennsylvania 2 243,411 2.1% 1,802,520 2.0% 98.8% South Carolina 2 215,197 1.8% 1,750,037 1.9% 100.0% Tennessee 13 1,358,175 11.5% 10,712,290 11.7% 96.6% Texas 4 381,947 3.2% 3,892,826 4.2% 92.4% Virginia 5 873,124 7.4% 4,898,416 5.3% 95.8% Wisconsin 6 1,150,946 9.7% 5,869,205 6.4% 95.4% ------------------------------------------------------------------------- TOTAL 111 11,856,957 100.0% 91,933,854 100.0% 95.6% ===================================================================================================
Company Leased Vacant Percent Summary GLA GLA (1) GLA Leased ------------------------------------------------------------------------------------------- Same Property (2) 9,107,076 8,728,038 379,038 95.8% Completed Construction 1,209,289 1,175,467 33,822 97.2% Under Construction 1,253,909 1,157,737 96,172 92.3% Redevelopment 286,683 275,483 11,200 96.1% ------------------------------------------------------- TOTAL (as of December 31, 2000) 11,856,957 11,336,725 520,232 95.6% =========================================================================================== Same Property Basis - December 31, 9,101,588 8,595,798 505,790 94.4% ===========================================================================================
(1) Leased GLA includes space for which the Company has a signed lease and the tenant is either open and/or paying rent. (2) Represents shopping centers which were owned by the Company as of both December 31, 1999 and December 31, 2000, excluding shopping centers classified as "Redevelopment". (3) The difference between 1999 and 2000 Same Property Company GLA is due to the addition of one square foot owned and non-owned outparcels. Additionally, two outparcels were leased in 2000. 23 Item 3. Legal Proceedings -------------------------- LITIGATION Since the Company's announcement of the undisclosed compensation arrangements and unauthorized transactions described in Part I, Item 1 of this report, a number of lawsuits have been filed against the Company. One or more of these suits also names as defendants JDN Development and certain current and former officers and directors of JDN Development and/or the Company. Certain class actions filed in federal court allege violations of the federal securities laws asserting that by failing to report the undisclosed compensation, unauthorized benefits and related party transactions to the public in the Company's financial statements, public filings, and otherwise, the defendants made or participated in making material misstatements or omissions which caused the plaintiffs to purchase the Company's common and preferred stock at artificially inflated prices. Included in the class actions is a lawsuit which names among the defendants certain underwriters involved in the preferred stock offering by the Company in 1998 (the "Preferred Stock Class Action"). The Preferred Stock Class Action raises allegations similar to those raised in the other class action cases, but it is based on purported misrepresentations or omissions in the Company's registration statement and prospectus in connection with the 1998 offering. The plaintiffs in these lawsuits seek compensatory damages of an indeterminate amount, interest, attorneys' fees, experts' fees and other costs and disbursements. On April 17, 2000, the federal court entered an order consolidating the various class actions in the United States District Court for the Northern District of Georgia ("Consolidated Class Actions"). On June 13, 2000, the federal court entered an order appointing Clarion-CRA Securities lead plaintiff and the law firm of Chitwood & Harley as lead plaintiff's counsel. On February 13, 2001, plaintiffs in the Preferred Stock Class Action purported to amend their complaint to add Waller, Lansden, Dortch & Davis, PLLC, the Company's securities counsel, as a defendant. The purported amendment was not filed by the lead plaintiff and the Company intends to file a motion to strike the purported amendment as improper. A class action lawsuit was also filed by the Company's shareholders against the Company, JDN Development, and four former officers and directors of these companies in the Superior Court of Fulton County, Georgia. The complaint contains substantially the same factual allegations asserted in the federal class actions, but purports to seek relief under state law for damages which these plaintiffs allege should have been paid to the class as dividends. The original complaint contained claims of common law fraud, conversion and purported violations of Georgia's Racketeer Influenced and Corrupt Organizations Act, but the fraud count has now been dropped by way of an amended complaint recently filed by the plaintiffs. The plaintiffs seek compensatory and punitive damages, attorneys' fees and expenses, interest and equitable relief. The case was removed to federal court, but has now been remanded back to Superior Court, where it is currently pending. Lawsuits have also been filed against the Company as a nominal defendant, as well as individual defendants J. Donald Nichols, Elizabeth L. Nichols, Craig Macnab, Philip G. Satre, William G. Byrnes, Haywood D. Cochrane, Jr., William B. Greene, Jeb L. Hughes, C. Sheldon Whittelsey, IV and William J. Kerley in the United States District Court for the Northern District of Georgia, Atlanta Division and in Fulton County Superior Court. Each of the named individuals is a current or former officer or director of the Company or JDN Development. A similar suit has now been filed in State Court of Fulton County naming Ernst & Young, LLP, the Company's auditors, in addition to the above-referenced defendants. The plaintiffs purport to bring these suits as derivative actions. The complaints allege that the individual defendants, from 1994 through 1999, violated certain duties in connection with the previously undisclosed compensation arrangements. The complaints also allege claims for breach of fiduciary duty, abuse of control, waste of corporate assets, unjust enrichment and gross mismanagement. The plaintiffs, on behalf of the Company, seek injunctive relief, compensatory and punitive damages and disgorgement of all profits and gains by the individual defendants. The Company believes that it has meritorious defenses to the claims brought in the lawsuits described above, but there can be no assurance that such defenses will be successful or that the lawsuits will 24 not have a material adverse effect on the Company's financial position, results of operations and cash flows. In addition, the timing of the final resolution of these proceedings is uncertain. The Company is also subject to a formal order of investigation initiated by the SEC as of August 2, 2000. Pursuant to this order, the Company has voluntarily provided certain documents and other information to the SEC regarding the compensation arrangements, unauthorized benefits and related party transactions discussed in Part I of this report. By letter dated March 5, 2001, the SEC staff advised the Company that it intended to recommend that the SEC institute a proceeding against the Company. The Company continues to cooperate fully with the SEC staff in order to resolve this matter as expeditiously as practicable. Management of the Company does not expect that the resolution of this matter will have a material adverse effect on the Company's business, financial condition or results of operation. However, the Company is unable to predict with certainty the timing or ultimate outcome of this matter. In an unrelated lawsuit, on February 2, 2000, Dogwood Drive L.L.C., ("Dogwood") filed suit against the Company and WHF, Inc. ("WHF"), a wholly-owned subsidiary of JDN Development, which, until April 1999, owned a 72% interest in Dogwood and served as the operating member of the entity. The suit was filed in the Superior Court of Gwinnett County, Georgia. The complaint asserts, among other things, breach of fiduciary duty against WHF and improper receipt of funds by the Company. The Company believes that it and WHF have meritorious defenses to the claims and intends to vigorously defend the suit. On April 28, 2000, Lake Lucerne Estates Civic Club, Inc., a nonprofit homeowners association located in Gwinnett County, Georgia, and a number of individual plaintiffs, filed suit against JDN Development, Lowe's Companies, Inc., and Haygood Contracting, Inc. The suit was filed in the Superior Court of Fulton County, Georgia. The complaint asserts trespass, nuisance and negligence against JDN Development in connection with the development of a shopping center anchored by Lowe's. JDN Development has filed defensive pleadings denying liability, and discovery is now being conducted by both sides. The Company is from time to time a party to other legal proceedings which arise in the ordinary course of its business. The Company is not currently involved in any litigation in addition to the lawsuits described above the outcome of which would, in management's judgement based on information currently available, have a material adverse effect on the results of operations or financial condition of the Company, nor is management aware of any such litigation threatened against the Company. INDEMNIFICATION AND ADVANCES The Company's Charter provides that the Company shall indemnify and advance expenses to its officers and directors to the fullest extent permitted by law for any liability arising from claims against them in their capacities as such unless (a) the indemnitee is adjudged to be liable to the Company in a proceeding by or in the right of the Company, (b) the indemnitee is charged with receipt of improper personal benefit, whether or not involving action in the indemnitee's official capacity, and the indemnitee is adjudged to be liable on the basis that personal benefit was improperly received, or (c) it is established that (i) the act or omission of the indemnitee was material to the matter giving rise to the proceeding and the act or omission was committed in bad faith or was the result of active and deliberate dishonesty, or (ii) the indemnitee actually received an improper personal benefit in money, property or services. In addition to the rights provided pursuant to state law and the Company's Charter, certain current and former officers and directors of the Company have contractual rights to indemnification and advancement of expenses which are identical to the rights provided by state law and the Company's Charter, pursuant to an indemnification agreement between each of these individuals and the Company. Each such indemnification agreement provides that the Company shall advance expenses to the indemnitee in advance of the final disposition of a lawsuit upon receipt of a written undertaking by or on behalf of the indemnitee to repay any such amount if it is ultimately determined that the indemnitee is not entitled to indemnification under the terms of the Agreement. 25 Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the quarter ended December 31, 2000. 26 PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters The Company's common shares are traded on the New York Stock Exchange ("NYSE") under the symbol "JDN." The following table sets forth the high and low trading prices per common share and the distributions declared per common share for the periods indicated, as reported by the NYSE: Distributions Declared Per High Low Share ---------------- ----------------- ------------------ 1999 First Quarter $ 23.1250 $ 19.3750 $ 0.3600 Second Quarter 23.3750 19.0000 0.3950 Third Quarter 22.1875 19.5000 0.3950 Fourth Quarter 20.3750 14.8750 0.3950 2000 First Quarter $ 18.0625 $ 8.0000 $ 0.3950 Second Quarter 13.0000 8.0000 0.3000 Third Quarter 12.0000 10.0000 0.3000 Fourth Quarter 11.6250 9.0000 0.3000 The Company intends to pay regular quarterly distributions to common shareholders. Future distributions will be declared and paid at the discretion of the Board of Directors and will depend upon cash generated by operating activities, the Company's financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Code, distributions to the Company's preferred shareholders, restrictions imposed by the Company's credit agreements and such other factors as the Board of Directors deems relevant. Distributions by the Company to the extent of its current and accumulated earnings and profits for federal income tax purposes are taxable to shareholders as ordinary dividend income. Distributions in excess of earnings and profits generally are treated as a non-taxable return of capital. Such distributions have the effect of deferring taxation until the sale of a shareholder's common stock. In order to maintain its qualification as a REIT, the Company must make annual distributions to shareholders of at least 95% (or 90% after December 31, 2000) of its taxable income (excluding any net capital gain). Under certain circumstances, which management does not expect to occur, the Company could be required to make distributions in excess of cash available for distributions in order to meet such requirements. The 2001 Credit Agreement restricts the amount of distributions to common and preferred shareholders to 95% of the Company's funds from Operations (as defined in the 2001 Credit Agreement). The Company's Dividend Reinvestment and Stock Purchase Plan has been suspended. As of March 16, 2001, there were approximately 441 holders of record of the Company's common stock and approximately 12,260 beneficial holders. 27 Item 6. Selected Financial Data The following table contains selected historical financial data for each of the years in the five year period ended December 31, 2000. You should read this table in conjunction with the consolidated financial statements and related notes included elsewhere in this report and "Management Discussion and Analysis of Financial Condition and Results of Operation". 28 Selected Financial Data
Years Ended December 31, ---------------------------------------------------------------------------- (dollars in thousands, except per share data) 2000 1999 1998 1997 1996 ----------------------------------------------------------------------------------------------------------------------------------- Operating Data Minimum and percentage rents $ 91,438 $ 92,964 $ 71,191 $ 43,346 $ 32,933 Recoveries from tenants 12,705 13,205 10,003 4,512 3,475 Other revenue 1,907 69 117 147 215 ---------------------------------------------------------------------------- Total revenues 106,050 106,238 81,311 48,005 36,623 Operating and maintenance expenses 8,736 8,338 6,439 3,201 2,586 Real estate taxes 6,730 6,979 5,316 2,540 1,817 General and administrative expenses 8,574 8,130 7,105 4,265 3,367 Corporate investigation and legal costs 3,159 - - - - Severence expense 3,711 - - - - Impairment losses 18,882 90 - - - Depreciation and amortization 20,735 22,047 16,824 10,130 7,786 Tenant settlement expense - 5,610 - - - ---------------------------------------------------------------------------- Total expenses 70,527 51,194 35,684 20,136 15,556 Income from operations 35,523 55,044 45,627 27,869 21,067 Interest expense, net (25,220) (18,423) (9,454) (4,856) (5,598) Income before extraordinary items 23,497 53,051 40,680 25,489 16,230 Net income 23,497 53,051 40,680 19,549 16,230 Net income attributable to common shareholders 18,809 48,363 39,339 19,549 16,230 Other Data Funds from operations (1) $ 37,745 $ 52,193 $ 56,135 $ 35,957 $ 24,231 Cash provided by (used in) Operating activities 52,656 58,796 56,060 41,577 26,070 Investing activities (33,698) (148,368) (352,096) (204,578) (83,983) Financing activities (11,757) 91,648 284,597 171,731 57,513 Ratio of earnings to fixed charges 0.99 1.73 2.39 2.49 2.25 Per Share Data (2) Net income per common share Basic $ 0.58 $ 1.46 $ 1.28 $ 0.85 $ 0.98 Diluted 0.58 1.44 1.26 0.83 0.97 Dividends per common share 1.30 1.55 1.41 1.32 1.25 December 31, ---------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ----------------------------------------------------------------------------------------------------------------------------------- Supplemental Data Shopping center properties 111 109 91 68 48 Gross leasable area (square feet in thousands) 11,857 12,945 12,098 8,327 6,135 Percent of gross leasable area leased 95.6% 95.2% 96.4% 97.1% 98.2% December 31, ---------------------------------------------------------------------------- (dollars in thousands) 2000 1999 1998 1997 1996 ----------------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data Shopping center properties before accumulated depreciation $ 879,715 $ 962,897 $ 844,041 $ 533,133 $ 331,927 Shopping center properties, net 799,602 891,346 787,948 494,827 303,954 Total assets 1,083,963 1,116,795 965,171 596,660 370,637 Unsecured debt 234,697 469,635 383,092 203,011 - Total debt 574,141 570,882 425,563 216,602 141,882 Total liabilities and minority interest 597,354 600,966 450,877 228,166 145,447 Shareholders' equity 486,609 515,829 514,294 368,494 225,190
(1) Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts, Inc. to mean net income, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from debt restructuring and sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. The Company believes that FFO is helpful to investors as a measure of the performance of an equity REIT because, along with cash provided by operating activities, investing activities and financing activities, it provides investors with an indication of the Company's ability to make capital expenditures and to fund other cash needs. The Company's method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash provided by operating activities, as defined by GAAP, should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of operating performance and is not indicative of cash available to fund all cash flow needs, including the Company's ability to make cash distributions. (2) Earnings per share amounts prior to 1998 have been restated to reflect a 3-for-2 common stock split effected in the form of a stock dividend in June 1998. 29 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the financial statements and notes thereto, the risk factors and the forward-looking statements discussion appearing elsewhere in this report. Overview JDN Realty Corporation is a real estate company specializing in the development and asset management of retail shopping centers. When referred to herein, the term "Company" represents JDN Realty Corporation and its wholly owned or majority-owned subsidiaries, other than JDN Development Company, Inc. ("JDN Development"). As of December 31, 2000, the Company and JDN Development owned and operated, either directly or indirectly through affiliated entities, 111 shopping center properties containing approximately 11.9 million square feet of gross leasable area ("Company GLA") located in 19 states, with the highest concentrations in Georgia, Tennessee, and Florida. The principal tenants of the Company's and JDN Development's properties include Lowe's, Wal-Mart and TJX companies. As of December 31, 2000, the Company and JDN Development, either directly or indirectly through affiliated entities or joint ventures, had 25 projects under construction. The Company was incorporated under Maryland law in 1993 and has elected to be treated as a real estate investment trust ("REIT") for federal income tax purposes. JDN Development was formed in December 1994 to engage primarily in the development of shopping center properties. In order to comply with federal income tax law requirements, JDN Development was initially structured such that the Company owned 99% of the economic interest while the remaining 1% economic interest was owned by a former executive officer of the Company. Recent legislation amending the tax laws applicable to REITs permitted a change in the ownership structure of JDN Development. Effective January 1, 2001, the Company effected this change by acquiring 100% of the ownership of JDN Development. As a result of this acquisition, effective January 1, 2001 the Company has changed its accounting for JDN Development from the equity method to the consolidated method. In addition, the Company and JDN Development elected taxable REIT subsidiary status for JDN Development. See "Federal Income Tax Legislative Developments" below. Because it is not a REIT, JDN Development may engage in certain activities in which the Company cannot, such as sales of all or portions of development projects and third-party fee development. While taxable REIT subsidiaries may engage in a variety of activities unrelated to real estate, the Company does not expect the activities of JDN Development to expand significantly beyond the development activities in which JDN Development has historically engaged. As of December 31, 2000, the Company had invested $4.0 million in JDN Development in the form of equity capital, $134.6 million in the form of secured notes receivable and $58.9 million in the form of unsecured advances. As of December 31, 2000, the Company guaranteed one loan of JDN Development in the amount of $3.3 million. The loan was secured by property owned by JDN Development and was paid in full in February 2001. Results of Operations Comparison of the Year Ended December 31, 2000 to the Year Ended December 31,1999. During 2000 and 1999, the Company began operations at 40 shopping center properties which it developed totaling 3.2 million square feet (the "00/99 Development Properties"). During 2000 and 1999, the Company sold 16 shopping center properties totaling 3.5 million square feet space (the "00/99 Disposition Properties"). As indicated below, the Company's results of operations were affected by the 00/99 Development Properties and the 00/99 Disposition Properties. Minimum and percentage rents decreased $1.5 million or 1.6% to $91.4 million for the year ended December 31, 2000 from $93.0 million for the same period in 1999. Minimum and percentage 30 rents increased by $12.4 million as a result of the 00/99 Development Properties. This increase is offset by a $13.5 million decrease related to the 00/99 Disposition Properties. Minimum and percentage rents also decreased as a result of a write-off of straight line rent for a theater tenant at one of the Company's shopping center properties in the amount of $325,000 and adjustments made to the allowance for doubtful accounts. Recoveries from tenants decreased $500,000 or 3.8% to $12.7 million for the year ended December 31, 2000 from $13.2 million for the same period in 1999. Recoveries from tenants increased by $743,000 as a result of the 00/99 Development Properties. This increase is offset by a $1.4 million decrease related to the 00/99 Disposition Properties. The remaining increase relates to net increases in recoveries from tenants at existing properties caused by net increases in recoverable expenses. Other revenue increased $1.8 million to $1.9 million for the year ended December 31, 2000 from $69,000 for the same period in 1999. This increase resulted primarily from lease termination fees at two of the Company's operating properties. Operating and maintenance expenses increased $398,000 or 4.8% to $8.7 million for the year ended December 31, 2000 from $8.3 million for the same period in 1999. Operating and maintenance expenses increased by $826,000 as a result of the 00/99 Development Properties. This increase is offset by a $738,000 decrease related to the 00/99 Disposition Properties. The remaining increases are a result of increased operating and maintenance expenses at existing properties. Real estate taxes decreased $249,000 or 3.6% to $6.7 million for the year ended December 31, 2000 from $7.0 million for the same period in 1999. Real estate taxes increased by $398,000 as a result of the 00/99 Development Properties. This increase is offset by a $749,000 decrease related to the 00/99 Disposition Properties. The remaining increase relates to reductions in real estate taxes at existing properties. General and administrative expenses increased $444,000 or 5.5% for the year ended December 31, 2000 over the same period in 1999. General and administrative expenses as a percent of minimum and percentage rents increased to 9.4% for the year ended December 31, 2000 from 8.7% for the year ended December 31, 1999. This increase is primarily a result of a reduction in capitalized compensation and other costs related to development projects of approximately $1.1 million offset by the forfeiture and reversal of previously expensed equity awards associated with the registration of two executive officers. Corporate investigation and legal costs incurred during the year ended December 31, 2000 of $3.2 million represent the professional fees incurred by the Company primarily as a result of an investigation into undisclosed transactions and lease discrepancies, the investigation by the SEC and the class action lawsuits. Severance expense incurred during the year ended December 31, 2000 of $3.7 million represents payments to certain former executive officers of the Company who resigned during the year ended December 31, 2000. Impairment losses on shopping centers held for sale for the year ended December 31, 2000 of $18.9 million represent charges to reduce the basis of shopping centers and land held for sale to their estimated fair value less costs to sell, and to reduce other assets to their net realizable value (see "Impairment Losses" below). Depreciation and amortization expense decreased $1.3 million or 6.0% to $20.7 million for the year ended December 31, 2000 from $22.0 million for the same period in 1999. Depreciation and amortization expense increased by $2.4 million as a result of the 00/99 Development Properties. This increase is offset by a $3.7 million decrease related to the 00/99 Disposition Properties. Interest expense, net of capitalized amounts, increased $6.8 million or 36.9% to $25.2 million for the year ended December 31, 2000 from $18.4 million for the same period in 1999. This increase results from an increase in average debt balances between 2000 and 1999, an increase in interest rates on the 31 Company's lines of credit and term loan and an increase in amortization of deferred loan costs related to fees and expenses associated with amending its credit facilities (see "Liquidity and Capital Resources" below). Other income, net decreased $138,000 or 7.6% to $1.7 million for the year ended December 31, 2000 from $1.8 million for the same period in 1999. This decrease results from the write-off of certain deferred costs related to the modification of the Company's Credit Agreements (see "Liquidity and Capital Resources" below) and a decrease in interest income recorded by the Company. Equity in net loss of unconsolidated entities decreased $825,000 or 21.7% to $3.0 million for the year ended December 31, 2000 from $3.8 million for the same period in 1999. The net loss results primarily from the following: (1) a decrease in rental revenues as a result of the sale of two operating assets; (2) impairment losses totaling $2.2 million recognized on land held for sale; (3) carrying costs associated with an increase in land held for sale or future development; and (4) the recording of a valuation allowance of $5.4 million on deferred tax assets at JDN Development. These decreases and charges were offset by operating increases in gains on land sales and reductions in expenses. Net gain on real estate sales for the year ended December 31, 2000 of $14.7 million represents a net gain on the sale of 11 shopping center properties and two vacant parcels of land. Net gain on real estate sales for the year ended December 31, 1999 of $18.6 million represents a net gain on the sales of five shopping center properties. Comparison of the Year Ended December 31, 1999 to the Year Ended December 31,1998. During 1999 and 1998, the Company began operations at 44 shopping center properties which it developed totaling 4.7 million square feet (the "99/98 Development Properties"). During 1998, the Company acquired 11 shopping center properties from third parties totaling 2.1 million square feet of gross leasable area (the "1998 Acquisition Properties"). During 1999, the Company sold five shopping center properties totaling 1.2 million square feet. Of the five shopping center properties sold in 1999, three were fully operational during all of 1999 and 1998 (the "1999 Disposition Properties") and two were under development and operational for only a portion of 1998, and are included in the 99/98 Development Properties. As indicated below, the Company's results of operations were affected by the 99/98 Development Properties, the 1998 Acquisition Properties and the 1999 Disposition Properties. Minimum and percentage rents increased $21.8 million or 30.7% to $93.0 million for the year ended December 31, 1999 from $71.2 million for the same period in 1998. Of this increase, $17.2 million relates to the 99/98 Development Properties and $4.9 million relates to the 1998 Acquisition Properties. These increases are offset by a $803,000 decrease related to the 1999 Disposition Properties. The remaining increase relates to an increase in minimum and percentage rents at existing properties. Recoveries from tenants increased $3.2 million or 32.0% to $13.2 million for the year ended December 31, 1999 from $10.0 million for the same period in 1998. Of this increase, $2.0 million relates to the 99/98 Development Properties and $1.6 million relates to the 1998 Acquisition Properties. These increases are offset by a $54,000 decrease related to the 1999 Disposition Properties and a decrease in recoveries from tenants caused by a net decrease in recoverable expenses at existing properties caused in part by the separate tax platting of two anchor tenant tracts in 1999 on which the Company paid the taxes in 1998 and billed back to the tenants. Other revenue decreased $48,000 or 41.0% to $69,000 for the year ended December 31, 1999 from $117,000 for the same period in 1998. This decrease is the result of a reduction in revenues associated with managing and leasing fewer properties for third-party owners. Operating and maintenance expenses increased $1.9 million or 29.5% to $8.3 million for the year ended December 31, 1999 from $6.4 million for the same period in 1998. Of this increase, $811,000 relates to the 99/98 Development Properties, $1.1 million relates to the 1998 Acquisition Properties and $9,000 relates to the 1999 Disposition Properties. Operating and maintenance expenses at existing properties remained relatively constant over the years ended December 31, 1999 and 1998. 32 Real estate taxes increased $1.7 million or 31.3% to $7.0 million for the year ended December 31, 1999 from $5.3 million for the same period in 1998. Of this increase, $1.3 million relates to the 99/98 Development Properties and $636,000 relates to the 1998 Acquisition Properties. These increases are offset by a $33,000 decrease related to the 1999 Disposition Properties and a decrease in real estate taxes at existing properties due to the separate tax platting of two anchor tenant tracts in 1999 on which the Company paid the taxes in 1998 and billed back to the tenants. General and administrative expenses increased $1.0 million or 14.4% to $8.1 million for the year ended December 31, 1999 from $7.1 million for the same period in 1998. General and administrative expenses as a percent of minimum and percentage rents decreased to 8.7% for the year ended December 31, 1999 from 10.0% for the same period in 1998. The decrease in general and administrative expenses as a percentage of minimum and percentage rents is a result of certain cost containing programs initiated at the Company. The increase in absolute dollars primarily reflects the cost of additional employees and other expenses associated with the increased number of properties owned and operated by the Company. Depreciation and amortization expense increased $5.2 million or 31.1% to $22.0 million for the year ended December 31, 1999 from $16.8 million for the same period in 1998. Of this increase, $3.7 million relates to the 99/98 Development Properties and $1.2 million relates to the 1998 Acquisition Properties. These increases are offset by a $1,000 decrease related to the 1999 Disposition Properties. The remaining increase primarily relates to furniture and fixtures purchased in connection with the Company's move to new corporate offices in 1998. Interest expense, net of capitalized amounts, increased $8.9 million or 94.9% to $18.4 million for the year ended December 31, 1999 from $9.5 million for the same period in 1998. This increase results primarily from an increase in average debt balances between 1999 and 1998 due primarily to a decrease in common and preferred stock equity offerings during the period. Other income, net increased $873,000 or 92.4% to $1.8 million for the year ended December 31, 1999 from $945,000 for the same period in 1998. This increase results primarily from certain non-recurring fees relating to structuring a real estate transaction, an increase in interest income received from third-party notes receivable and fewer abandoned acquisition opportunities leading to a decrease in related expenses. Equity in net income (loss) of unconsolidated entities decreased $7.2 million to ($3.8) million for the year ended December 31, 1999 from $3.4 million for the same period in 1998. This decrease is attributable to the pre-tax effects of (1) the tenant settlement of $7.5 million discussed below, (2) the write-off of $5.6 million in abandoned pre-development costs, (3) $3.0 million in impairment losses related to parcels of land held for sale offset by (a) increases in land sales and (b) brokerage commissions and third-party property management fees earned by a subsidiary of JDN Development acquired in 1999. Minority interest in net income of consolidated subsidiary increased $19,000 or 9.6% to $215,000 for the year ended December 31, 1999 from $196,000 for the same period in 1998. This increase primarily results from an increase in net income allocated to the third-party investors in consolidated limited partnerships. Net gain on real estate sales for the year ended December 31, 1999 of $18.6 million represents net gains on the sale of five shopping center properties during 1999. Net gain on real estate sales for the year ended December 31, 1998 of $379,000 represents a gain on the sale of two parcels of land in 1998. Tenant Settlement In April 2000, the Company announced the discovery of discrepancies in cost and other information underlying certain leases and real estate sales agreements with the Company's two largest tenants, Wal-Mart and Lowe's (collectively, the "Major Anchor Tenants"). The Company determined that these discrepancies may have affected the negotiation of rental rates and purchase prices paid by the Major Anchor Tenants on transactions with the Company and JDN Development. After further investigation and discussions with the Major Anchor Tenants, the Company, JDN Development and the 33 Major Anchor Tenants entered into an Estoppel and Release on May 23, 2000 (the "Settlement Agreement") which settled potential claims resulting from these discrepancies. Material terms of the Settlement Agreement included the following: . The Company, JDN Development and the Major Anchor Tenants reaffirmed the terms of all existing leases without modification, restatement or adjustment; . The Company, JDN Development and the Major Anchor Tenants reaffirmed all previously consummated real estate sales transactions without modification, restatement or adjustment; and . The Company and JDN Development agreed to pay the Major Anchor Tenants an aggregate of $10 million, $5 million to each of the Major Anchor Tenants. As an inducement to enter into the Settlement Agreement, JDN Development agreed to pay an additional $350,000 to Lowe's. As a further inducement to enter into the Settlement Agreement, the Company and JDN Development agreed to reduce the selling price by $2.75 million of three Supercenters which the Company and JDN Development intended to sell to Wal-Mart. These Supercenter sales closed in June 2000. The Company and JDN Development recorded all charges related to this matter in the fourth quarter of 1999. Impairment Losses During 2000, the Company recorded impairment losses of approximately $18.9 million and JDN Development recorded impairment losses of $5.2 million. Of the amount the Company recorded, approximately $9.8 million relates to operating shopping centers that are being actively marketed for sale or already sold, approximately $5.5 million relates to operating shopping centers currently in use, $2.1 million relates to non-operating real estate and $1.5 million relates to an impaired mortgage note receivable. All amounts recorded at JDN Development relate to non-operating real estate. Additional impairment losses may be recognized in the future as the Company looks to the disposition of operating shopping center properties and the sale of various parcels of land adjacent to its operating properties as a significant source of funding development activities. Funds From Operations Funds from operation ("FFO") is defined by the National Association of Real Estate Investment Trusts, Inc. to mean net income, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from debt restructuring and sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. The Company believes that FFO is helpful to investors as a measure of the performance of an equity REIT because, along with cash provided by operating activities, investing activities and financing activities, it provides investors with an indication of the Company's ability to make capital expenditures and to fund other cash needs. The Company's method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash provided by operating activities as defined by GAAP, should not be considered an alternative to net income (determined in accordance with GAAP) as an indication of operating performance and is not indicative of cash available to fund all cash flow needs, including the Company's ability to make cash distributions. The Company has presented below the calculation of FFO for the periods indicated: 34
Years Ended December 31, 2000 1999 1998 ------------------------------------------------ (in thousands) Net income attributable to common shareholders $ 18,809 $ 48,363 $ 39,339 Depreciation of real estate assets 19,181 20,739 15,854 Amortization of tenant allowances and tenant improvements 258 220 178 Amortization of deferred leasing commissions 564 531 283 Impairment losses on shopping centers held for sale 15,409 90 - Net gain on real estate sales (14,712) (18,627) (379) Adjustments related to activities in unconsolidated entities (1,764) 877 860 ------------------------------------------------ FFO $ 37,745 $ 52,193 $ 56,135 ================================================
Development The Company's primary business has historically been to develop shopping centers anchored by retailers such as, for example, Lowe's and Wal- Mart. The Company and JDN Development have also historically developed for other retailers such as Kohl's, Kroger and PetsMart. Further, the Company and JDN Development are involved in development activities with 10 different secondary anchor tenants such as Best Buy and Bed, Bath and Beyond. The Company and JDN Development expect to continue to pursue development opportunities with retailers with which they have traditionally worked while broadening the tenant and product mix to include grocers and grocery anchored shopping centers. Management intends to become more selective in the development projects it approves with a focus on location characteristics in high barrier-to-entry markets with demographic attributes that allow for net operating income growth over time. As a result of management adopting more selective criteria when considering new developments, along with other factors, such as cost of capital, management changes and changing relations with retail customers, the Company expects that the volume of new development projects will decrease over the next 12 to 18 months. This reduction in activity may cause the rate of historical growth in revenues to decrease and income from land sales and development fees at JDN Development to decrease. These decreases could affect the Company's ability to increase its dividend to shareholders from its current level. Leasing and Tenant Information The properties of the Company and JDN Development were 95.8% leased as of December 31, 2000, 95.2% leased as of December 31, 1999 and 96.4% leased as of December 31, 1998. The increase from 1999 to 2000 is primarily attributable to the leasing of a portion of a previously vacant anchor space at one of the Company's shopping center properties. The decrease from 1998 to 1999 is primarily attributable to the termination of an anchor tenant lease at one of the Company's shopping center properties, and to vacancies at newly developed shopping centers and shopping centers with unleased space acquired by the Company as redevelopment opportunities. The 61 properties that the Company and JDN Development owned and operated for all of 1999 and 2000 were 96.8%, 95.4% and 96.8% leased as of December 31, 2000, 1999 and 1998, respectively. The Company derives the majority of its rental income and development activities from the retail industry; and as such, is exposed to adverse trends or events affecting segments of the retail 35 industry. As of December 31, 2000, the Company and JDN Development were exposed to the following segments of the retail industry: Percentage of Type Annualized Base Rent --------------------------------------------------------------------------- Home Improvement 17.9% Supermarket 13.8% Discount 9.0% Restaurant 8.1% Discount Department Stores 4.3% Apparel 3.9% Home Goods 3.6% Theatre 3.2% Office Supplies 2.9% Drug Store 2.3% The Theatre segment is currently experiencing the fallout of aggressive expansion of new, multi-screen facilities. Recently, several companies' operating theatres have filed for protection under Chapter 11 of the bankruptcy code. Of the Company's six leases with theatre companies, three are with companies who have filed for Chapter 11 protection representing 2.5% of Annualized Base Rent. As of March 16, 2001, two of these leases have been modified for rental rate reductions totaling approximately $1.1 million, one of which has been approved by the bankruptcy court. The third lease also has not been assumed, but currently has no provision for rental rate reduction. Rejection of one or more of these leases or modification resulting in rate reductions could have an adverse effect on the Company's results of operations in future periods. Liquidity and Capital Resources Sources and Uses of Funds ------------------------- Historically, the Company's primary sources of funds have been cash provided by operating activities, proceeds from lines of credit, term debt, secured mortgage notes payable, debt and equity offerings, and shopping center sales. The Company's primary uses of funds have historically been development, redevelopment and acquisition of shopping center properties, distributions to shareholders, repayment of outstanding indebtedness, repurchase of common stock, scheduled debt amortization, leasing costs and capital improvements to its existing shopping center properties. The Company generally has used cash provided by operating activities to fund its distributions to shareholders, capital improvements to existing properties and scheduled debt amortization. The Company has used proceeds from its lines of credit, term debt, secured mortgage notes payable, debt and equity offerings and shopping center sales to repay outstanding indebtedness, to repurchase common stock and to fund its ongoing development, redevelopment and acquisition activities. During 2000, the Company incurred $33.6 million in development costs, invested $19.9 million in partnerships that were formed to develop shopping center properties and advanced $76.1 million to JDN Development to fund its development and redevelopment activities. To fund these development activities, the Company and JDN Development sold all or portions of 13 shopping centers and two vacant parcels of land for net proceeds of approximately $99.5 million and $18.8 million respectively. In addition, the Company utilized approximately $40.5 million of the proceeds held by a qualified intermediary in connection with a Section 1031 tax-free deferred exchange to fund its development activities. 36 During the first quarter of 2000, the Company repurchased a total of 423,500 shares of its common stock for approximately $6.8 million at an average price of approximately $16.13 per share under a share repurchase program that has since been discontinued. Indebtedness ------------ As of December 31, 2000, the Company's indebtedness consisted of the following:
Percent Principal Interest Maturity of Total Months to Balance Rate Date Indebtedness Maturity -------------- ----------- ----------- ------------- ----------- (in thousands) Fixed Rate Mortgage note payable - Denver, Colorado $ 21,627 6.81% 17-Jul-01 3.7% 7 MandatOry Par Put Remarketed Securities (1) 75,000 6.67%(2) 31-Mar-03 13.1% 27 Mortgage note payable- Richmond, Kentucky 5,990 8.00%(3) 1-Dec-03 1.0% 35 Seven Year Notes 74,873 7.10%(2) 1-Aug-04 13.0% 43 Ten Year Notes 84,824 7.23%(2) 1-Aug-07 14.8% 79 Mortgage note payable- Milwaukee, Wisconsin 4,471 7.75% 1-Aug-09 0.8% 103 Mortgage note payable- Jackson, Mississippi 6,696 9.25%(4) 1-Mar-17 1.2% 194 Mortgage note payable- Marietta, Georgia 10,746 7.66%(2) 15-Nov-17 1.9% 203 Mortgage note payable- Lilburn, Georgia 12,420 6.70%(2) 10-Feb-18 2.2% 205 Mortgage note payable- Woodstock, Georgia 11,679 6.55%(2) 15-Apr-18 2.0% 208 Mortgage note payable- Hendersonville, Tennessee 10,550 7.66%(2) 15-Jan-19 1.8% 217 Mortgage note payable- Alpharetta, Georgia 13,265 6.62%(2) 15-Apr-19 2.3% 220 -------------- ----------- -------------- ----------- 332,141 7.09% 57.8% 80 Floating Rate (6) Secured Term Loan 100,000 10.67%(5) 14-Jun-01 17.4% 5 Secured Line of Credit 142,000 10.92%(5) 14-Jun-01 24.8% 5 -------------- ----------- -------------- ----------- 242,000 10.82% 42.2% 5 -------------- ----------- -------------- ----------- $ 574,141 8.66% 100.0% 48 ============== =========== ============== ===========
(1) Represents notes payable with a stated rate of 6.918% and a stated maturity date of March 31, 2013. These notes are subject to mandatory tender on March 31, 2003. (2) Represents stated rate plus amortization of deferred loan costs. (3) The interest rate is adjusted on December 1 of each year. (4) The note can be prepaid after March 1, 2002 with 90 days written notice to the Lender. The Company will not incur any prepayment penalties in association with the loan prepayment after this date. (5) Represents stated rate of LIBOR plus 2.25% plus amortization of deferred loan costs. (6) Floating rate debt exposure is limited through investment in financial derivatives. As of December 31, 2000, $150 million of the $232 million was hedged with a LIBOR cap of 7.25% on $100 million which was terminated by the Company upon closing of the 2001 Credit Agreement and a $50 million swap with a fixed rate of 6.485% which expired on January 1, 2001. As a result of the undisclosed compensation and related party transactions discussed elsewhere in this report, from April 14, to May 23, 2000 the Company was deemed to be in default under the credit agreements related to its then existing primary line of credit and term loan. On May 23, 2000, the Company entered into a Second Amended and Restated Credit Agreement (the "Secured Line of Credit") and an Amended and Restated Term Loan Agreement (the "Secured Term Loan"), each effective as of May 19, 2000 (the Secured Line of Credit and the Secured Term Loan collectively referred to herein as the "Secured Credit Agreements"). Significant changes in the Secured Line of Credit as compared to the revolving line of credit it replaced included the following: . Reduced maximum borrowings allowed from $200.0 million to $175.0 million; . Changed the maturity date from May 2002 to June 2001; . Changed the facility from unsecured to secured; . Increased the borrowing rate from LIBOR plus 1.15% to LIBOR plus 2.50%; . Increased the facility fee payable quarterly from .15% to .35% of the maximum loan amount; . Increased the limit on the ratio of Consolidated Liabilities to Gross Asset Value from 55% to 60%, and deleted the covenants limiting the ratios of Unencumbered Assets to Total 37 Unsecured Funded Debt and Unsecured NOI to Unsecured Interest Expense, all as defined; and . Further restricted the Company's ability to pay distributions to shareholders. The Secured Term Loan amended the then existing term loan to, among other things: . Increase the borrowing rate from LIBOR plus 1.40% to LIBOR plus 2.50%; . Change the maturity date from February 2002 to June 2001; and . Change the facility from unsecured to secured. In the fourth quarter of 2000, the Company executed a Consent and First Amendment to the Second Amended and Restated Credit Agreement for the Secured Line of Credit and a similar Amendment for the Secured Term Loan (the "Amendments"), each effective as of September 30, 2000. The Amendments modified the Secured Credit Agreements as follows: . Reduced the borrowing rate from LIBOR plus 2.50% to LIBOR plus 2.25%; . Modified the definition of Secured Debt to include all debt secured by real property; and . Modified the provisions for Replacement Properties (as defined in the Secured Credit Agreement). On March 29, 2001, the Company closed a Third Amended and Restated Master Credit Agreement with Fleet National Bank as Agent (the "2001 Credit Agreement"), replacing the existing Secured Credit Agreements. The 2001 Credit Agreement provides for maximum borrowings of $300.0 million, comprised of a $150.0 million revolving credit facility and a $150.0 million term loan. Loans made pursuant to the 2001 Credit Agreement will initially bear interest at LIBOR plus 2.00% and will range from LIBOR plus 1.75% to LIBOR plus 2.25% based on Company leverage and credit quality. The 2001 Credit Agreement matures December 31, 2002. The 2001 Credit Agreement provides that the loans thereunder will be initially secured by first priority security interests in 52 properties valued at approximately $512.3 million. The Company may, however, add, remove or substitute certain of its other properties as Borrowing Base Properties subject to the conditions set forth in the 2001 Credit Agreement. The 2001 Credit Agreement contains certain requirements for each property within the Borrowing Base Properties and certain value and occupancy requirements for the Borrowing Base Properties in the aggregate. The 2001 Credit Agreement contains financial covenants including, but not limited to, a liabilities-to-assets ratio, fixed charges coverage ratios and a net worth covenant. In addition, the 2001 Credit Agreement restricts, subject to certain exceptions, the amount of distributions to the Company's shareholders to 95% of the Company's Funds From Operations (as defined in the 2001 Credit Agreement). The Company incurred fees and expenses associated with the closing of the 2001 Credit Agreement of approximately $4.9 million. During 2000, the Company entered into a two-year forward interest rate cap on $100.0 million of its floating rate debt. The cap effectively limited the floating one-month LIBOR rate on its Secured Term Loan to 7.25% or less over a two-year period. Upon closing of the 2001 Credit Agreement, the Company entered into an interest rate swap agreement with a notional amount of $150.0 million that effectively fixes the underlying LIBOR rate at 4.62%. Future Sources and Uses of Funds -------------------------------- The most significant expected use of capital for the Company is its development activities. As of December 31, 2000, the Company, JDN Development and affiliated entities had 25 projects under construction and intend to commence construction during 2001 on approximately five additional projects. 38 The Company expects that the capital required to fund the future costs of these 30 projects, net of estimated construction reimbursements and expected land sales to retailers who will build and own their space in these projects, is approximately $162.5 million. These future costs are expected to be incurred during the remainder of 2001 and 2002. This projected capital requirement includes a number of assumptions including commitments by secondary anchor tenants. If some or all of these tenants do not execute leases, management anticipates that the amount required to finance these projects will be less. Another potential use of capital is the satisfaction of any liabilities arising out of pending litigation and governmental proceedings. As noted in Note 19, the Company is a party to certain litigation and government regulatory proceedings and may become subject to additional litigation or proceedings in the future. These matters may result in liabilities, fines, penalties or other remedies that, if material, could adversely affect the Company's financial condition, future results of operations and liquidity. The Company believes that cash provided by operating activities will be sufficient to fund its required distributions to shareholders (95% of taxable income for the year ended December 31, 2000 and 90% of taxable income for each year thereafter), improvements to the Company's operating shopping centers, leasing costs and scheduled debt amortization. The Company has historically utilized the public debt and equity markets to fund its development activities. However, the Company believes that it will be unable to issue unsecured debt, common stock or preferred stock as a result of, among other things, unfavorable capital markets for the foreseeable future. Also, because of the delay in filing the Company's Annual Report on Form 10-K for the year ended December 31, 1999, and the delay in filing the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 2000, the Company is not currently eligible to issue securities under its Form S-3 and will not be eligible to use Form S-3 until it has made timely filings of periodic reports with the SEC for at least twelve calendar months after August 2000. Therefore, even if capital markets were to become more favorable for the issuance of securities, public issuances of debt or equity securities before August 2001 would be costly and require significant time to consummate. Furthermore, the Company is limited on the amount of debt that may be outstanding at any given time. Under the applicable indentures for its MOPPRS, Seven Year Notes and Ten Year Notes, and the 2001 Credit Agreement, the Company is limited in the amount of secured debt it may have outstanding to 40% of its Consolidated Total Assets, as defined. As of December 31, 2000, the Company's ratio of Secured Debt to Consolidated Total Assets was 28%. Under the 2001 Credit Agreement, the Company is limited in the amount of total debt it may have outstanding to 60% of Total Consolidated Assets, as defined. As of December 31, 2000, the Company's ratio of total debt to Total Consolidated Assets, as defined, was 49.6%. The company is also restricted on additional indebtedness in its interest coverage and fixed charges coverage ratios in the 2001 Credit Agreements. Therefore, the Company has only a limited ability to fund its development projects with proceeds from additional indebtedness. The Company and JDN Development expect the sale of all or portions of operating shopping center properties in addition to the sale of various parcels of land adjacent to its operating properties to be the primary source of capital for the Company to fund its development needs and certain other uses of funds noted above. In addition, the Company expects funds from the sale of its properties in 2000 and 2001 to be used to satisfy potential liabilities arising out of pending litigation, governmental proceedings and settlement agreements with respect to certain undisclosed transactions. During 2000, the Company and JDN Development sold all or portions of 13 shopping center properties and two parcels of land for gross proceeds of approximately $118.3 million. As of December 31, 2000, the Company and JDN Development were negotiating the sale of all or portions of 23 shopping centers with an aggregate net book value of approximately $114.2 million for estimated aggregate proceeds of approximately $134.3 million, 11 of which were subject to definitive agreements at that date. The Company expects that most of these properties will be sold in 2001 and the first half of 2002. As of March 21, 2001, the Company had closed on the sale of three of these shopping center properties for net proceeds of approximately $22.1 million. The Company expects to begin marketing for sale additional shopping centers that are expected to close after the first half of 2001. The closing of the dispositions is dependent upon, among other things, completion of due diligence and the ability of some of the 39 purchasers to successfully obtain financing. Therefore, there can be no assurance that any of these transactions will close when expected or at all, and there can be no assurance that, if closed, the disposition transactions will produce sufficient liquidity to enable the Company to fund its planned development projects. The Company also expects to obtain construction loans on certain development projects to help fund its expected development expenditures. The ability to obtain construction loans will be dependent upon a number of factors, including achievement of adequate pre-leasing of the project and satisfaction of any environmental, title or other issues with respect to the underlying real estate. The Company has engaged a financial advisor in the implementation of the Company strategy and in particular, assistance with financing alternatives. These alternative means could include, for example, the formation of joint ventures with institutional investors or other partners with available capital at attractive rates. Management believes that proceeds from asset sales, construction loans and any additional capital identified by its financial advisor will provide the additional funding necessary to complete its current development pipeline. However, if the Company is unsuccessful in raising capital adequate to fund its development activities, it will be required to discontinue the funding of some or all of its projects and will be required to liquidate some or all of its projects on potentially unfavorable terms. These unfavorable terms could result in significant losses upon liquidation and would have an adverse impact on future rental income, FFO and the Company's ability to continue the level of its current distributions to holders of its common stock. In order for the Company to continue to qualify as a REIT, it must annually distribute to its shareholders at least 95% (or 90% after December 31, 2000) of its taxable income (excluding net capital gains). Management believes that the Company will be able to meet this requirement in 2001 with cash provided by operating activities. As of December 31, 2000, the Company's indebtedness requires the following payments in the future: Percent of Debt Year Total Expiring ---------------------------------------------------------------------------- 2001 $ 266,048 46.3% 2002 2,604 0.5% 2003 83,286 14.5% 2004 77,689 13.5% 2005 3,271 0.6% 2006 3,259 0.6% 2007 88,294 15.4% 2008 3,770 0.7% 2009 3,543 0.6% 2010 3,622 0.6% Thereafter 38,755 6.7% -------------- -------------------- $ 574,141 100.0% ============== ==================== With the closing of the 2001 Credit Agreement, the Company has refinanced $242.0 million of the $266.0 million of its indebtedness maturing in 2001. The Company is negotiating to refinance a $21.6 million mortgage note payable secured by a shopping center in Denver, Colorado which matures July 17, 40 2001. The Company expects this refinancing to close on or before the maturity date of this indebtedness. With respect to its other maturing obligations, management will evaluate various alternatives and select the best available options based on market conditions at the time. There can be no assurance, however, that the debt or equity capital markets will be favorable or available in the future, and unfavorable or unavailable markets could limit the Company's ability to continue to operate its business as it has in the past, complete development projects or repay or refinance maturing debt. Derivatives and Market Risk --------------------------- The Company is exposed to market risk from changes in interest rates on its indebtedness, which could impact its financial condition and results of operations. The Company manages its exposure to these market risks through its regular operating and financing activities. The Company manages its ratio of fixed to floating rate debt with the objective of achieving a mix that management believes is appropriate. The Company has and may from time to time in the future enter into interest rate swap agreements or interest rate cap agreements in an attempt to hedge its exposure to increasing interest rates. Management does not foresee or expect any significant changes in its exposure to interest rate fluctuations or in how such exposure is managed in the near future. The Company intends to use derivative financial instruments as risk management tools and not for speculative or trading purposes. As of December 31, 2000, the Company had one interest rate swap agreement and one interest rate cap agreement as described below:
Strike Effective Termination Value at Description of Agreement Notional Amount Price Date Date 12/31/00 (1) ------------------------------ -------------------- ------------ ------------- ---------------- ----------------- LIBOR, 30-day "Rate Swap" $ 50,000,000 6.485% 2/11/97 1/1/01 $ 13,000 LIBOR, 30-day "Rate Cap" $ 100,000,000 7.250% 8/21/00 (2) 8/21/02 $ 26,000
(1) A positive value indicates the theoretical net proceeds to the Company if the indicated agreement is sold, while a negative value indicates the theoretical cost to terminate the transaction. (2) The Company paid a one-time $396,000 fee. In conjunction with the closing of the 2001 Credit Agreement, the Company terminated the interest rate cap agreement that was due to expire in August 2002 and entered into an interest rate swap agreement at a strike price of 4.62% on $150.0 million of the Company's floating rate debt. The swap will expire on December 31, 2002. The Company's future earnings, cash flows and fair values of financial instruments are primarily dependent upon market rates of interest such as LIBOR. Based upon consolidated indebtedness and interest rates at December 31, 2000 (see "Indebtedness" above), a hypothetical immediate 1.0% increase in interest rates would decrease future annual earnings by approximately $1.1 million, cash flows by approximately $1.4 million and fair value of debt by approximately $10.1 million. Based upon consolidated indebtedness and interest rates at December 31, 1999, a hypothetical immediate 1.0% increase in interest rates would decrease future annual earnings by approximately $961,000, cash flows by approximately $1.2 million and fair value of debt by approximately $14.1 million. 41 Contingencies In February 2000, the Company announced that it had discovered undisclosed compensation arrangements with two executive officers of JDN Development, additional unauthorized benefits to these same two executive officers, and undisclosed related party transactions involving these two officers and the former Chairman and Chief Executive Officer of the Company. As a result of this discovery, a special committee of the Board of Directors was formed to, among other things, conduct an inquiry into these matters. As a result of the above investigation, the two executive officers of JDN Development, the Chairman and Chief Executive Officer of the Company and the Company's Chief Financial Officer resigned in 2000. Since the Company's announcement of the undisclosed transactions mentioned above, a number of lawsuits have been filed against the Company. One or more of these suits also names as defendants JDN Development and certain current and former officers and directors of JDN Development and/or the Company. Certain class actions filed in federal court allege violations of the federal securities laws asserting that by failing to report the undisclosed compensation, unauthorized benefits and related party transactions to the public in the Company's financial statements, public filings, and otherwise, the defendants made or participated in making material misstatements or omissions which caused the plaintiffs to purchase the Company's common and preferred stock at artificially inflated prices. Included in the class actions is a lawsuit which names among the defendants certain underwriters involved in the preferred stock offering by the Company in 1998 (the "Preferred Stock Class Action"). The Preferred Stock Class Action raises allegations similar to those raised in the other class action cases, but it is based on purported misrepresentations or omissions in the Company's registration statement and prospectus in connection with the 1998 offering. The plaintiffs in these lawsuits seek compensatory damages of an indeterminate amount, interest, attorneys' fees, experts' fees and other costs and disbursements. On April 17, 2000, the federal court entered an order consolidating the various class actions in the United States District Court for the Northern District of Georgia ("Consolidated Class Actions"). On June 13, 2000, the federal court entered an order appointing Clarion-CRA Securities lead plaintiff and the law firm of Chitwood & Harley as lead plaintiff's counsel. On February 13, 2001, plaintiffs in the Preferred Stock Class Action purported to amend their complaint to add Waller, Lansden, Dortch & Davis, PLLC, the Company's securities counsel, as a defendant. The purported amendment was not filed by the lead plaintiff and the Company intends to file a motion to strike the purported amendment as improper. A class action lawsuit was also filed by the Company's shareholders against the Company, JDN Development, and four former officers and directors of these companies in the Superior Court of Fulton County, Georgia. The complaint contains substantially the same factual allegations asserted in the federal class actions, but purports to seek relief under state law for damages which these plaintiffs allege should have been paid to the class as dividends. The original complaint contained claims of common law fraud, conversion and purported violations of Georgia's Racketeer Influenced and Corrupt Organizations Act, but the fraud count has now been dropped by way of an amended complaint recently filed by the plaintiffs. The plaintiffs seek compensatory and punitive damages, attorneys' fees and expenses, interest and equitable relief. The case was removed to federal court, but has now been remanded back to Superior Court, where it is currently pending. Lawsuits have also been filed against the Company as a nominal defendant, as well as individual defendants J. Donald Nichols, Elizabeth L. Nichols, Craig Macnab, Philip G. Satre, William G. Byrnes, Haywood D. Cochrane, Jr., William B. Greene, Jeb L. Hughes, C. Sheldon Whittelsey, IV and William J. Kerley in the United States District Court for the Northern District of Georgia, Atlanta Division and in Fulton County Superior Court. Each of the named individuals is a current or former officer or director of the Company or JDN Development. A similar suit has now been filed in State Court of Fulton County naming Ernst & Young, LLP, the Company's auditors, in addition to the above-referenced defendants. The plaintiffs purport to bring these suits as derivative actions. The complaints allege that the individual defendants, from 1994 through 1999, violated certain duties in connection with the previously undisclosed compensation arrangements. The complaints also allege claims for breach of fiduciary duty, abuse of 42 control, waste of corporate assets, unjust enrichment and gross mismanagement. The plaintiffs, on behalf of the Company, seek injunctive relief, compensatory and punitive damages and disgorgement of all profits and gains by the individual defendants. The Company believes that it has meritorious defenses to the claims brought in the lawsuits described above, but there can be no assurance that such defenses will be successful or that the lawsuits will not have a material adverse effect on the Company's financial position, results of operations and cash flows. In addition, the timing of the final resolution of these proceedings is uncertain. The Company is also subject to a formal order of investigation initiated by the SEC as of August 2, 2000. Pursuant to this order, the Company has voluntarily provided certain documents and other information to the SEC regarding the compensation arrangements, unauthorized benefits and related party transactions mentioned above. By letter dated March 5, 2001, the SEC staff advised the Company that it intended to recommend that the SEC institute a proceeding against the Company. The Company continues to cooperate fully with the SEC staff in order to resolve this matter as expeditiously as practicable. Management of the Company does not expect that the resolution of this matter will have a material adverse effect on the Company's business, financial condition or results of operation. However, the Company is unable to predict with certainty the timing or ultimate outcome of this matter. In an unrelated lawsuit, on February 2, 2000, Dogwood Drive L.L.C., ("Dogwood") filed suit against the Company and WHF, Inc. ("WHF"), a wholly-owned subsidiary of JDN Development, which, until April 1999, owned a 72% interest in Dogwood and served as the operating member of the entity. The suit was filed in the Superior Court of Gwinnett County, Georgia. The complaint asserts, among other things, breach of fiduciary duty against WHF and improper receipt of funds by the Company. The Company believes that it and WHF have meritorious defenses to the claims and intends to vigorously defend the suit. On April 28, 2000, Lake Lucerne Estates Civic Club, Inc., a nonprofit homeowners association located in Gwinnett County, Georgia, and a number of individual plaintiffs, filed suit against JDN Development, Lowe's Companies, Inc., and Haygood Contracting, Inc. The suit was filed in the Superior Court of Fulton County, Georgia. The complaint asserts trespass, nuisance and negligence against JDN Development in connection with the development of a shopping center anchored by Lowe's. JDN Development has filed defensive pleadings denying liability, and discovery is now being conducted by both sides. The Company is from time to time a party to other legal proceedings which arise in the ordinary course of its business. The Company is not currently involved in any litigation in addition to the lawsuits described above the outcome of which would, in management's judgement based on information currently available, have a material adverse effect on the results of operations or financial condition of the Company, nor is management aware of any such litigation threatened against the Company. The Company incurred legal and professional fees during the year ended December 31, 2000 in amounts significantly in excess of those incurred in previous years as a result of the litigation noted above. During 2000, the Company expensed approximately $3.2 million in legal and professional fees related to the special investigation, class action lawsuit and SEC inquiry. The Company cannot reasonably predict, with any degree of certainty, the additional legal and professional fees which will be incurred related to the class action litigation, the special committee's investigation, or any other related investigation by the SEC, the NYSE, IRS or any other regulatory body. Federal Income Tax Legislative Developments In 1999, legislation was enacted which contained several provisions affecting REITs. The new provisions became effective January 1, 2001 and significantly modify the REIT-related provisions of the Code. In addition to the provisions that directly affect the Company (discussed below), the legislation 43 also contained provisions relating to the following: (i) special foreclosure rules for healthcare REITs; (ii) clarification of the definition of independent contractors; and (iii) modification of the earnings and profits rules. Investment Limitations ---------------------- The REIT asset tests are modified by adding a requirement that except for (i) "Safe Harbor Debt" and (ii) the ownership of stock in "taxable REIT subsidiaries," a REIT cannot own more than 10 percent of the total value of the securities of any corporation. "Safe Harbor Debt" is non-contingent, non- convertible debt ("straight debt") which satisfies one of the following three requirements: (a) the straight debt is issued by an individual, (b) all of the securities of the issuer owned by the REIT is "straight debt" or (c) the issuer is a partnership in which the REIT owns at least 20% of the partnership's profits. Taxable REIT Subsidiaries ------------------------- A REIT will be permitted to operate a "taxable REIT subsidiary" which can provide a limited amount of services to tenants and other customers of the REIT (even if such services were not considered customarily furnished in connection with the rental of real property) and can manage or operate properties, generally for third parties, without causing the rents received by the REIT from such parties not to be treated as rent from real properties. A taxable REIT subsidiary will be subject to regular federal income tax, and state and local income tax where applicable, as a regular "C" corporation. The value of the securities of all taxable REIT subsidiaries cannot exceed 20% of the total value of the REIT's assets. In addition, interest paid by a taxable REIT subsidiary to the related REIT is subject to the earnings stripping rules contained in Section 163(j) of the Code and, therefore, the taxable REIT subsidiary cannot deduct interest in any year that would exceed 50% of the subsidiary's adjusted gross income. If any amount of interest, rent, or other deductions of the taxable REIT subsidiary to be paid to the REIT is determined not to be at arm's length, an excise tax of 100% is imposed on the portion that is redetermined to be excessive. However, rent received by a REIT will not fail to qualify as rents from real property by reason of the fact that all or any portion of such rent is redetermined for purposes of the excise tax. After considering the new investment limitations and taxable REIT subsidiary provisions, the Company and JDN Development have jointly elected to treat JDN Development as a taxable REIT subsidiary effective January 1, 2001. In addition, effective January 1, 2001, the Company acquired the remaining voting stock in JDN Development and, therefore, owns 100% of the capital stock of JDN Development. The Company will consolidate JDN Development's operations in its financial statements effective with the first reporting period in 2001. Distribution Requirements ------------------------- In order to continue to maintain its qualification as a REIT, a REIT is required to distribute annually 95% of its REIT taxable income (excluding net capital gain). This required distribution is reduced from 95% to 90% effective for taxable years beginning after December 31, 2000. The Secured Credit Agreements restrict the Company's ability to pay cash distributions. Rents from Personal Property ---------------------------- A REIT may treat rent from personal property as rent from real property so long as the rent from personal property does not exceed 15% of the total rent from both real and personal property for the taxable year. This determination will now be made by comparing the fair market value of the personal property to the fair market value of the real and personal property. Inflation The Company's leases generally contain provisions designed to mitigate the adverse impact of inflation on net income. These provisions include clauses enabling the Company to pass through to 44 tenants certain operating costs, including real estate taxes, common area maintenance, utilities and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. Certain of the Company's leases contain clauses enabling the Company to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the Company's non-anchor leases are for terms of less than ten years, which permits the Company to seek increased rents upon re-leasing at higher market rates. 45 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Information on quantitative and qualitative disclosure about market risk are included in Part II, Item 7 of this Annual Report on Form 10-K under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Derivatives and Market Risk." Item 8. Financial Statements and Supplementary Data The financial statements and supplementary data required under Regulation S-X and listed in Item 14(a)(1) below are included in a separate section of this report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 46 PART III Item 10. Directors and Executive Officers of the Registrant The information relating to Directors of the Company set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Election of Directors" is incorporated herein by reference. The information relating to Executive Officers of the Company is included in Part I, Item 1 of this annual report on Form 10-K under the caption "Executive Officers of the Registrant." The information relating to Section 16(a) beneficial ownership reporting compliance set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Security Ownership of Certain Beneficial Owners and Management" is incorporated herein by reference. Item 11. Executive Compensation The information set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Executive Compensation" is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management The information set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Security Ownership of Certain Beneficial Owners and Management" is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions The information set forth in the Company's Proxy Statement relating to the 2001 Annual Meeting of Shareholders under the caption "Certain Relationships and Related Transactions" is incorporated herein by reference. 47 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Index to Financial Statements, Financial Statement Schedules and Exhibits (1) Financial Statements The following financial statements are included in and filed pursuant to Part II, Item 8 and are included herein on the pages indicated: Consolidated balance sheets - December 31, 2000 and 1999.................................. F-1 Consolidated statements of income - Years ended December 31, 2000, 1999, and 1998............................................... F-2 Consolidated statements of shareholders' equity - Years ended December 31, 2000, 1999, and 1998............................................... F-3 Consolidated statements of cash flows - Years ended December 31, 2000, 1999, and 1998................................................ F-4 Notes to consolidated financial statements................................................ F-5 Report of Ernst & Young LLP, Independent Auditors......................................... F-22 (2) Financial Statement Schedules The following financial statement schedules are included in and filed pursuant to Item 14(d) and are included herein on the pages indicated: Schedule II - Valuation and Qualifying Accounts ...................................... F-23 Schedule III - Real Estate and Accumulated Depreciation................................... F-24
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. (3) Exhibits Exhibit Number Description -------------- ----------- 3.1 Articles of Restatement of JDN Realty Corporation (1) 3.2 Articles of Merger of JDN Enterprises, Inc. with and into the Company (2) 3.3 Amendment No. 1 to the Amended and Restated Bylaws of the Company 3.4 Form of Articles Supplementary of JDN Realty Corporation classifying the 9 3/8% Series A Cumulative Redeemable Preferred Stock (14) 4.1 Specimen Common Stock Certificate (3) 4.2 Form of the Company's 9 3/8 % Series A Cumulative Redeemable Preferred Stock Certificate (14) 4.3 Form of 6.918 % MandatOry Par Put Remarketed Securities (sm) ("MOPPRS (sm)") due March 31, 2013 (15) 4.4 Form of 6.80% Global Note due August 1, 2004 (8) 48 4.5 Form of 6.95% Global Note due August 1, 2007 (8) 4.6 Form of Articles Supplementary of JDN Realty Corporation classifying the 9 3/8% Series A cumulative Redeemable Preferred Stock (14) 10.1 JDN Realty Corporation 1993 Incentive Stock Plan, as amended (17) 10.2 JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan, as amended (17) 10.3 JDN Realty Corporation Long-Term Incentive Plan (17) 10.4 Indemnification Agreement by and between J. Donald Nichols and JDN Realty Corporation, dated February 23, 1994 (2) 10.5 Indemnification Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation, dated February 23, 1994 (2) 10.6 Indemnification Agreement by and between William J. Kerley and JDN Realty Corporation, dated February 23, 1994 (2) 10.7 $200,000,000 Amended and Restated Credit Agreement dated as of September 3, 1998, among JDN Realty Corporation and Wachovia Bank, N.A., as Agent (4) 10.8 First Amendment dated as of June 11, 1999 to the $200,000,000 Amended and Restated Credit Agreement dated as of September 2, 1998 among JDN Realty Corporation, the Banks listed therein and Wachovia Bank, N.A., as Agent (5) 10.9 Agreement for Continued Funding dated March 2, 2000, but effective as of February 14, 2000, by and among JDN Realty Corporation, JDN Development Company, Inc., the Banks parties thereto and Wachovia Bank, N.A., as Agent (13) 10.10 $175,000,000 Second Amended and Restated Credit Agreement dated as of May 19, 2000, among JDN Realty Corporation, the Banks listed therein and Wachovia Bank, N.A., as Agent (16) 10.11 $100,000,000 Term Loan Credit Agreement dated as of February 17, 1999 among JDN Realty Corporation, Wachovia Bank, N.A., as Agent and PNC, National Association, as Documentation Agent (6) 10.12 First Amendment dated as of June 11, 1999 to the $100,000,000 Term Loan Credit Agreement dated as of February 17, 1999 among JDN Realty Corporation, the Banks Listed Herein, Wachovia Bank, N.A., as Agent and PNC Bank, National Association as the Documentation Agent (7) 10.13 Interim Agreement dated as of March 2, 2000, but effective as of February 14, 2000, by and among JDN Realty Corporation, JDN Development Company, Inc. the Banks parties thereto and Wachovia Bank, N.A., as Agent (13) 10.14 $100,000,000 Amended and Restated Term Loan Credit Agreement dated as of May 19, 2000, among JDN Realty Corporation, the Banks listed therein, Wachovia Bank, N.A., as Agent and PNC Bank, National Association, as Documentation Agent (16) 10.15 Indenture, dated as of July 15, 1997, by JDN Realty Corporation to First Union National Bank as Trustee (8) 10.16 First Supplemental Indenture, dated as of July 31, 1997, by JDN Realty Corporation to First Union National Bank, as Trustee (8) 10.17 Second Supplemental Indenture, dated as of February 5, 1998, by JDN Realty Corporation to First Union National Bank, as Trustee (9) 10.18 First Amendment to Second Supplemental Indenture, dated as of March 31, 1998, by JDN Realty Corporation to First Union National Bank, as Trustee (15) 10.19 JDN Realty Corporation Dividend Reinvestment and Stock Purchase Plan (10) 49 10.20 JDN Realty Corporation 1995 Employee Stock Purchase Plan, as amended (17) 10.21 Employment Agreement by and between J. Donald Nichols and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.22 Agreement dated May 19, 2000 between JDN Realty Corporation, JDN Development Company, Inc. and J. Donald Nichols regarding termination of Employment Agreement by and between J. Donald Nichols and JDN Realty Corporation dated as of December 1, 1996 (17) 10.23 Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.24 Employment Agreement by and between William J. Kerley and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.25 Agreement dated April 15, 2000 between JDN Realty Corporation, JDN Development Company, Inc. and William J. Kerley regarding termination of Employment Agreement by and between William J. Kerley and JDN Realty Corporation dated as of December 1, 1996 (17) 10.26 Employment Agreement by and between John D. Harris, Jr. and JDN Realty Corporation dated as of May 1, 1997 (12) 10.27 Employment Agreement by and between Leilani L. Jones and JDN Realty Corporation, dated as of May 1, 1997 (12) 10.28 Employment Agreement by and between David L. Henzlik and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.29 Employment Agreement by and between W. Fred Williams, Jr. and JDN Development Company, Inc. dated as of March 8, 2000 and related Performance Share Agreement dated as of March 7, 2000 (17) 10.30 Tenant Estoppel and Release dated as of May 23, 2000 by and between JDN Development Company, Inc. and JDN Realty Corporation and their Affiliates Wal-Mart Stores, Inc. and Wal-Mart Real Estate Business Trust and Lowe's Companies, Inc. and Lowe's Home Centers, Inc. (16) 10.31 Separation and Partial Settlement Agreement dated as of June 14, 2000 by and between JDN Realty Corporation and JDN Development Company, Inc. and their affiliates, and ALA Associates, Inc., Jeb L. Hughes and C. Sheldon Whittelsey, IV (17) 10.32 Third Amended and Restated Master Credit Agreement dated as of March 29, 2001 among JDN Realty Corporation and Fleet National Bank as Agent 10.33 Amendment No. 2 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (19) 10.34 Agreement dated July 26, 2000 between JDN Realty Corporation and Elizabeth L. Nichols regarding termination of Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation dated as of December 1, 1996 (18) 10.35 Employment Agreement by and between Craig Macnab and JDN Realty Corporation dated as of November 17, 2000 10.36 Employment Agreement by and between Lee S. Wielansky and JDN Development Company, Inc. dated as of November 27, 2000 10.37 Agreement dated September 5, 2000 and related Consulting Agreement dated October 2, 2000 between JDN Development Company, Inc. and W. Fred Williams regarding termination of Employment Agreement by and between W. Fred Williams and JDN Development Company, Inc. 50 10.38 Amendment No. 3 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan 10.39 Amendment No. 1 to JDN Realty Corporation 1993 Incentive Stock Plan. 12 Ratio of Earnings to Fixed Charges 21 Subsidiaries of the Registrant 99.1 Federal Income Tax Considerations (1) Filed as an exhibit to the Company's filing on Form 8-K dated November 7, 1996, previously filed pursuant to the Securities Exchange Act of 1934, and hereby incorporated by reference. (2) Filed as an exhibit to the Company's Registration Statement on Form S-11 (No. 33-73710) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (3) Filed as an exhibit to the Company's Registration Statement on Form S-3 (No. 333-22339) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (4) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (5) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (6) Filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (7) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (8) Filed as an exhibit to the Company's filing on Form 8-K dated August 1, 1997, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (9) Filed as an exhibit to the Company's filing on Form 8-K dated February 13, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (10) Filed as an exhibit to the Company's Registration Statement on Form S-3 (No. 33-90868) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (11) Filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 1996, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (12) Filed as an exhibit to the Company's filing on Form 10-K for the year ended December 31, 1997, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (13) Filed as an exhibit to the Company's filing on Form 8-K dated March 7, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. 51 (14) Filed as an exhibit to the Company's filing on Form 8-A dated September 17, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (15) Filed as an exhibit to the Company's filing on Form 8-K dated April 1, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (16) Filed as an exhibit to the Company's filing on Form 8-K dated May 23, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (17) Filed as an exhibit to the Company's filing on Form 10-K for the year ended December 31, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. (18) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. (19) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. 52 Executive Compensation Plans and Arrangements The following is a list of all executive compensation plans and arrangements filed as exhibits to this annual report on Form 10-K or incorporated herein by reference: 1. JDN Realty Corporation 1993 Incentive Stock Plan, as amended (Exhibit 10.1) 2. JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan, as amended (Exhibit 10.2) 3. JDN Realty Corporation Long-Term Incentive Plan (Exhibit 10.3) 4. Employment Agreement, dated as of December 1, 1996, by and between J. Donald Nichols and the Company (Exhibit 10.21) 5. Letter Agreement dated May 19, 2000 between the Company, JDN Development and J. Donald Nichols regarding termination of Employment Agreement by and between J. Donald Nichols and the Company dated as of December 1, 1996 (Exhibit 10.22) 6. Employment Agreement, dated as of December 1, 1996, by and between Elizabeth L. Nichols and the Company (Exhibit 10.23) 7. Employment Agreement, dated as of December 1, 1996, by and between William J. Kerley and the Company (Exhibit 10.24) 8. Letter Agreement dated April 15, 2000 between the Company, JDN Development and William J. Kerley regarding termination of Employment Agreement by and between William J. Kerley and the Company dated December 1, 1996 (Exhibit 10.25) 9. Employment Agreement, dated as of December 1, 1996, by and between David L. Henzlik and the Company (Exhibit 10.28) 10. Employment Agreement, dated as of May 1, 1997, by and between John D. Harris, Jr. and the Company (Exhibit 10.26) 11. Employment Agreement, dated as of May 1, 1997, by and between Leilani L. Jones and the Company (Exhibit 10.27) 12. Employment Agreement, dated as of March 8, 2000, by and between W. Fred Williams, Jr. and JDN Development Company, Inc. and related Performance Share Agreement, dated as of March 7, 2000 (Exhibit 10.29) 13. Indemnification Agreement, dated as of February 23, 1994, by and between J. Donald Nichols and the Company (Exhibit 10.4) 14. Indemnification Agreement, dated as of February 23, 1994, by and between Elizabeth L. Nichols and the Company (Exhibit 10.5) 15. Indemnification Agreement, dated as of February 23, 1994, by and between William J. Kerley and the Company (Exhibit 10.6) 16. Separation and Partial Settlement Agreement dated as of June 14, 2000 by and between JDN Realty Corporation and JDN Development Company, Inc. and their Affiliates, ALA Associates, Inc. and Jeb L. Hughes and C. Sheldon Whittelsey, IV (Exhibit 10.31) 17. JDN Realty Corporation 1995 Employee Stock Purchase Plan as amended (Exhibit 10.20) 18. JDN Realty Corporation Dividend Reinvestment and Stock Purchase Plan (Exhibit 10.19) 19. Amendment No. 2 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (Exhibit 10.33) 20. Agreement dated July 26, 2000 between JDN Realty Corporation and Elizabeth L. Nichols regarding termination of Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation dated as of December 1, 1996 (Exhibit 10.34) 21. Employment Agreement by and between Craig Macnab and JDN Realty Corporation dated as November 17, 2000 (Exhibit 10.35) 22. Employment Agreement by and between Lee S. Wielansky and JDN Development Company, Inc. dated as of November 27, 2000 (Exhibit 10.36) 53 23. Agreement dated September 5, 2000 and related Consulting Agreement dated October 2, 2000 between JDN Development Company, Inc. and W. Fred Williams regarding termination of Employment Agreement by and between W. Fred Williams and JDN Development Company, Inc. (Exhibit 10.37) 24. Amendment No. 3 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (Exhibit 10.38) 25. Amendment No. 1 to JDN Realty Corporation 1993 Incentive Stock Plan (Exhibit 10.39) (b) Reports on Form 8-K During the three months ended December 31, 2000, the Company did not file any reports on Form 8-K. (c) Exhibits The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules The response to this portion of Item 14 is submitted as a separate section of this report. 54 Item 8 ------ FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA ------------------------------------------ Item 14(d) ---------- FINANCIAL STATEMENT SCHEDULES ----------------------------- 55 JDN REALTY CORPORATION CONSOLIDATED BALANCE SHEETS
December 31, -------------------------------- (dollars in thousands, except per share data) 2000 1999 ----------------------------------------------------------------------------------------------------------------------- ASSETS Shopping center properties, at cost: Land $ 208,653 $ 191,823 Buildings and improvements 626,042 666,465 Property under development 45,020 104,609 -------------------------------- 879,715 962,897 Less: accumulated depreciation and amortization (80,113) (71,551) -------------------------------- Shopping center properties, net 799,602 891,346 Cash and cash equivalents 9,277 2,076 Proceeds receivable from deferred exchange - 40,476 Rents receivable, net of allowance for doubtful accounts of $732 and $714 in 2000 and 1999, respectively 11,200 10,272 Investments in and advances to unconsolidated entities: JDN Development Company, Inc. 193,523 121,095 Other 53,276 33,343 Deferred costs, net of amortization 6,039 5,099 Other assets 11,046 13,088 -------------------------------- $ 1,083,963 $ 1,116,795 ================================ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Unsecured notes payable $ 234,697 $ 234,635 Lines of credit and term loan 242,000 235,000 Mortgage notes payable 97,444 101,247 Accounts payable and accrued expenses 14,558 16,328 Other liabilities 5,151 9,500 -------------------------------- Total liabilities 593,850 596,710 Third party investors' interest 3,504 4,256 Shareholders' Equity Preferred stock, par value $.01 per share - authorized 20,000,000 shares: 9 3/8% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25 per share, issued and outstanding 2,000,000 shares in 2000 and 1999, respectively 20 20 Common stock, par value $.01 per share - authorized 150,000,000 shares, issued and outstanding 32,867,354 and 33,401,468 shares in 2000 and 1999, respectively 329 334 Paid-in capital 489,289 518,504 Accumulated deficit (3,029) (3,029) -------------------------------- 486,609 515,829 -------------------------------- $ 1,083,963 $ 1,116,795 ================================
See accompanying notes. F-1 JDN REALTY CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, ----------------------------------------------- (in thousands, except per share data) 2000 1999 1998 -------------------------------------------------------------------------------------------------------------------------------- Revenues: Minimum and percentage rents $ 91,438 $ 92,964 $ 71,191 Recoveries from tenants 12,705 13,205 10,003 Other revenue 1,907 69 117 ----------------------------------------------- Total revenues 106,050 106,238 81,311 Operating expenses: Operating and maintenance 8,736 8,338 6,439 Real estate taxes 6,730 6,979 5,316 General and administrative 8,574 8,130 7,105 Corporate investigation and legal costs 3,159 - - Severance expense 3,711 - - Impairment losses 18,882 90 - Depreciation and amortization 20,735 22,047 16,824 Tenant settlement expense - 5,610 - ----------------------------------------------- Total operating expenses 70,527 51,194 35,684 ----------------------------------------------- Income from operations 35,523 55,044 45,627 Other income (expense): Interest expense, net (25,220) (18,423) (9,454) Other income, net 1,680 1,818 945 Equity in net income (loss) of unconsolidated entities (2,976) (3,800) 3,379 ----------------------------------------------- Income before minority interest in net income of consolidated subsidiaries and net gain on real estate sales 9,007 34,639 40,497 Minority interest in net income of consolidated subsidiaries (222) (215) (196) ----------------------------------------------- Income before net gain on real estate sales 8,785 34,424 40,301 Net gain on real estate sales 14,712 18,627 379 ----------------------------------------------- Net Income 23,497 53,051 40,680 Dividends to preferred shareholders (4,688) (4,688) (1,341) ----------------------------------------------- Net income attributable to common shareholders $ 18,809 $ 48,363 $ 39,339 =============================================== Net income per common share: Basic $ 0.58 $ 1.46 $ 1.28 =============================================== Diluted $ 0.58 $ 1.44 $ 1.26 =============================================== Dividends per common share $ 1.295 $ 1.545 $ 1.413 ===============================================
See accompanying notes. F-2 JDN REALTY CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Preferred Common Paid-in Accumulated (in thousands, except per share data) Stock Stock Capital Deficit Total -------------------------------------------------------------------------------------------------------------------------------- Balance, January 1, 1998 $ - $ 277 $ 375,306 $ (7,089) $ 368,494 Issuance of preferred stock 20 - 48,154 - 48,174 Issuances of common stock - 50 102,425 - 102,475 Distributions to preferred shareholders ($0.67 per share) - - - (1,341) (1,341) Distributions to common shareholders ($1.41 per share) - - (4,849) (39,339) (44,188) Net income - - - 40,680 40,680 ------------------------------------------------------------------- Balance, December 31, 1998 20 327 521,036 (7,089) 514,294 Issuances of common stock - 11 11,990 - 12,001 Repurchases of common stock - (4) (6,990) - (6,994) Distributions to preferred shareholders ($2.34 per share) - - - (4,688) (4,688) Distributions to common shareholders ($1.55 per share) - - (7,532) (44,303) (51,835) Net income - - - 53,051 53,051 ------------------------------------------------------------------- Balance, December 31, 1999 $ 20 $ 334 $ 518,504 $ (3,029) $ 515,829 Issuances of common stock - 5 1,610 - 1,615 Retirement of restricted common stock - (6) (291) - (297) Repurchases of common stock - (4) (6,839) - (6,843) Distributions to preferred shareholders ($2.34 per share) - - - (4,688) (4,688) Distributions to common shareholders ($1.30 per share) - - (23,695) (18,809) (42,504) Net income - - - 23,497 23,497 ------------------------------------------------------------------- Balance, December 31, 2000 $ 20 $ 329 $ 489,289 $ (3,029) $ 486,609 ===================================================================
See accompanying notes. F-3 JDN REALTY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, ---------------------------------------- (in thousands) 2000 1999 1998 ---------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 23,497 $ 53,051 $ 40,680 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 19,543 21,002 15,676 Amortization 3,499 2,507 1,758 Equity in net income of unconsolidated entities 2,976 3,800 (3,379) Minority interest in net income of consolidated subsidiaries 222 215 196 Net gain on real estate sales (14,712) (18,627) (379) Impairment losses 18,882 90 - Tenant settlement expenses - 5,610 - Changes in assets and liabilities: Rents receivable (928) (3,164) (4,467) Other assets 310 (515) (130) Accounts payable and accrued expenses (1,235) (4,703) 3,766 Other liabilities 602 (470) 2,339 ---------------------------------------- Net cash provided by operating activities 52,656 58,796 56,060 Cash flows from investing activities Development of shopping center properties (33,639) (205,085) (159,590) Purchases of shopping center properties - - (105,453) Improvements to shopping center properties (2,134) (984) (1,507) Proceeds from real estate sales 99,459 61,972 747 Net repayment of advances (to) from JDN Development Company, Inc. (76,141) 26,875 (75,361) Investments in unconsolidated entities (19,948) (33,343) - Other (1,295) 2,197 (10,932) ---------------------------------------- Net cash used in investing activities (33,698) (148,368) (352,096) Cash flows from financing activities Proceeds from mortgages and notes payable - 61,254 1,060 Principal payments on mortgages and notes payable (2,744) (1,648) (532) Proceeds from lines of credit 204,596 529,040 381,420 Principal payments on lines of credit (197,596) (442,559) (276,401) Proceeds from issuance of unsecured notes payable - - 76,548 Proceeds from deferred exchange of properties 40,476 - - Net proceeds from issuance of common stock - 11,225 101,011 Net proceeds from issuance of preferred stock - - 48,174 Repurchases of common stock (6,843) (6,995) - Distributions to common shareholders (42,504) (51,835) (44,188) Distributions to preferred shareholders (4,688) (4,688) (1,341) Deferred financing costs (2,454) (2,072) (1,154) Other - (74) - ---------------------------------------- Net cash provided by financing activities (11,757) 91,648 284,597 ---------------------------------------- Increase (decrease) in cash and cash equivalents 7,201 2,076 (11,439) Cash and cash equivalents at beginning of year 2,076 - 11,439 ---------------------------------------- Cash and cash equivalents at end of year $ 9,277 $ 2,076 $ - ========================================
See accompanying notes. F-4 JDN Realty Corporation Notes to Consolidated Financial Statements December 31, 2000 (dollars in thousands, except per share data) 1. Description of Business and Summary of Significant Accounting Policies Description of Business JDN Realty Corporation (the "Company") is a real estate company specializing in the development and asset management of retail shopping centers. The Company's operating shopping centers and development projects are located in 19 states. The Company has elected to be taxed as a real estate investment trust ("REIT"). Basis of Presentation The financial statements represent the consolidated financial statements of the Company, its wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Segment Reporting The Company operates in one reportable segment, the development, ownership and operation of retail properties, as defined in Statement of Financial Accounting Standard ("SFAS") No. 131, Disclosures about the Segments of an Enterprise and Related Information. Substantially all of the Company's assets, revenues and income are derived from this segment. Investments in Unconsolidated Entities The Company uses the equity method of accounting for investments in non- majority owned entities, including those where the Company's voting control is below 20%, where the Company has the ability to exercise significant influence over operating and financial policies. Real Estate Assets Shopping center properties are stated at cost less accumulated depreciation. The Company capitalizes costs of construction, property taxes, interest and other miscellaneous costs incurred during the development period until such time as projects become operational. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets beginning when the phases become substantially complete. The estimated useful life for financial reporting purposes is 31.5 years. Expenditures for maintenance and repairs are charged to operations as incurred. Renovations which improve or extend the life of the related assets are capitalized. As of December 31, 2000, the Company was negotiating the sale of 21 shopping center properties, with an aggregate net book value of $104,172 and an aggregate Net Operating Income of $90,583. The Company expects that these shopping center properties will be sold in 2001 and the first half of 2002. The Company records impairment losses and reduces the carrying amount of long-lived assets used in operations to their fair value when indicators of impairment are present and the estimated undiscounted cash flows, calculated using assumptions indicative of market conditions at the time impairment is evident, related to those assets are less than their carrying amounts. The Company records impairment losses and reduces the carrying amount of assets held for sale when the carrying amounts exceed the estimated selling prices less costs to sell. During 2000, the Company recorded impairment losses of approximately $18,882, of which approximately $9,829 relates to operating shopping centers held for sale and $5,491 relates to operating shopping centers held for use. F-5 Deferred Costs Costs and fees associated with the Company's debt obligations are included in deferred costs in the accompanying consolidated balance sheets and are amortized over the terms of the related debt agreements. Amortization of these deferred financing costs is included in interest expense in the consolidated statements of income. Accumulated amortization related to deferred costs totaled approximately $4,484 and $2,402 at December 31, 2000 and 1999, respectively. The Company capitalizes certain internal and external costs incurred in the development of computer software for internal use in accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The Company capitalized software development costs of $1,398 in 1999. Other Assets Included in other assets are notes receivable of $6,579 and $9,079 as of December 31, 2000 and 1999 respectively. Revenue Recognition The Company leases space in its shopping centers to tenants and recognizes minimum base rentals as revenue on a straight-line basis over the terms of the operating leases. The tenants are required to pay additional rentals based on common area maintenance expenses, and the Company recognizes such rentals as the revenue is earned. Certain tenants pay incremental rental amounts based on store sales and these percentage rentals are recognized as sales contingencies are resolved. The tenant base includes primarily national or regional retail chains and local retailers, and consequently the Company's credit risk is concentrated in the retail industry. Rents receivable in excess of security deposits are unsecured and are subject to credit losses to this extent. Net Gain on Real Estate Sales Net gain on real estate sales relates to the sale of shopping center properties and undeveloped parcels of land. In accordance with SFAS No. 66, Accounting for Real Estate Sales, the applicable gain or loss is recognized when the earnings process is deemed to be complete, which generally coincides with the closing. The Company records depreciation on shopping center properties through the date of sale. Interest Costs Interest costs incurred during the development period of projects are capitalized and depreciated over the life of the building. Interest costs capitalized were $9,444, $7,565 and $6,401 for the years ended December 31, 2000, 1999 and 1998, respectively. Interest payments totaled $45,051, $35,750 and $21,766 during the years ended December 31, 2000, 1999, and 1998, respectively. Interest income totaled $14,209, $10,765 and $8,571 during the years ended December 31, 2000, 1999 and 1998 respectively. Interest Rate Protection Agreements The Company utilizes interest rate swap agreements or interest rate cap agreements in an attempt to hedge its exposure to increasing rates on its floating rate debt. The interest rate swap agreements involve the exchange of amounts based on fixed interest rates for amounts based on variable interest rates over the lives of the agreements without an exchange of the notional amounts upon which the payments are based. The differential to be paid or received as interest rates change is accrued and recognized as an adjustment to interest incurred. The interest rate cap agreements involve a similar exchange once interest rates rise above a specified threshold. Below that threshold, the Company neither pays nor receives amounts under the interest rate cap agreements. Prior to the adoption of SFAS No. F-6 133, the fair value of the interest rate protection agreements and changes in the fair value as a result of changes in market interest rates are not recognized in the financial statements. On January 1, 2001, the Company adopted SFAS No. 133, as amended by SFAS No. 137 and No. 138 Accounting for Derivative Instruments and Hedging Activities. This accounting standard requires companies to carry all derivative instruments, including certain embedded derivatives, on the balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. The Company uses only qualifying hedges that are designated specifically to reduce exposure to interest rate risk. If in the future, the interest rate protection agreements were terminated, the fair value would be recognized as expense upon termination. In the event of early extinguishment of a designated debt obligation, the fair value would be recognized as expense concurrent with the extinguishment. The effect of adopting the SFAS No. 133 did not have a material effect on the Company's consolidated financial statements. Stock-Based Compensation The Company uses the intrinsic value method for valuing its awards of stock options and restricted stock and recording the related compensation expense, if any, in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. See Note 13 for pro forma disclosures using the fair value method as described in SFAS No. 123, Accounting for Stock-Based Compensation ("Statement 123"). Income Taxes The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code") and began operating as such on March 27, 1994. As a result, the Company is not subject to federal income taxes to the extent that it distributes annually at least 95% (or 90% after December 31, 2000) of its taxable income to its shareholders and satisfies certain other requirements defined in the Code. Accordingly, no provision was made for income taxes in the accompanying consolidated financial statements. The Company's distributions per common share are summarized as follows: Years ended December 31, 2000 1999 1998 ------------------------------ Ordinary income $ 0.64 $1.38 $1.35 Return of capital - - 0.06 Long-term capital gains 0.66 0.17 - ------------------------------ $ 1.30 $1.55 $1.41 ============================== Per Share Data In May 1998, the Company declared a 3-for-2 stock split, effected in the form of a stock dividend, to shareholders of record on June 19, 1998. All share and per share information has been restated to reflect the stock split. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Use of Estimates The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts F-7 reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications Certain amounts as previously reported have been reclassified to conform to the current year's presentation. 2. Unsecured Notes Payable Unsecured Notes Payable consisted of the following: December 31, 2000 1999 -------------------------------- Mandatory Par Put Remarketed Securities $ 75,000 $ 75,000 Seven Year Notes 74,873 74,838 Ten Year Notes 84,824 84,797 -------------------------------- $ 234,697 $ 234,635 ================================ The Mandatory Par Put Remarketed Securities ("MOPPRS") represent unsecured notes payable with a face amount of $75,000, a stated interest rate of 6.918% and a maturity date of March 31, 2013. Interest on the MOPPRS is payable semi- annually in arrears on each March 31 and September 30. In connection with the issuance of the MOPPRS, the Company sold an option to remarket the MOPPRS on March 31, 2003 to the agent. On March 31, 2003 the MOPPRS are subject to mandatory tender. The Seven-Year Notes represent unsecured notes with a face amount of $75,000, a stated interest rate of 6.80% and a maturity date of August 1, 2004. The Ten-Year Notes represent unsecured notes payable with a face amount of $85,000, a stated interest rate of 6.95% and a maturity date of August 1, 2007. Interest on the Seven Year Notes and Ten Year Notes is payable semi-annually in arrears on each February 1 and August 1. The Seven Year Notes, the Ten Year Notes and the MOPPRS were issued under Supplemental Indentures and an Indenture which contain covenants customary for notes of these types, including limitations on total indebtedness of the Company, limitations on secured debt, maintenance of minimum interest coverage ratios and maintenance of minimum ratios of unencumbered assets to unsecured debt. 3. Line of Credit and Term Loan Line of Credit and Term Loan consisted of the following: December 31, 2000 1999 --------------------------------------- Term Loan $ 100,000 $ 100,000 Line of Credit 142,000 135,000 --------------------------------------- $ 242,000 $ 235,000 ======================================= Through May 23, 2000, the Line of Credit represented a $200,000 unsecured line of credit with a bank group, which was scheduled to mature in May 2002. Through May 23, 2000, the Term Loan represented a $100,000 unsecured term loan with a bank group, which was scheduled to mature in February 2002. As a result of certain undisclosed transactions and lease discrepancies discovered by the Company, it was determined that the Company had breached certain non-financial and non-operating covenants contained in the credit agreements underlying the Line of Credit and the Term Loan (collectively the "Credit Agreements"). On March 2, 2000, the Company entered into a Continued F-8 Funding Agreement and an Interim Agreement with the bank groups which suspended the breach of these covenants and permitted the Company to access credit on an unsecured basis under the Line of Credit from February 14, 2000 until these agreements expired on April 14, 2000. The Company incurred $531 in fees related to the Continued Funding Agreement and the Interim Agreement. From April 15, 2000 to May 23, 2000, the Company was in default of the Credit Agreements and incurred interest at the default rate, which ranged from 11.0% to 11.5% during that period. On May 23, 2000, the Company closed a Second Amended and Restated Credit Agreement (the "Secured Line of Credit") and an Amended and Restated Term Loan Agreement (the "Secured Term Loan"), each effective as of May 19, 2000 (the Secured Line of Credit and the Secured Term Loan collectively referred to herein as the "Secured Credit Agreements"). Significant changes in the Secured Line of Credit as compared to the Line of Credit include the following: . Reduced maximum borrowings allowed from $200.0 million to $175.0 million; . Changed the maturity date from May 2002 to June 2001; . Changed the facility from unsecured to secured; . Increased the borrowing rate from LIBOR plus 1.15% to LIBOR plus 2.50% through September 30, 2000, and LIBOR plus 2.25% thereafter; . Increased the facility fee payable quarterly from .15% to .35% of the maximum loan amount; . Increased the limit on the ratio of Consolidated Liabilities to Gross Asset Value from 55% to 60%, and deleted the covenants limiting the ratios of Unencumbered Assets to Total Unsecured Funded Debt and Unsecured NOI to Unsecured Interest Expense, all as defined; and . Further restricted the Company's ability to pay distributions to shareholders. The Secured Term Loan amended the Term Loan to, among other things, increase the borrowing rate from LIBOR plus 1.40% to LIBOR plus 2.50% (adjusted to LIBOR plus 2.25% after September 30, 2000), to change the maturity date from February 2002 to June 2001 and to change the facility from unsecured to secured. The Secured Credit Agreements provide that the loans thereunder will be secured by first priority security interests in the Borrowing Base Properties, as defined in the Secured Credit Agreements. The Borrowing Base Properties consist of 52 properties with a net book value of approximately $440.3 million at December 31, 2000. Generally, each Borrowing Base Property must maintain occupancy and leasing percentages of 80% or higher and in the aggregate 60% of the value of the Borrowing Base Properties (based upon a 10% capitalization rate on annualized Net Operating Income, as defined) must be equal to or exceed the Commitments, as defined in the Secured Credit Agreements. The Company has agreed in the Secured Credit Agreements not to purchase or finance the purchase of its common or preferred equity securities (except, in the case of its common stock, as may be required to fund employee benefit plans in the ordinary course of business or to satisfy the requirements of stock option plans) or debt securities, or to make any voluntary prepayment of such debt securities other than with proceeds of the sale of shopping center properties not included in the Borrowing Base Properties. In addition, the Secured Credit Agreements restrict the amount of distributions to shareholders to 100% of REIT taxable income, as defined in the Code, for the year ended December 31, 2000 and to 95% of REIT taxable income for the year ended December 31, 2001. The Company paid the banks up-front fees of $1,800 in connection with the Secured Credit Agreements. These fees were recorded as deferred financing costs with the related amortization recorded as an adjustment to interest incurred over the life of the Secured Credit Facilities. At December 31, 2000, the Company had the ability to draw an additional $33,000 under the Secured Line of Credit. The weighted average interest rate on amounts outstanding under the Secured Line of Credit was 8.95%. At December 31, 2000, the weighted average interest rate on amounts outstanding under the Secured Term Loan was 8.89%. F-9 On March 29, 2001, the Company closed a Third Amended and Restated Master Credit Agreement with Fleet National Bank as Agent (the "2001 Credit Agreement"), amending and superseding its existing Secured Credit Agreements. The 2001 Credit Agreement provides for maximum borrowings of $300.0 million, comprised of a $150.0 million revolving credit facility and a $150.0 million term loan. Loans made pursuant to the 2001 Credit Agreement will initially bear interest at LIBOR plus 2.00% and will range from LIBOR plus 1.75% to LIBOR plus 2.25% based on Company leverage and credit quality. The 2001 Credit Agreement matures December 31, 2002 which may be extended until January 1, 2003 provided that the Company is in compliance with the terms of the agreement. The 2001 Credit Agreement provides that the loans thereunder will remain secured by first priority security interests, which were granted in connection with the amendments to the Secured Credit Agreement in 2000, in the Borrowing Base Properties (as defined in the 2001 Credit Agreement). At the closing of the 2001 Credit Agreement, the Borrowing Base Properties consisted of 52 properties valued at approximately $512.3 million. The Company may, however, add, remove or substitute certain of its other properties as Borrowing Base Properties subject to the conditions set forth in the 2001 Credit Agreement. The 2001 Credit Agreement contains certain requirements for each property within the Borrowing Base Properties and certain value and occupancy requirements for the Borrowing Base Properties in the aggregate. The 2001 Credit Agreement contains financial covenants including, but not limited to, a liabilities-to-assets ratio, fixed charges coverage ratios and a net worth covenant. In addition, the 2001 Credit Agreement restricts, subject to certain exceptions, the amount of distributions to the Company's shareholders to 95% of the Company's Funds From Operations (as defined in the 2001 Credit Agreement). 4. Mortgage Notes Payable At December 31, 2000, the Company's Mortgage Notes Payable consisted of nine amortizing notes payable secured by shopping center properties with an aggregate net book value of $97,444. At December 31, 2000, the Mortgage Notes Payable had a weighted average interest rate of 7.21%, aggregate monthly payments of principal and interest of $824 and maturities beginning in July 2001 and continuing through April 2019. 5. Debt Maturities As of December 31, 2000, principal payments on the Company's Unsecured Notes Payable, Secured Line of Credit, Secured Term Loan, and Mortgage Notes Payable were due as follows: Year ending December 31, -------------------------------------------------------------------------------- 2001 $ 266,048 2002 2,604 2003 83,286 2004 77,689 2005 3,271 Thereafter 141,243 ------------- $ 574,141 ============= In March 2001, the Company refinanced $242.0 million of the $266.0 million maturing in 2001. F-10 6. Fair Value of Financial Instruments The Company maintains an interest rate swap agreement and an interest rate cap agreement to hedge against increasing rates on its floating rate debt. Under the terms of the interest rate swap agreement, the Company pays a fixed rate of 6.48% and receives a variable rate equal to the rate for the one-month LIBOR based on a notional amount of $50,000. The interest rate swap agreement terminates on January 1, 2001. Under the terms of the interest rate cap agreement, the Company will receive a monthly amount equal to the positive difference between the one-month LIBOR and 7.25% based on a notional amount of $100,000. This interest rate cap agreement terminates on August 21, 2002. Under the terms of the interest rate cap agreement, if the one-month LIBOR does not exceed 7.25% on the payment date each month, the Company receives no payment. The carrying amounts and fair values of the Company's financial instruments with differences are as follows:
December 31, 2000 December 31, 1999 -------------------------- -------------------------- Carrying Carrying Amount Fair Value Amount Fair Value -------------------------- -------------------------- Unsecured Notes Payable $ 234,697 $ 193,591 $ 234,635 $ 225,473 Mortgage Notes Payable 97,444 94,328 101,247 98,398 Interest Rate Swap and Cap 313 39 - (114)
The following methods and assumptions were used by the Company in estimating its fair value disclosures of financial instruments: . Cash and cash equivalents, accounts receivable and accounts payable: The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts receivable and accounts payable approximates their fair value. . Unsecured notes payable: The fair values of the Company's unsecured notes payable are estimated based on dealer quotes at or near year- end. . Lines of credit and term loan: The carrying amounts of the Company's borrowings under its lines of credit and term loan approximate fair value based on the Company's current incremental borrowing rates for similar borrowing arrangements. . Mortgage notes payable: The fair values of the Company's mortgage notes payable are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. . Interest rate swap and cap: The fair values of the Company's interest rate swap and cap are based on dealer quotes that consider the estimated net proceeds if sold for positive valuations or the estimated cost to terminate for negative valuations. 7. Preferred Stock In September 1998, the Company issued 2,000,000 shares of its 9 3/8% Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock"), par value $0.01 per share, with a liquidation preference of $25.00 per share. The Series A Preferred Stock has no stated maturity but is redeemable at the Company's option on or after September 15, 2003 for $25.00 per share plus accumulated, accrued and unpaid dividends. Dividends on the Series A Preferred Stock are cumulative from the date of original issue and are payable quarterly on or about the last day of March, June, September and December of each year, when and as declared. Holders of the Series A Preferred Stock have no voting rights except with respect to certain extraordinary events affecting the rights of the holders of the Series A Preferred Stock. The Series A Preferred Stock is not convertible or exchangeable for any other securities or property of the Company. F-11 8. Investments in and Advances to Unconsolidated Entities As of December 31, 2000 the Company owned 1% of the outstanding voting common stock and 100% of the outstanding non-voting common stock of JDN Development Company, Inc. ("JDN Development"). As of December 31, 2000, W. Fred Williams, the former President of JDN Development, owned the remaining 99% of the outstanding voting common stock of JDN Development. The Company accounts for its investment in JDN Development using the equity method because management believes that it is able to exercise significant influence over the operating and financial policies of JDN Development. As of December 31, 2000 the Company also has an investment along with JDN Development in 21 partnerships formed for the purpose of acquiring, developing, selling or exchanging real estate assets. During the development stage of any project developed within one of these partnerships, the Company is the limited partner, and JDN Development is the general partner. Once the project has reached stabilization, the Company becomes the general partner, and JDN Development becomes the limited partner. The partnerships are consolidated in the general partner's financial statements. The Company accounts for its investment in JDN Development using the equity method because management believes that it is able to exercise significant influence over the operating and financial policies of JDN Development. See discussion related to ownership changes in JDN Development and the resulting accounting change in Note 21 below. F-12 The following summarizes the combined financial information of JDN Development and the partnerships:
December 31, 2000 1999 --------------------------- Assets Operating properties $ 34,961 $ 27,662 Property under development 128,378 113,869 Land held for sale 60,346 24,727 --------------------------- Total real estate 223,685 166,258 Other assets 36,517 32,818 --------------------------- $260,202 $199,076 =========================== Liabilities Mortgage notes payable $ 3,373 $ 16,335 Notes and advances payable to JDN Realty Corporation 198,026 122,120 Other liabilities 13,630 24,158 --------------------------- 215,029 162,613 Third party investors' interest 49,857 32,146 (Deficit) equity (4,684) 4,317 --------------------------- $260,202 $199,076 ===========================
Years Ended December 31, 2000 1999 1998 --------------------------------------------- Rental revenues $ 3,357 $ 4,368 $ 4,297 Operating expenses (5,372) (3,490) (1,796) Tenant settlement expense - (7,490) - Impairment losses (5,833) (2,988) - Provision for abandoned projects (3,819) (5,616) (840) --------------------------------------------- (Loss) income from operations (11,667) (15,216) 1,661 Interest expense (9,476) (5,121) (4,545) Net gain on real estate sales 11,828 10,594 7,957 Other income, net 3,311 931 817 --------------------------------------------- (Loss) income before income tax expense (6,004) (8,812) 5,890 Income tax benefit (expense) (2,999) 3,524 (2,392) --------------------------------------------- Net (loss) income $ (9,003) $ (5,288) $ 3,498 =============================================
F-13 9. Operating Leases Shopping center properties are leased to tenants under operating leases with expiration dates extending to the year 2059. As of December 31, 2000, approximate future minimum rentals due under noncancellable operating leases, excluding tenant reimbursements of operating expenses and additional rentals based on tenants' sales volume, were as follows: -------------------------------------------------------------------------------- 2001 $ 84,908 2002 80,408 2003 74,596 2004 70,437 2005 64,210 Thereafter 595,020 ----------------- $ 969,579 ================= As of December 31, 2000, Lowe's Companies, Inc., a national retailer, was an anchor in 21 of the Company's shopping centers. Lowe's was a tenant of the Company in 15 of the shopping centers and an unrelated party owned Lowe's portion of the center in the remaining six shopping centers. Rentals from this significant tenant were 17%, 14%, and 12% of total minimum and percentage rent for the years ended December 31, 2000, 1999, and 1998, respectively. There were no other tenants which represented more than 10% of the Company's total minimum and percentage rent in any year presented. As of December 31, 2000, Wal-Mart Stores, Inc., a national retailer, was an anchor in 33 of the Company's shopping centers. Wal-Mart was a tenant of the Company in 11 of the shopping centers and an unrelated party owned Wal-Mart's portion of the center in the remaining 22 shopping centers. Rentals from this significant tenant were approximately 9%, 15%, and 16% of total minimum and percentage rents for the years ended December 31, 2000, 1999, and 1998, respectively. 10. Long-Term Incentive Plan In 1999, the Company adopted the JDN Realty Corporation Long-Term Incentive Plan (the "LTIP"). Under the LTIP the Board of Directors may award restricted stock of the Company and options to purchase shares of common stock of the Company. Any restricted stock or stock options awarded under the LTIP are to be issued under the Incentive Stock Plan (see Note 11 below) and would vest upon satisfaction of criteria established by the Board of Directors. During 1999, the Company granted 600,000 shares of restricted stock under the LTIP. This non-cash issuance of stock totaling $12,038 is excluded from the statement of cash flows in 1999. During 2000, a total of 468,285 shares of this restricted stock were forfeited and the remaining 131,715 shares vested as pursuant to separation agreements with two of the Company's former officers. The Company recorded $976 and $344 related to stock based compensation under the LTIP for the years ended December 31, 2000 and 1999, respectively. 11. Incentive Stock Plan The Company maintains the JDN Realty Corporation 1993 Incentive Stock Plan (the "Incentive Stock Plan") which provides for the issuance of options to purchase shares of the Company's common stock, restricted stock and stock appreciation rights to individuals providing services to the Company, its subsidiaries and affiliated entities at the discretion of the Compensation Committee of the Board of Directors. Under the Incentive Stock Plan, the exercise price of options granted will not be less than the F-14 fair market value of the shares on the date of grant for incentive stock options and will not be less than 50% of the fair market value of the shares on the date of grant for non-qualified stock options. No options have been granted under the Incentive Stock Plan with exercise prices below fair market value. The options generally expire 10 years from the date of grant and vest one-third after six months and one-third after each of the two successive twelve-month periods thereafter. The following is a summary of option activity under the Incentive Stock Plan:
Weighted Average Number of Shares Option Price Option Price Underlying Options Per Share Per Share ------------------------------------------------------------------------------------------------------------------------------- Options outstanding, January 1, 1998 2,733,470 $13.50 to $20.75 $17.639 Granted 10,000 $21.3125 21.313 Exercised (23,500) $13.50 to $20.75 14.782 Forfeited (5,000) $20.75 20.750 -------------------------------------------------------------------------- Options outstanding, December 31, 1998 2,714,970 $13.50 to $21.3125 17.672 Granted - - - Exercised (35,500) $13.50 to $20.75 14.623 Forfeited (10,000) $21.3125 21.313 -------------------------------------------------------------------------- Options outstanding, December 31, 1999 2,669,470 $13.50 to $21.3125 17.699 Granted 386,000 $9.75 to $10.50 10.180 Forfeited (2,060,011) $10.19 to $20.75 17.812 -------------------------------------------------------------------------- Options outstanding, December 31, 2000 995,459 $9.75 to $20.75 $14.552 ========================================================================== Options exercisable, December 31, 2000 659,959 $9.75 to $20.75 $16.743 ==========================================================================
Effective February 27, 1998, the Company amended the Incentive Stock Plan to, among other things, provide for issuances of restricted stock. Concurrently, the Company adopted the JDN Realty Corporation Deferred Bonus Plan pursuant to the Incentive Stock Plan (the "Deferred Bonus Plan") which established a program to provide incentive compensation to certain key employees in the form of a bonus that could be deferred at the election of the employee, the value of which is tied to the equity value of the Company. An eligible employee could elect to defer all or a specified portion of the receipt of cash bonus payments awarded by the Company and could receive restricted stock in lieu thereof under the Incentive Stock Plan. On March 1, 1998, the Company issued 111,312 shares of restricted stock under the Deferred Bonus Plan. This restricted stock vested one-fourth on March 1, 1999 and one-fourth on each successive March 1 thereafter. As of December 31, 2000, 1,993,655 shares were available for the Company to award in any combination of options, restricted stock or stock appreciation rights under the Incentive Stock Plan. During 2000, a total of 41,700 shares of this restricted stock were forfeited. The weighted average remaining contractual life of options outstanding under the Incentive Stock Plan as of December 31, 2000 was 6.9 years. During 2000 the Company issued 393,800 shares of restricted stock under the 1993 Incentive Stock Plan at a weighted average grant-date fair value of $4,185. The restricted stock, governed by the 2000 Restricted Stock Agreement, was issued to key employees to provide incentives that reward long-term growth and profitability of the Company. Of the 393,800 shares of restricted stock issued in 2000, 278,800 vest on July 10, 2010, however, up to 20% of the restricted stock may vest each year based upon achieving certain performance criteria adopted by the Compensation Committee. The remaining 115,000 shares of restricted stock vest monthly over a two year period beginning in April 2000 and continuing through March 2002. As of December 31, 2000, 366,152 shares of restricted stock were outstanding. The Company recorded $417, $193 and $116 related to stock based compensation under the Incentive Stock Plan for the years ended December 31, 2000, 1999 and 1998, respectively. The weighted average fair value of options granted under the Incentive Stock Plan for the years ended December 31, 2000 and 1998 was $88 and $10, respectively. F-15 12. Directors Stock Plan The Company maintains the JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (the "Directors Plan") which provides for the issuance of options to purchase shares of the Company's common stock or the granting of shares of common stock to members of the Company's Board of Directors who are not employees of the Company. The Directors Plan initially provided that 4,500 options be granted automatically to each non-employee director serving the Company on January 1 of each year. The exercise price of each option equaled the fair market value of the shares on the date of grant. The options expire 10 years from the date of grant and vest in the following manner: (1) one-third two years after the date of grant, (2) one-third three years after the date of grant, and (3) one-third four years after the date of grant. In November 1998, the Company amended the Directors Plan as follows with respect to future grants: (1) increased the number of options granted automatically, annually to 15,000 options to each non-employee director serving the Company on January 1 of each year; (2) changed the option vesting period to the following: (a) one-third six months after the date of grant, (b) one-third 18 months after the date of grant, and (c) one-third 30 months after the date of grant; and (3) provided for the awarding of $10 in value of common stock to each non-employee director on the first day of each calendar quarter beginning January 1, 1999. In August 2000, the Company amended the Directors Plan to reduce the amount of the quarterly stock award to $8.75. The following is a summary of option activity under the Directors Plan:
Weighted Average Number of Shares Option Price Option Price Underlying Options Per Share Per Share ------------------------------------------------------------------------------------------------------------------------------- Options outstanding, January 1, 1998 58,500 $13.333 to $18.417 $15.571 Granted 18,000 $21.584 21.584 Exercised (3,000) $13.333 13.333 -------------------------------------------------------------------------- Options outstanding, December 31, 1998 73,500 $13.333 to $21.584 17.135 Granted 75,000 $21.563 21.563 Exercised (1,500) $18.417 18.417 Forfeited (22,500) $18.417 to $21.584 21.147 -------------------------------------------------------------------------- Options outstanding, December 31, 1999 124,500 $13.333 to $21.584 19.061 Granted 75,000 $16.130 16.130 -------------------------------------------------------------------------- Options outstanding, December 31, 2000 199,500 $13.333 to $21.584 $17.959 ========================================================================== Options exercisable, December 31, 2000 116,000 $13.333 to $21.584 $17.828 ==========================================================================
As of December 31, 2000, 239,433 shares were available for award under the Directors Plan in any combination of options or shares of common stock. The weighted average remaining contractual life of options outstanding under the Directors Plan as of December 31, 2000 was 7.4 years. The Company recorded $175 and $190 related to stock based compensation under the Directors Plan for the years ended December 31, 2000 and 1999, respectively. The weighted average fair value of options granted under the Directors Plan for the years ended December 31, 2000, 1999 and 1998 was $12, $97 and $19, respectively. In February 2001, the Company made a one-time grant of an additional 30,000 options under the Directors Plan to each of the four non-employee directors at an exercise price of $12.17 per share. 13. Pro Forma Disclosures on Stock Based Compensation Pro forma information regarding net income and earnings per share is required by SFAS No. 123 using an acceptable fair value method for all stock based compensation granted by the Company subsequent to December 31, 1994. The Company estimated the fair value for this stock based compensation at the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for 2000, 1999 and 1998: risk-free interest rate of 5.74% 4.57%, and 5.71%, respectively; dividend yield of 12.71%, 7.33% and 7.24%, respectively; volatility factor of the expected market price of the Company's common stock of 0.27, 0.17, and 0.16, respectively; and a weighted-average expected life of the options of 4, 5 and 5 years, respectively. F-16 Option valuation models used under SFAS 123 were developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of stock based compensation is amortized to expense over the applicable vesting periods. On a pro forma basis, assuming that the Company utilized the fair value method of accounting for stock based compensation, net income and net income per share information was as follows:
Years Ended December 31, 2000 1999 1998 -------------------------------------------- Net income $ 25,067 $52,135 $39,400 Net income attributable to common shareholders 20,379 47,447 38,059 Net income attributable to common shareholders per share: Basic $ 0.63 $ 1.43 $ 1.24 Diluted 0.63 1.41 1.22
14. Employee Stock Purchase Plan The Company suspended the JDN Realty Corporation 1995 Employee Stock Purchase Plan (the "ESPP") in 2000 which was intended to qualify as an "Employee Stock Purchase Plan" within the meaning of Section 423 of the Code. The ESPP authorized the sale of up to 150,000 shares of common stock to eligible employees of the Company at a 15% discount from the market price. During 1999 and 1998, the Company issued 2,158, and 1,755 shares, respectively, under the ESPP. 15. Dividend Reinvestment and Stock Purchase Plan The Company previously established the JDN Realty Corporation Dividend Reinvestment and Stock Purchase Plan (the "DRIP"). The DRIP allowed shareholders to automatically reinvest cash dividends in and make optional cash purchases of shares of the Company's common stock. As of December 31, 1999, 31,786 shares had been issued under the DRIP and 718,214 were reserved for issuance. In 2000, the DRIP was suspended. 16. Common Stock Repurchase Program On November 9, 1999, the Company announced a program which provided for the repurchase of up to 3.0 million of its outstanding common shares. Through December 31, 2000, the Company had repurchased 872,200 shares at an average price of approximately $15.84 per share for a total of $13,812. As of December 31, 2000, the Company has discontinued this repurchase program. F-17 17. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share:
Years Ended December 31, 2000 1999 1998 -------------------------------------------- Numerator: Net Income $ 23,497 $ 53,051 $ 40,680 Dividends to preferred shareholders (4,688) (4,688) (1,341) -------------------------------------------- Net income attributable to common shareholders $ 18,809 $ 48,363 $ 39,339 ============================================ Denominator (in thousands): Weighted-average shares outstanding 32,829 33,426 30,788 Unvested restricted stock outstanding (456) (300) (87) -------------------------------------------- Denominator for basic earnings per share 32,373 33,126 30,701 Dilutive effect of stock options and unvested restricted stock 56 442 527 -------------------------------------------- Denominator for diluted earnings per share 32,429 33,568 31,228 ============================================ Net income per common share: Basic $ 0.58 $ 1.46 $ 1.28 ============================================ Diluted $ 0.58 $ 1.44 $ 1.26 ============================================
The Company is the general partner in a limited partnership that issued limited partnership units initially valued at $3,000 in a limited partnership formed to own and operate a shopping center in Milwaukee, Wisconsin. Subject to certain conditions, the limited partnership units are exchangeable for cash or 139,535 shares of the Company's common stock. As of December 31, 2000, none of the limited partnership units have been exchanged for shares. Using the "if-converted" method, the dilutive effect of these units is immaterial. 18. Commitments As of December 31, 2000, the Company guaranteed one loan of JDN Development in the amount of $3,348. The loan was secured by property owned by JDN Development and was satisfied in full in February, 2001. As of December 31, 2000, the Company had executed construction contracts on 16 of its development sites and had approximately $4,028 in costs remaining to be incurred under these contracts. 19. Contingencies In February 2000, the Company announced that it had discovered undisclosed compensation arrangements with two executive officers of JDN Development, additional unauthorized benefits to these same two executive officers, and undisclosed related party transactions involving these two officers and the former Chairman and Chief Executive Officer of the Company. As a result of this discovery, a special committee of the Board of Directors was formed to, among other things, conduct an inquiry into these matters. As a result of the above investigation, the two executive officers of JDN Development, the Chairman and Chief Executive Officer of the Company and the Company's Chief Financial Officer resigned in 2000. F-18 Since the Company's announcement of the undisclosed transactions mentioned above, a number of lawsuits have been filed against the Company. One or more of these suits also names as defendants JDN Development and certain current and former officers and directors of JDN Development and/or the Company. Certain class actions filed in federal court allege violations of the federal securities laws asserting that by failing to report the undisclosed compensation, unauthorized benefits and related party transactions to the public in the Company's financial statements, public filings, and otherwise, the defendants made or participated in making material misstatements or omissions which caused the plaintiffs to purchase the Company's stock at artificially inflated prices. Included in the class actions is a lawsuit which names among the defendants certain underwriters involved in the preferred stock offering by the Company in 1998 (the "Preferred Stock Class Action"). The Preferred Stock Class Action raises allegations similar to those raised in the other class action cases, but it is based on purported misrepresentations or omissions in the Company's registration statement and prospectus in connection with the 1998 offering. The plaintiffs in these lawsuits seek compensatory damages of an indeterminate amount, interest, attorneys' fees, experts' fees and other costs and disbursements. On April 17, 2000, the federal court entered an order consolidating the various class actions in the United States District Court for the Northern District of Georgia ("Consolidated Class Actions"). On June 13, 2000, the federal court entered an order appointing Clarion-CRA Securities lead plaintiff and the law firm of Chitwood & Harley as lead plaintiff's counsel. On February 13, 2001, plaintiffs in the Preferred Stock Class Action purported to amend their complaint to add Waller, Lansden, Dortch & Davis, PLLC, the Company's securities counsel, as a defendant. The purported amendment was not filed by the lead plaintiff and the Company intends to file a motion to strike the purported amendment as improper. A class action lawsuit was also filed by the Company's shareholders against the Company, JDN Development, and four former officers and directors of these companies in the Superior Court of Fulton County, Georgia. The complaint contains substantially the same factual allegations asserted in the federal class actions, but purports to seek relief under state law for damages which these plaintiffs allege should have been paid to the class as dividends. The original complaint contained claims of common law fraud, conversion and purported violations of Georgia's Racketeer Influenced and Corrupt Organizations Act, but the fraud count has now been dropped by way of an amended complaint recently filed by the plaintiffs. The plaintiffs seek compensatory and punitive damages, attorneys' fees and expenses, interest and equitable relief. The case was removed to federal court, but has now been remanded back to Superior Court, where it is currently pending. Lawsuits have also been filed against the Company as a nominal defendant, as well as individual defendants J. Donald Nichols, Elizabeth L. Nichols, Craig Macnab, Philip G. Satre, William G. Byrnes, Haywood D. Cochrane, Jr., William B. Greene, Jeb L. Hughes, C. Sheldon Whittelsey, IV and William J. Kerley in the United States District Court for the Northern District of Georgia, Atlanta Division and in Fulton County Superior Court. Each of the named individuals are current or former officers or directors of the Company or JDN Development. A similar suit has now been filed in State Court of Fulton County naming Ernst & Young, LLP, the Company's auditors, in addition to the above-referenced defendants. The plaintiffs purport to bring these suits as derivative actions. The complaints allege that the individual defendants, from 1994 through 1999, violated certain duties in connection with the previously undisclosed compensation arrangements. The complaints also allege claims for breach of fiduciary duty, abuse of control, waste of corporate assets, unjust enrichment and gross mismanagement. The plaintiffs, on behalf of the Company, seek injunctive relief, compensatory and punitive damages and disgorgement of all profits and gains by the individual defendants. The Company believes that it has meritorious defenses to the claims brought in the lawsuits described above, but there can be no assurance that such defenses will be successful or that the lawsuits will not have a material adverse effect on the Company's financial position, results of operations and cash flows. In addition, the timing of the final resolution of these proceedings is uncertain. The Company is also subject to a formal order of investigation initiated by the SEC as of August 2, 2000. Pursuant to this order, the Company has voluntarily provided certain documents and other information to the SEC regarding the compensation arrangements, unauthorized benefits and related party transactions mentioned above. By letter dated March 5, 2001, the SEC staff advised the Company that it intended to recommend that the SEC institute a proceeding against the Company. F-19 The Company continues to cooperate fully with the SEC staff in order to resolve this matter as expeditiously as practicable. Management of the Company does not expect that the resolution of this matter will have a material adverse effect on the Company's business, financial condition or results of operation. However, the Company is unable to predict with certainty the timing or ultimate outcome of this matter. In an unrelated lawsuit, on February 2, 2000, Dogwood Drive L.L.C., ("Dogwood") filed suit against the Company and WHF, Inc. ("WHF"), a wholly-owned subsidiary of JDN Development, which, until April 1999, owned a 72% interest in Dogwood and served as the operating member of the entity. The suit was filed in the Superior Court of Gwinnett County, Georgia. The complaint asserts, among other things, breach of fiduciary duty against WHF and improper receipt of funds by the Company. The Company believes that it and WHF have meritorious defenses to the claims and intends to vigorously defend the suit. On April 28, 2000, Lake Lucerne Estates Civic Club, Inc., a nonprofit homeowners association located in Gwinnett County, Georgia, and a number of individual plaintiffs, filed suit against JDN Development, Lowe's Companies, Inc., and Haygood Contracting, Inc. The suit was filed in the Superior Court of Fulton County, Georgia. The complaint asserts trespass, nuisance and negligence against JDN Development in connection with the development of a shopping center anchored by Lowe's. JDN Development has filed defensive pleadings denying liability, and discovery is now being conducted by both sides. The Company is from time to time a party to other legal proceedings which arise in the ordinary course of its business. The Company is not currently involved in any litigation in addition to the lawsuits described above the outcome of which would, in management's judgement based on information currently available, have a material adverse effect on the results of operations or financial condition of the Company, nor is management aware of any such litigation threatened against the Company. 20. Related Party Transactions GeoSurvey, Ltd. Co. ("GeoSurvey"), which was 50% owned by two former executive officers of JDN Development and 50% owned by an unrelated third party, performs survey work for the Company. During the years ended December 31, 2000, 1999 and 1998, the Company paid for services provided by GeoSurvey in the amounts of $17, $18, and $11, respectively. Comm-Aviation, LLC ("Comm-Aviation"), which was 99% owned by J. Donald Nichols, the Company's former Chief Executive Officer, provided charter flight service to the Company. During the years ended December 31, 2000, 1999 and 1998, the Company paid for services provided by Comm-Aviation in the amounts of $47, $126 and $208, respectively. Lightyear Holdings, Inc. (formerly Unidial Holdings, Inc.) ("Lightyear"), which was 31% owned by Mr. Nichols through June 2, 2000, provides telecommunication services to the Company. Craig Macnab, a member of the Company's Board of Directors and the Company's current Chief Executive Officer, was also a board member of Lightyear from August 1996 until April 2000. During the years ended December 31, 2000, 1999, and 1998, the Company paid for services provided by Lightyear in the amounts of $37, $49, and $41, respectively. JDN Development paid additional amounts to these same companies in these years. 21. Subsequent Events During 2001, the Company sold three of its shopping center properties containing 253,500 square feet to three third-party purchasers for approximately $22,093. Recent legislation amending the tax laws applicable to REITs permitted a change in the ownership structure of JDN Development. Effective January 1, 2001, the Company affected this change by acquiring 100% of the ownership of JDN Development. As a result of the stock acquisition, the Company has changed its accounting for JDN Development from the equity method to the consolidated F-20 method effective January 1, 2001. In addition, the Company and JDN Development elected taxable REIT subsidiary status for federal income tax purposes for JDN Development. In conjunction with the closing of the 2001 Credit Agreement, the Company entered into an interest rate swap agreement at a strike price of 4.62% on $150,000 of the Company's indebtedness. The swap will expire on December 31, 2002. 22. Quarterly Financial Information (Unaudited) The following is a summary of the unaudited quarterly financial information for the years ended December 31, 2000 and 1999:
Quarters First Second Third Fourth -------------------------------------------------------------------------------------------------------------------- 2000: Revenues $ 26,156 $ 26,276 $ 27,795 $ 25,823 Net income (loss) 14,059 10,604 12,023 (13,188) Net income (loss) attributable to common shareholders 12,887 9,432 10,851 (14,360) Income (loss) per common share: Basic $ 0.40 $ 0.29 $ 0.34 $ (0.44) Diluted 0.40 0.29 0.34 (0.44) 1999: Revenues $ 25,690 $ 25,940 $ 26,656 $ 27,952 Net income 11,932 12,099 18,601 10,419 Net income attributable to common shareholders 10,760 10,927 17,429 9,247 Income per common share: Basic $ 0.33 $ 0.33 $ 0.53 $ 0.28 Diluted 0.32 0.32 0.52 0.28
Fourth Quarter net income was impacted by special charges, which include impairment charges related to both operating and non-operating real estate assets on the Company and JDN Development, and a charge to earnings to create a valuation allowance on deferred tax assets recorded at JDN Development. Impairment charges amounted to $19,794 or $0.61 per share. The valuation allowance on the deferred tax asset at JDN Development amounted to $5,346 or $0.16 per share. F-21 Report of Independent Auditors Shareholders and Board of Directors JDN Realty Corporation We have audited the accompanying consolidated balance sheets of JDN Realty Corporation as of December 31, 2000 and 1999 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of JDN Realty Corporation at December 31, 2000 and 1999 and the consolidated results of its operations and cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Atlanta, Georgia March 29, 2001 F-22 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS JDN REALTY CORPORATION (In thousands)
--------------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E --------------------------------------------------------------------------------------------------------------------------------- Additions ----------------------------------------- Balance at Beginning Charges to Costs Charged to Other Deductions- Balance at End Description of Period and Expenses Accounts - Describe Describe of Period --------------------------------------------------------------------------------------------------------------------------------- Year ended December 31, 2000: Deduct from asset accounts: Allowance for Doubtful Accounts $714 $496 $478 (1) $732 ============== =============== ============== =============== Year ended December 31, 1999: Deduct from asset accounts: Allowance for Doubtful Accounts $667 $646 $599 (1) $714 ============== =============== ============== =============== Year ended December 31, 1998: Deduct from asset accounts: Allowance for Doubtful Accounts $719 $386 $438 (1) $667 ============== =============== ============== ===============
(1) Write-off of uncollectible rents receivable. F-23 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
------------------------------------------------------------------------------------------------------------------------------------ COL. A COL. B COL. C COL. D COL. E ------------------------------------------------------------------------------------------------------------------------------------ Cost Capitalized Subsequent to Gross Amount at which Initial Cost to Company Acquisition Carried at close of Period -------------------------- ----------------- ----------------------------- Buildings and Buildings and Description Encumbrances Land Improvements Improvements Land Improvements Total ------------------------------------------------------------------------------------------------------------------------------------ Operating Property ------------------ Southland Plaza (Decatur, AL) $ 4,061 $ 1,013 $ 5,802 $ 250 $ 1,013 $ 6,052 $ 7,065 East Side Plaza (Gadsden, AL) - 130 - 2,361 130 2,361 2,491 Pepperell Corners (Opelika, AL) 9,063 2,062 11,676 149 2,062 11,825 13,887 Pepperell Corners, Phase II (Opelika, AL) 1,050 744 1,628 (33) 744 1,595 2,339 Lowe's (Opelika, AL) 5,364 2,600 7,027 218 2,600 7,245 9,845 Trotter's Ridge (Scottsboro, AL) 1,610 581 3,068 77 581 3,145 3,726 University Hills (Denver, CO) 21,627 15,272 17,017 6,082 15,272 23,099 38,371 Brandon Lake Village (Brandon, FL) - 3,627 7,110 1,414 3,627 8,524 12,151 Publix (Brandon, FL) 4,601 1,721 3,418 117 1,721 3,535 5,256 Golden Corral (Bradenton, FL) - 883 1,283 10 883 1,293 2,176 White Sands (Fort Walton, FL) - 452 - 1,162 452 1,162 1,614 Gulf Breeze Marketplace (Gulf Breeze, FL) - 830 - 2,953 830 2,953 3,783 Ocala West Shopping Center (Ocala, FL) - 839 4,920 229 839 5,149 5,988 Capital West (Tallahassee, FL) 3,602 2,040 - 4,877 2,040 4,877 6,917 Lowe's (Alpharetta, GA) 13,265 5,366 6,800 631 4,466 7,431 11,897 Athens East (Athens, GA) - 102 2,690 - 102 2,690 2,792 Lowe's (Buford, GA) - 5,369 19,555 (11,465) 1,971 8,090 10,061 Riverplace (Canton, GA) 4,221 2,857 4,478 1,887 2,857 6,365 9,222 River Pointe (Canton, GA) 1,288 370 2,301 219 361 2,520 2,881 Felton's Crossing (Cartersville, GA) - 177 - 7,001 177 7,001 7,178 ------------------------------------------------------------------------------------------------------------------------------------ COL. F COL. G COL. H COL. I ------------------------------------------------------------------------------------------------------------------------------------ Life on which depreciation in Accumulated Date of latest income statements is Description Depreciation Construction Date Acquired computed ------------------------------------------------------------------------------------------------------------------------------------ Operating Property ------------------ Southland Plaza (Decatur, AL) $ 763 1965 1996 Building 31.5 years (1) Sign 20 years (2) East Side Plaza (Gadsden, AL) 1,262 1979 1980 Building 31.5 years (1) Pepperell Corners (Opelika, AL) 2,540 1993 1994 Building 31.5 years (1) Pepperell Corners, Phase II (Opelika, AL) 294 1995 1995 Building 31.5 years (1) Lowe's (Opelika, AL) 322 1999 1999 Building 31.5 years (1) Trotter's Ridge (Scottsboro, AL) 125 1999 1999 Building 31.5 years (1) University Hills (Denver, CO) 3,897 1997 1998 Building 31.5 years (1) Sign 20 years (2) Brandon Lake Village (Brandon, FL) 599 1997 1998 Building 31.5 years (1) Publix (Brandon, FL) 210 1999 1999 Building 31.5 years (1) Golden Corral (Bradenton, FL) 44 1999 1999 Building 31.5 years (1) White Sands (Fort Walton, FL) 453 1986 1985 Building 31.5 years (1) Sign 20 years (2) Gulf Breeze Marketplace (Gulf Breeze, FL) 106 1998 1998 Building 31.5 years (1) Ocala West Shopping Center (Ocala, FL) 531 1984 1997 Building 31.5 years (1) Capital West (Tallahassee, FL) 1,625 1990 1989 Building 31.5 years (1) Sign 20 years (2) Lowe's (Alpharetta, GA) 547 1998 1998 Building 31.5 years (1) Athens East (Athens, GA) 63 2000 2000 Building 31.5 years (1) Lowe's (Buford, GA) 523 1998 1998 Building 31.5 years (1) Riverplace (Canton, GA) 1,611 1983 1983 Building 31.5 years (1) River Pointe (Canton, GA) 345 1996 1996 Building 31.5 years (1) Felton's Crossing (Cartersville, GA) 1,728 1984 1983 Building 31.5 years (1) Sign 20 years (2)
F-24 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
----------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C ----------------------------------------------------------------------------------------------------------------- Cost Capitalized Subsequent to Initial Cost to Company Acquisition ------------------------------------------- Buildings and Encumbrances Land Improvements ----------------------------------------------------------------------------------------------------------------- Operating Property: ------------------- Chamblee Plaza (Chamblee, GA) - 1,698 9,913 578 Bradley Park Crossing (Columbus, GA) 3,950 2,015 7,622 155 Cumming Marketplace (Cumming, GA) 9,538 6,963 15,250 4,403 Pinetree Village (Cumming, GA) - 648 1,707 1,608 Douglasville Marketplace (Douglasville, GA) - 2,511 - 5,768 Dodge County (Eastman, GA) 1,762 172 - 2,755 Banks Station (Fayetteville, GA) - 1,522 9,603 (1,196) Bruno's Plaza (Ft. Oglethorpe, GA) 5,842 1,092 6,193 172 Ellis Crossing (Griffin, GA) - 302 - 2,487 Fayetteville - Specialty Shops (Fayetteville, GA) - 1,231 2,122 - North Main Street (Lafayette, GA) 2,590 123 - 4,455 LaGrange Wal-Mart (LaGrange, GA) - 183 - 1,420 CVS (Lawrenceville, GA) 402 925 1,138 59 Five Forks Village (Lawrenceville, GA) 2,942 1,245 7,065 156 Lawrenceville Town Center (Lawrenceville, GA) 12,787 3,563 17,037 (2,792) Five Forks Crossing (Lilburn, GA) 2,442 930 5,287 42 Pleasant Hill Lowe's (Lilburn, GA) 12,420 3,643 6,413 281 Midway Plaza (Loganville, GA) 3,618 1,356 6,400 109 K-Mart (Macon, GA) - 998 5,515 - Beacon Heights (Madison, GA) - 549 - 3,552 ------------------------------------------------------------------ COL. E COL. F -------------------------------------------------- Gross Amount at which Carried at close of Period Buildings and Accumulated Land Improvements Total Depreciation ------------------------------------------------------------------ Operating Property: ------------------- Chamblee Plaza (Chamblee, GA) 1,698 10,491 12,189 832 Bradley Park Crossing (Columbus, GA) 2,014 7,777 9,791 374 Cumming Marketplace (Cumming, GA) 5,010 19,653 24,663 722 Pinetree Village (Cumming, GA) 1,243 3,315 4,558 98 Douglasville Marketplace (Douglasville, GA) 6,339 5,768 12,107 15 Dodge County (Eastman, GA) 180 2,755 2,935 787 Banks Station (Fayetteville, GA) 1,253 8,407 9,660 2,168 Bruno's Plaza (Ft. Oglethorpe, GA) 1,092 6,365 7,457 1,272 Ellis Crossing (Griffin, GA) 302 2,487 2,789 1,150 Fayetteville - Specialty Shops (Fayetteville, GA) 1,231 2,122 3,353 63 North Main Street (Lafayette, GA) 123 4,455 4,578 1,149 LaGrange Wal-Mart (LaGrange, GA) 183 1,420 1,603 738 CVS (Lawrenceville, GA) 925 1,197 2,122 76 Five Forks Village (Lawrenceville, GA) 1,245 7,221 8,466 1,549 Lawrenceville Town Center (Lawrenceville, GA) 2,984 14,245 17,229 3,812 Five Forks Crossing (Lilburn, GA) 930 5,329 6,259 1,145 Pleasant Hill Lowe's (Lilburn, GA) 3,556 6,694 10,250 522 Midway Plaza (Loganville, GA) 1,356 6,509 7,865 1,030 K-Mart (Macon, GA) 869 5,515 6,384 336 Beacon Heights (Madison, GA) 417 3,552 3,969 1,540 ------------------------------------------------------------- COL. G COL. H COL. I ------------------------------------------------------------- Life on which depreciation in Date of latest income statements is Construction Date Acquired computed ------------------------------------------------------------- Operating Property: ------------------- Chamblee Plaza (Chamblee, GA) 1976 1998 Building 31.5 years (1) Bradley Park Crossing (Columbus, GA) 1999 1999 Building 31.5 years (1) Cumming Marketplace (Cumming, GA) 1997 1997 Building 31.5 years (1) Sign 20 years (2) Pinetree Village (Cumming, GA) 1999 1999 Building 31.5 years (1) Douglasville Marketplace (Douglasville, GA) 1999 1999 Building 31.5 years (1) Dodge County (Eastman, GA) 1990 1986 Building 31.5 years (1) Sign 20 years (2) Banks Station (Fayetteville, GA) 1990 1994 Building 31.5 years (1) Bruno's Plaza (Ft. Oglethorpe, GA) 1973 1994 Building 31.5 years (1) Ellis Crossing (Griffin, GA) 1986 1985 Building 31.5 years (1) Sign 20 years (2) Fayetteville - Specialty Shops (Fayetteville, GA) 2000 2000 Building 31.5 years (1) North Main Street (Lafayette, GA) 1990 1988 Building 31.5 years (1) Sign 20 years (2) LaGrange Wal-Mart (LaGrange, GA) 1984 1983 Building 31.5 years (1) CVS (Lawrenceville, GA) 1998 1998 Building 31.5 years (1) Five Forks Village (Lawrenceville, GA) 1990 1994 Building 31.5 years (1) Lawrenceville Town Center (Lawrenceville, GA) 1989 1994 Building 31.5 years (1) Five Forks Crossing (Lilburn, GA) 1990 1994 Building 31.5 years (1) Pleasant Hill Lowe's (Lilburn, GA) 1997 1997 Building 31.5 years (1) Midway Plaza (Loganville, GA) 1995 1997 Building 31.5 years (1) K-Mart (Macon, GA) 1999 1999 Building 31.5 years (1) Beacon Heights (Madison, GA) 1989 1987 Building 31.5 years (1) Sign 20 years (2)
F-25 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31,2000 (In thousands)
----------------------------------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E ----------------------------------------------------------------------------------------------------------------------------------- Cost Capitalized Subsequent to Gross Amount at which Initial Cost to Company Acquisition Carried at close of Period ----------------------------------------------------------------------- Buildings and Buildings and Encumbrances Land Improvements Improvements Land Improvements Total ----------------------------------------------------------------------------------------------------------------------------------- Operating Property: ------------------- Garrison Ridge Xing (Marietta, GA) 10,746 3,587 8,440 10 3,412 8,450 11,862 Applebee's (McDonough, GA) - 341 674 7 341 681 1,022 Newnan Crossing (Newnan, GA) 5,169 3,750 17,745 (9,942) 2,180 7,803 9,983 Peachtree City Marketplace (Peachtree GA) 1,441 772 1,242 2,473 1,150 3,715 4,865 Pike's Nursery (Peachtree City, GA) - 1,008 1,004 (1) 1,008 1,003 2,011 Merchant Square (Riverdale, GA) - 191 - 1,372 191 1,372 1,563 Freeway Junction (Stockbridge, GA) 5,376 979 5,550 238 979 5,788 6,767 Pike's Nurseries (Stockbridge, GA) - 963 1,039 44 963 1,083 2,046 Lowe's (Stone Mountain, GA) 4,260 3,186 7,882 (25) 3,307 7,857 11,164 Noble Farm Plaza (Suwanee, GA) 1,722 1,540 3,389 784 1,540 4,173 5,713 Cofer Crossing (Tucker, GA) 5,037 5,046 1,167 4,252 5,421 5,419 10,840 Shannon Square (Union City, GA) 3,303 195 - 4,347 195 4,347 4,542 Warner Robins Place (Warner Robins, GA) - 203 907 3,505 541 4,412 4,953 Pike's Nursery (Woodstock, GA) - 1,323 1,102 - 1,323 1,102 2,425 Woodstock Place (Woodstock, GA) 5,646 1,692 - 7,778 1,292 7,778 9,070 Woodstock Project (Woodstock, GA) 11,679 3,738 7,210 (104) 3,843 7,106 10,949 North Ridge Shopping Center (Davenport, IA) - 741 2,324 8,868 2,159 11,192 13,351 Decatur Marketplace (Decatur, IL) - 289 2,609 211 289 2,820 3,109 Suttons North Plaza (Topeka, KS) - 270 1,660 1,728 270 3,388 3,658 North Park Marketplace (Lexington, KY) - 243 - 1,662 722 1,662 2,384 ----------------------------------------------------------------------------------------------------------------------------------- COL. F COL. G COL. H COL. I ----------------------------------------------------------------------------------------------------------------------------------- Life on which depreciation in Accumulated Date of latest income statements is Depreciation Construction Date Acquired computed ----------------------------------------------------------------------------------------------------------------------------------- Operating Property: ------------------- Garrison Ridge Xing (Marietta, GA) 801 1997 1997 Building 31.5 years (1) Sign 20 years (2) Applebee's (McDonough, GA) 30 1999 1999 Building 31.5 years (1) Newnan Crossing (Newnan, GA) 1,191 1995 1995 Building 31.5 years (1) Sign 20 years (2) Peachtree City Marketplace (Peachtree GA) 113 1999 1999 Building 31.5 years (1) Pike's Nursery (Peachtree City, GA) 112 1997 1997 Building 31.5 years (1) Merchant Square (Riverdale, GA) 489 1989 1989 Building 31.5 years (1) Freeway Junction (Stockbridge, GA) 1,104 1988 1994 Building 31.5 years (1) Pike's Nurseries (Stockbridge, GA) 119 1997 1997 Building 31.5 years (1) Lowe's (Stone Mountain, GA) 318 1999 1999 Building 31.5 years (1) Noble Farm Plaza (Suwanee, GA) 321 1997 1997 Building 31.5 years (1) Cofer Crossing (Tucker, GA) 292 1998 1998 Building 31.5 years (1) Shannon Square (Union City, GA) 1,757 1986 1984 Building 31.5 years (1) Sign 20 years (2) Warner Robins Place (Warner Robins, GA) 146 1997 1997 Building 31.5 years (1) Pike's Nursery (Woodstock, GA) 128 1997 1997 Building 31.5 years (1) Woodstock Place (Woodstock, GA) 1,591 1985 1982 Building 31.5 years (1) Sign 20 years (2) Woodstock Project (Woodstock, GA) 688 1997 1997 Building 31.5 years (1) North Ridge Shopping Center (Davenport, IA) 190 1999 1999 Building 31.5 years (1) Decatur Marketplace (Decatur, IL) 88 1999 1999 Building 31.5 years (1) Suttons North Plaza (Topeka, KS) 301 1976 1997 Building 31.5 years (1) North Park Marketplace (Lexington, KY) 29 1999 1999 Building 31.5 years (1)
F-26 Schedule III- Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
------------------------------------------------------------------------------------------------------------------------------------ COL.A COL. B COL. C COL. D COL. E ------------------------------------------------------------------------------------------------------------------------------------ Cost Capitalized Subsequent to Gross Amount at Initial Cost to Company Acquisition which Carried at close of Period ---------------------------------------------------------------------------- Buildings and Buildings and Description Encumbrances Land Improvements Improvements Land Improvements Total ------------------------------------------------------------------------------------------------------------------------------------ Operating Property: ------------------ South Farm Marketplace (Lexington, KY) - 4,785 298 (97) 4,785 201 4,986 Carriage Gate (Richmond, KY) 5,990 1,398 7,994 19 1,398 8,013 9,411 Junction S/C (Jackson, MS) 6,696 1,361 7,858 91 1,361 7,949 9,310 Metro Station (Jackson, MS) - 521 3,382 (1,089) 296 2,293 2,589 Oxford (Oxford, MS) - 1,809 1 - 1,809 1 1,810 Crosscreek Shopping Center (Tupelo, MS) - 754 - 4,059 1,203 4,059 5,262 River Hills S/C (Asheville, NC) 6,175 3,125 13,376 529 3,125 13,905 17,030 Cross Pointe Centre (Fayetteville, NC) 8,106 1,931 10,840 537 1,931 11,377 13,308 Lawndale Crossing (Greensboro, NC) 2,930 3,483 - 6,228 5,418 6,228 11,646 East Ridge Crossing (Hendersonville, NC) 6,777 - - 4,372 - 4,372 4,372 Lumberton - Lowe's (Lumberton, NC) - 506 - - 506 - 506 Jeffries Crossing (Rocky Mount, NC) 2,700 334 3,400 1,623 466 5,023 5,489 Kester Mill Village (Winston-Salem, NC) - 814 2,122 (627) 685 1,495 2,180 Tri-State Plaza (Burlington, OH) 5,263 1,563 6,210 213 1,363 6,423 7,786 Gallipolis Marketplace (Gallipolis, OH) - 1,405 10,587 (8,831) 393 1,756 2,149 Township Marketplace (Monaca, PA) 9,164 5,177 10,105 4,735 5,566 14,840 20,406 Ashley Crossing (Charleston, SC) 7,779 1,459 10,354 205 1,459 10,559 12,018 Kelley Corners (Lake City, SC) - 415 5,310 (5,310) - - - Merchants Walk (Sumter, SC) - 130 - 799 130 799 929 Millcreek Commons (Antioch, TN) 2,045 531 3,092 42 531 3,134 3,665 ------------------------------------------------------------------------------------------------------------------------------------ COL. F COL. G COL. H COL. I ------------------------------------------------------------------------------------------------------------------------------------ Life on which depreciation in Accumulated Date of latest income statements is Description Depreciation Construction Date Acquired computed ------------------------------------------------------------------------------------------------------------------------------------ Operating Property: ------------------ South Farm Marketplace (Lexington, KY) 6 1998 1998 Building 31.5 years (1) Carriage Gate (Richmond, KY) 1,611 1992 1994 Building 31.5 years (1) Sign 20 years (2) Junction S/C (Jackson, MS) 964 1996 1997 Building 31.5 years (1) Metro Station (Jackson, MS) 274 1997 1998 Building 31.5 years (1) Oxford (Oxford, MS) - 2000 2000 Building 31.5 years (1) Crosscreek Shopping Center (Tupelo, MS) 20 1999 1999 Building 31.5 years (1) River Hills S/C (Asheville, NC) 1,651 1996 1997 Building 31.5 years (1) Sign 20 years (2) Cross Pointe Centre (Fayetteville, NC) 1,009 1985 1998 Building 31.5 years (1) Lawndale Crossing (Greensboro, NC) 119 1999 1999 Building 31.5 years (1) East Ridge Crossing (Hendersonville, NC) 1,610 1988 1988 Building 31.5 years (1) Sign 20 years (2) Lumberton - Lowe's (Lumberton, NC) - 2000 2000 Building 31.5 years (1) Jeffries Crossing (Rocky Mount, NC) 183 1999 1999 Building 31.5 years (1) Kester Mill Village (Winston-Salem, NC) 125 1999 1999 Building 31.5 years (1) Tri-State Plaza (Burlington, OH) 1,182 1995 1995 Building 31.5 years (1) Sign 20 years (2) Gallipolis Marketplace (Gallipolis, OH) 116 1998 1998 Building 31.5 years (1) Township Marketplace (Monaca, PA) 1,142 1997 1997 Building 31.5 years (1) Ashley Crossing (Charleston, SC) 2,275 1991 1994 Building 31.5 years (1) Sign 20 years (2) Kelley Corners (Lake City, SC) - 1991 1994 Building 31.5 years (1) Sign 20 years (2) Merchants Walk (Sumter, SC) 368 1987 1986 Building 31.5 years (1) Sign 20 years (2) Millcreek Commons (Antioch, TN) 272 1990 1998 Building 31.5 years (1)
F-27 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
------------------------------------------------------------------------------------------------------------------------------------ COL. A COL. B COL. C COL. D COL. E ------------------------------------------------------------------------------------------------------------------------------------ Cost Capitalized Gross Amount at Subsequent to which Carried at close Initial Cost to Company Acquisition of Period ----------------------- ------------------------------------------------- Buildings and Buildings and Description Encumbrances Land Improvements Improvements Land Improvements Total ------------------------------------------------------------------------------------------------------------------------------------ Operating Property: ------------------ Overlook at Hamilton Place (Chattanooga, TN) 7,087 1,595 12,725 211 1,595 12,936 14,531 Columbia Square (Columbia, TN) 2,277 673 3,859 30 673 3,889 4,562 Farragut Pointe (Farragut, TN) 2,830 731 4,165 30 731 4,195 4,926 Alexander Plaza (Franklin, TN) - 24 - 491 24 491 515 Battlewood Shopping Center (Franklin, TN) 2,159 662 3,822 169 662 3,991 4,653 Cool Springs (Franklin, TN) - 764 48 - 764 48 812 Northcreek Commons (Goodlettsville, TN) 2,805 743 4,311 243 743 4,554 5,297 Lowe's (Hendersonville, TN) 10,550 4,074 7,649 41 4,074 7,690 11,764 Country Bridge (Memphis, TN) 2,548 750 4,294 211 750 4,505 5,255 Memorial Village (Murfreesboro, TN) 3,889 991 5,636 385 991 6,021 7,012 Towne Center (Murfreesboro, TN) 3,573 3,016 6,822 3,667 3,016 10,489 13,505 The Marketplace (Nashville, TN) 6,658 4,710 10,495 12,278 5,158 22,773 27,931 MacArthur Marketplace (Irving, TX) 6,243 6,440 11,918 1,379 7,286 13,297 20,583 Nacogdoches Marketplace (Nacogdoches, TX) 1,619 613 3,521 178 646 3,699 4,345 Bermuda Square S/C (Chester, VA) 3,841 1,302 7,534 549 1,302 8,083 9,385 Candlers Station (Lynchburg, VA) 10,942 2,495 15,601 (2,408) 2,054 13,193 15,247 Genito Crossing (Midlothian, VA) 3,151 823 4,812 18 823 4,830 5,653 Lexington Commons (Lexington, VA) - 882 4,548 927 882 5,475 6,357 Tri-Rivers S/C (South Boston, VA) - 502 4,414 192 503 4,606 5,109 Shoppers World (Brookfield, WI) 6,280 1,989 12,025 53 1,989 12,078 14,067 ------------------------------------------------------------------------------------------------------------------------ COL. A COL. F COL. G COL. H COL. I ------------------------------------------------------------------------------------------------------------------------ Life on which depreciation in Accumulated Date of Date latest income statements Description Depreciation Construction Acquired is computed ------------------------------------------------------------------------------------------------------------------------ Operating Property: ------------------ Overlook at Hamilton Place (Chattanooga, TN) 2,757 1992 1994 Building 31.5 years (1) Columbia Square (Columbia, TN) 779 1993 1994 Building 31.5 years (1) Farragut Pointe (Farragut, TN) 904 1991 1994 Building 31.5 years (1) Alexander Plaza (Franklin, TN) 116 1983 1983 Building 31.5 years (1) Battlewood Shopping Center (Franklin, TN) 336 1990 1998 Building 31.5 years (1) Cool Springs (Franklin, TN) - 2000 2000 Building 31.5 years (1) Northcreek Commons (Goodlettsville, TN) 720 1987 1995 Building 31.5 years (1) Sign 20 years (2) Lowe's (Hendersonville, TN) 461 1999 1999 Building 31.5 years (1) Country Bridge (Memphis, TN) 942 1993 1994 Building 31.5 years (1) Memorial Village (Murfreesboro, TN) 1,169 1972 1994 Building 31.5 years (1) Towne Center (Murfreesboro, TN) 703 1998 1998 Building 31.5 years (1) The Marketplace (Nashville, TN) 1,081 1998 1998 Building 31.5 years (1) MacArthur Marketplace (Irving, TX) 509 1999 1999 Building 31.5 years (1) Nacogdoches Marketplace (Nacogdoches, TX) 183 1999 1999 Building 31.5 years (1) Bermuda Square S/C (Chester, VA) 820 1977 1997 Building 31.5 years (1) Candlers Station (Lynchburg, VA) 1,266 1990 1998 Building 31.5 years (1) Genito Crossing (Midlothian, VA) 502 1985 1997 Building 31.5 years (1) Lexington Commons (Lexington, VA) 1,416 1989 1988 Building 31.5 years (1) Sign 20 years (2) Tri-Rivers S/C (South Boston, VA) 528 1989 1997 Building 31.5 years (1) Sign 20 years (2) Shoppers World (Brookfield, WI) 1,080 1967 1998 Building 31.5 years (1)
F-28 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
--------------------------------------------------------------------------------------------------------------------------------- COL.A COL. B COL. C COL. D COL. E ---------------------------------------------------------------------------------------------------------------------------------- Cost Capitalized Subsequent to Gross Amount at which Carried Initial Cost to Company Acquisition at close of Period --------------------------------------------------------------------------- Buildings and Buildings and Description Encumbrances Land Improvements Improvements Land Improvements Total ----------------------------------------------------------------------------------------------------------------------------------- Operating Property: ------------------ Brown Deer Center (Brown Deer, WI) 7,170 1,790 10,230 85 1,791 10,315 12,106 Market Place of Brown Deer (Brown Deer, WI) 4,471 1,641 9,437 8 1,642 9,445 11,087 Point Loomis (Milwaukee, WI) 5,302 912 5,331 88 912 5,419 6,331 West Allis Center (Milwaukee WI) - 2,479 14,885 178 2,479 15,063 17,542 Alabama Corporate - - - (533) (94) (533) (627) Atlanta Headquarters - 495 - 6,292 495 6,292 6,787 JDN Realty Corporation (Atlanta, GA) - 362 - (2,569) 250 (2,569) (2,319) ----------------------------------------------------------------------------------------------------------------------------------- Total Operating Property 339,444 181,720 526,993 99,049 181,370 626,042 807,412 -------------------------------------------------------------------------------------- Land under Ground Lease -------------------------------------------------------------------------------------- Charleston, South Carolina - 362 - - 362 - 362 -------------------------------------------------------------------------------------- Total Land under Ground Lease - 362 - - 362 - 362 -------------------------------------------------------------------------------------- Underdeveloped Land: ------------------- -------------------------------------------------------------------------------------- Gadsden, Alabama - 55 - - 55 - 55 Brandon, Florida - 6,125 - - 2,748 - 2,748 Buford, Georgia - 1,347 - - 1,286 - 1,286 Cartersville, Georgia - 86 - - 86 - 86 Eastman, Georgia - 60 - - 61 - 61 Fayetteville, Georgia - 150 - - 150 - 150 Fayetteville - Specialty Shop - 3,281 - - 3,281 - 3,281 Franklin - Cool Springs - 3,190 - - 3,190 - 3,190 Greensboro - Lawndale Crossing - 696 - - 696 - 696 JDN Realty Corp - - - - (376) - (376) Lafayette, Georgia - 84 - - 84 - 84 Macon, Georgia - 287 - - 287 - 287 Madison, Georgia - 22 - - 22 - 22 Monaca - 5,298 - - 5,298 - 5,298 Nashville - 1,560 - - 1,560 - 1,560 Oxford - 398 - - 398 - 398 Peachtree City - 543 - - 543 - 543 Stone Mountain - 5,828 - - 5,828 - 5,828 Tupelo - 368 - - 368 - 368 Warner Robins, Georgia - 235 - - 235 - 235 Rockingham, North Carolina - 300 - - 300 - 300 Charleston, South Carolina - 179 - - 179 - 179 Murfreesboro, Tennessee - 357 - - 367 - 367 Lexington, Virginia - 164 - - 75 - 75 Lynchburg, Virginia - 250 - - 200 - 200 ------------------------------------------------------------------------------------------------- - 30,863 - - 26,921 - 26,921 ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------- Subtotal 339,444 212,945 526,993 99,049 208,653 626,042 834,695 ------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------ COL. F COL. G COL. H COL. I ------------------------------------------------------------------------------------------------------------------------------ Life on which depreciation in Accumulated Date of latest income statements is Description Depreciation Construction Date Acquired computed ------------------------------------------------------------------------------------------------------------------------------ Operating Property ------------------ Brown Deer Center (Brown Deer, WI) 924 1967 1998 Building 31.5 years (1) Market Place of Brown Deer (Brown Deer, WI) 849 1989 1998 Building 31.5 years (1) Point Loomis (Milwaukee, WI) 484 1962 1998 Building 31.5 years (1) West Allis Center (Milwaukee WI) 1,346 1968 1998 Building 31.5 years (1) Alabama Corporate - 2000 2000 Building 31.5 years (1) Atlanta Headquarters - 1955 1997 Building 31.5 years (1) Sign 20 years (2) JDN Realty Corporation (Atlanta, GA) 537 1999 1999 Building 31.5 years (1) ------------------------------------------------------------------------------------------------------------------------------ Total Operating Property 80,113 ---------- ---------- Land under Ground Lease Charleston, South Carolina - ---------- Total Land under Ground Lease - ---------- Underdeveloped Land: ------------------- Gadsden, Alabama - Brandon, Florida - Buford, Georgia - Cartersville, Georgia - Eastman, Georgia - Fayetteville, Georgia - Fayetteville - Specialty Shop - Franklin - Cool Springs - Greensboro - Lawndale Crossing - JDN Realty Corp - Lafayette, Georgia - Macon, Georgia - Madison, Georgia - Monaca - Nashville - Oxford - Peachtree City - Stone Mountain - Tupelo - Warner Robins, Georgia - Rockingham, North Carolina - Charleston, South Carolina - Murfreesboro, Tennessee - Lexington, Virginia - Lynchburg, Virginia - ---------- - ---------- ---------- Subtotal 80,113 ----------
F-29 Schedule III- Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands)
------------------------------------------------------------------------------------------------------------------------------------ COL. A COL. B COL. C COL. D COL. E COL. F ------------------------------------------------------------------------------------------------------------------------------------ Cost Capitalize Gross Amount at which Subsequent to Carried at Initial Cost to Company Acquisition close of Period --------------------------------------------------------------------------------------- Buildings and Buildings Accumulated Description Encumbrance Land Improvements Improvements Land Improvements Total Depreciation ------------------------------------------------------------------------------------------------------------------------------------ Property under Development -------------------------- Early Acquisition Cost - - 67 - - 67 67 - Fayetteville, AR - 2,685 1,718 - 2,685 1,718 4,403 - Irving, TX - 2,548 2,070 - 2,548 2,070 4,618 - Greensboro North, NC - 174 775 - 174 775 949 - McDonough, GA - 1,253 301 - 1,253 301 1,554 - Turner Hill, GA - 3,619 660 - 3,619 660 4,279 - Brandon Publix, FL - 2,045 2,143 - 2,045 2,143 4,188 - Lexington S. Farm, KY - 573 793 - 573 793 1,366 - Lexington N Park, KY - 404 1,256 - 404 1,256 1,660 - Tupelo, MS - 263 2,560 - 263 2,560 2,823 - Chesterfield, MI - 3,475 755 - 3,475 755 4,230 - Grandville, MI - 5,375 2,604 - 5,375 2,604 7,979 - Warner Robbins, GA - - 1,936 - - 1,936 1,936 - Overland Park KS - 3,833 2,369 - 3,833 2,369 6,202 - Oxford, MS - 525 414 - 525 414 939 - Newnan, GA - - 437 - - 437 437 - Realty Prop. Dev. - - (2,610) - - (2,610) (2,610) - Total Property under ---------------------------------------------------------------------------------------------------- Development - 26,772 18,248 - 26,772 18,248 445,020 - ---------------------------------------------------------------------------------------------------- Total $ 339,444 $ 239,71 $ 545,241 $ 99,049 $235,425 $ 644,290 $879,715 $ 80,113 ----------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------- COL. G COL. H COL. I ------------------------------------------------------------------------- life on which depreciation in Date of latest income statements is Construction Date Acquired computed ------------------------------------------------------------------------- F-30 Schedule III - Real Estate and Accumulated Depreciation JDN Realty Corporation December 31, 2000 (In thousands) (1) Estimated useful life of building. (2) Estimated useful life of sign.
Years Ended December 31, 2000 1999 1998 ----------------------------------------------- Investment in Real Estate Balance at beginning of year $ 962,897 $ 844,041 $ 533,133 Additions/Improvements 110,390 294,635 330,273 Deductions (193,572) (175,779) (19,365) ----------------------------------------------- Balance at end of year $ 879,715 $ 962,897 $ 844,041 =============================================== Accumulated Depreciation Balance of beginning of year $ 71,551 $ 56,093 $ 38,306 Additions charged to costs and expenses 21,612 21,932 19,010 Other Additions - - - Deductions (13,050) (6,474) (1,223) ----------------------------------------------- Balance at end of year $ 80,113 $ 71,551 $ 56,093 ===============================================
F-31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. JDN REALTY CORPORATION Dated: April 2, 2001 By: /s/ Craig Macnab ------------- ------------------------------------- Craig Macnab Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Craig Macnab Chief Executive Officer, April 2, 2001 -------------------- ------------- Craig Macnab and Director /s/ John D. Harris, Jr. Chief Financial Officer, Senior April 2, 2001 ------------------------------------ ------------- John D. Harris, Jr. Vice President, Secretary and Treasurer /s/ Michael A. Quinlan Vice President and Controller April 2, 2001 ------------------------------------ ------------- Michael A. Quinlan /s/ Haywood D. Cochrane, Jr. Director April 2, 2001 ------------------------------------ ------------- Haywood D. Cochrane, Jr. /s/ William B. Greene Director April 2, 2001 ------------------------------------ ------------- William B. Greene /s/ William G. Byrnes Director April 2, 2001 ------------------------------------ ------------- William G. Byrnes /s/ Philip G. Satre Director April 2, 2001 ------------------------------------ ------------- Philip G. Satre /s/ Lee S. Wielansky Director April 2, 2001 ------------------------------------ ------------- Lee S. Wielansky
Item 14(c) ---------- EXHIBIT INDEX (3) Exhibits Exhibit Number Description -------------- ----------- 3.1 Articles of Restatement of JDN Realty Corporation (1) 3.2 Articles of Merger of JDN Enterprises, Inc. with and into the Company (2) 3.3 Amendment No. 1 to the Amended and Restated Bylaws of the Company 3.4 Form of Articles Supplementary of JDN Realty Corporation classifying the 9 3/8% Series A Cumulative Redeemable Preferred Stock (14) 4.1 Specimen Common Stock Certificate (3) 4.2 Form of the Company's 9 3/8 % Series A Cumulative Redeemable Preferred Stock Certificate (14) 4.3 Form of 6.918 % MandatOry Par Put Remarketed Securities (sm) ("MOPPRS (sm)") due March 31, 2013 (15) 4.4 Form of 6.80% Global Note due August 1, 2004 (8) 4.5 Form of 6.95% Global Note due August 1, 2007 (8) 4.6 Form of Articles Supplementary of JDN Realty Corporation classifying the 9 3/8% Series A cumulative Redeemable Preferred Stock (14) 10.1 JDN Realty Corporation 1993 Incentive Stock Plan, as amended (17) 10.2 JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan, as amended (17) 10.3 JDN Realty Corporation Long-Term Incentive Plan (17) 10.4 Indemnification Agreement by and between J. Donald Nichols and JDN Realty Corporation, dated February 23, 1994 (2) 10.5 Indemnification Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation, dated February 23, 1994 (2) 10.6 Indemnification Agreement by and between William J. Kerley and JDN Realty Corporation, dated February 23, 1994 (2) 10.7 $200,000,000 Amended and Restated Credit Agreement dated as of September 3, 1998, among JDN Realty Corporation and Wachovia Bank, N.A., as Agent (4) 10.8 First Amendment dated as of June 11, 1999 to the $200,000,000 Amended and Restated Credit Agreement dated as of September 2, 1998 among JDN Realty Corporation, the Banks listed therein and Wachovia Bank, N.A., as Agent (5) 10.9 Agreement for Continued Funding dated March 2, 2000, but effective as of February 14, 2000, by and among JDN Realty Corporation, JDN Development Company, Inc., the Banks parties thereto and Wachovia Bank, N.A., as Agent (13) 10.10 $175,000,000 Second Amended and Restated Credit Agreement dated as of May 19, 2000, among JDN Realty Corporation, the Banks listed therein and Wachovia Bank, N.A., as Agent (16) 10.11 $100,000,000 Term Loan Credit Agreement dated as of February 17, 1999 among JDN Realty Corporation, Wachovia Bank, N.A., as Agent and PNC, National Association, as Documentation Agent (6) 10.12 First Amendment dated as of June 11, 1999 to the $100,000,000 Term Loan Credit Agreement dated as of February 17, 1999 among JDN Realty Corporation, the Banks Listed Herein, Wachovia Bank, N.A., as Agent and PNC Bank, National Association as the Documentation Agent (7) 10.13 Interim Agreement dated as of March 2, 2000, but effective as of February 14, 2000, by and among JDN Realty Corporation, JDN Development Company, Inc. the Banks parties thereto and Wachovia Bank, N.A., as Agent (13) 10.14 $100,000,000 Amended and Restated Term Loan Credit Agreement dated as of May 19, 2000, among JDN Realty Corporation, the Banks listed therein, Wachovia Bank, N.A., as Agent and PNC Bank, National Association, as Documentation Agent (16) 10.15 Indenture, dated as of July 15, 1997, by JDN Realty Corporation to First Union National Bank as Trustee (8) 10.16 First Supplemental Indenture, dated as of July 31, 1997, by JDN Realty Corporation to First Union National Bank, as Trustee (8) 10.17 Second Supplemental Indenture, dated as of February 5, 1998, by JDN Realty Corporation to First Union National Bank, as Trustee (9) 10.18 First Amendment to Second Supplemental Indenture, dated as of March 31, 1998, by JDN Realty Corporation to First Union National Bank, as Trustee (15) 10.19 JDN Realty Corporation Dividend Reinvestment and Stock Purchase Plan (10) 10.20 JDN Realty Corporation 1995 Employee Stock Purchase Plan, as amended (17) 10.21 Employment Agreement by and between J. Donald Nichols and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.22 Agreement dated May 19, 2000 between JDN Realty Corporation, JDN Development Company, Inc. and J. Donald Nichols regarding termination of Employment Agreement by and between J. Donald Nichols and JDN Realty Corporation dated as of December 1, 1996 (17) 10.23 Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.24 Employment Agreement by and between William J. Kerley and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.25 Agreement dated April 15, 2000 between JDN Realty Corporation, JDN Development Company, Inc. and William J. Kerley regarding termination of Employment Agreement by and between William J. Kerley and JDN Realty Corporation dated as of December 1, 1996 (17) 10.26 Employment Agreement by and between John D. Harris, Jr. and JDN Realty Corporation dated as of May 1, 1997 (12) 10.27 Employment Agreement by and between Leilani L. Jones and JDN Realty Corporation, dated as of May 1, 1997 (12) 10.28 Employment Agreement by and between David L. Henzlik and JDN Realty Corporation, dated as of December 1, 1996 (11) 10.29 Employment Agreement by and between W. Fred Williams, Jr. and JDN Development Company, Inc. dated as of March 8, 2000 and related Performance Share Agreement dated as of March 7, 2000 (17) 10.30 Tenant Estoppel and Release dated as of May 23, 2000 by and between JDN Development Company, Inc. and JDN Realty Corporation and their Affiliates Wal-Mart Stores, Inc. and Wal-Mart Real Estate Business Trust and Lowe's Companies, Inc. and Lowe's Home Centers, Inc. (16) 10.31 Separation and Partial Settlement Agreement dated as of June 14, 2000 by and between JDN Realty Corporation and JDN Development Company, Inc. and their affiliates, and ALA Associates, Inc., Jeb L. Hughes and C. Sheldon Whittelsey, IV (17) 10.32 Third Amended and Restated Master Credit Agreement dated as of March 29, 2001 among JDN Realty Corporation and Fleet National Bank as Agent 10.33 Amendment No. 2 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan (19) 10.34 Agreement dated July 26, 2000 between JDN Realty Corporation and Elizabeth L. Nichols regarding termination of Employment Agreement by and between Elizabeth L. Nichols and JDN Realty Corporation dated as of December 1, 1996 (18) 10.35 Employment Agreement by and between Craig Macnab and JDN Realty Corporation dated as of November 17, 2000 10.36 Employment Agreement by and between Lee S. Wielansky and JDN Development Company, Inc. dated as of November 27, 2000 10.37 Agreement dated September 5, 2000 and related Consulting Agreement dated October 2, 2000 between JDN Development Company, Inc. and W. Fred Williams regarding termination of Employment Agreement by and between W. Fred Williams and JDN Development Company, Inc. 10.38 Amendment No. 3 to JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan 10.39 Amendment No. 1 to JDN Realty Corporation 1993 Incentive Stock Plan. 12 Ratio of Earnings to Fixed Charges 21 Subsidiaries of the Registrant 99.1 Federal Income Tax Considerations (1) Filed as an exhibit to the Company's filing on Form 8-K dated November 7, 1996, previously filed pursuant to the Securities Exchange Act of 1934, and hereby incorporated by reference. (2) Filed as an exhibit to the Company's Registration Statement on Form S- 11 (No. 33-73710) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (3) Filed as an exhibit to the Company's Registration Statement on Form S- 3 (No. 333-22339) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (4) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (5) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (6) Filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (7) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (8) Filed as an exhibit to the Company's filing on Form 8-K dated August 1, 1997, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (9) Filed as an exhibit to the Company's filing on Form 8-K dated February 13, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (10) Filed as an exhibit to the Company's Registration Statement on Form S- 3 (No. 33-90868) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference. (11) Filed as an exhibit to the Company's annual report on Form 10-K for the year ended December 31, 1996, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (12) Filed as an exhibit to the Company's filing on Form 10-K for the year ended December 31, 1997, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (13) Filed as an exhibit to the Company's filing on Form 8-K dated March 7, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (14) Filed as an exhibit to the Company's filing on Form 8-A dated September 17, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (15) Filed as an exhibit to the Company's filing on Form 8-K dated April 1, 1998, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (16) Filed as an exhibit to the Company's filing on Form 8-K dated May 23, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated by reference. (17) Filed as an exhibit to the Company's filing on Form 10-K for the year ended December 31, 1999, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. (18) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference. (19) Filed as an exhibit to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 2000, previously filed pursuant to the Securities Exchange Act of 1934 and hereby incorporated herein by reference.