-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ByWTJeql4gwR2bzAy4RU4s1mOmNbs+cK3aiCKyDvCUTq5Uf6Tn5ya+Jx5HKN6sB7 7sVzvX4umpUzQqWuWxIMKQ== 0000931763-99-002299.txt : 19990812 0000931763-99-002299.hdr.sgml : 19990812 ACCESSION NUMBER: 0000931763-99-002299 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JDN REALTY CORP CENTRAL INDEX KEY: 0000916836 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 581468053 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12844 FILM NUMBER: 99684575 BUSINESS ADDRESS: STREET 1: 359 EAST PACES FERRY ROAD STREET 2: STE 400 CITY: ATLANTA STATE: GA ZIP: 30305 BUSINESS PHONE: 4042623252 MAIL ADDRESS: STREET 1: 3359 EAST PACES FERRY RD STREET 2: STE 400 CITY: ATLANTA STATE: GA ZIP: 30305 10-Q 1 JDN REALTY CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 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 (I.R.S. Employer Identification No.) incorporation or organization) 359 East Paces Ferry Road, NE, Suite 400, Atlanta, GA 30305 ----------------------------------------------------------- (Address of principal executive offices - zip code) (404) 262-3252 -------------------------------------------------- (Registrant's telephone number, including area code) Not applicable ------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) 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 ------ ------ As of July 30, 1999, 33,247,659 shares of the Registrant's Common Stock, $.01 par value, were outstanding. PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
Page No. -------- Condensed Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 2 Condensed Consolidated Statements of Income - Three Months Ended June 30, 1999 and 1998 3 Condensed Consolidated Statements of Income - Six Months Ended June 30, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flow - Six Months Ended June 30, 1999 and 1998 5 Notes to Condensed Consolidated Financial Statements 6
1 JDN REALTY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1999 1998 --------------- ------------- (Unaudited) (In thousands) ASSETS Shopping center properties held for use in operations, at cost: Land $ 152,713 $ 153,111 Buildings and improvements 582,358 619,963 ----------- --------- 735,071 773,074 Less: accumulated depreciation and amortization (60,782) (56,093) ----------- --------- Shopping center properties held for use in operations, net 674,289 716,981 Shopping center properties under development 70,874 74,192 Shopping center held for sale 105,006 -- ----------- --------- Total shopping center properties 850,169 791,173 Rents receivable 8,681 7,158 Investments in and advances to unconsolidated entities 178,610 151,040 Deferred costs, net of amortization 5,355 4,424 Other assets 14,087 15,127 ----------- --------- $ 1,056,902 $ 968,922 =========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Unsecured notes payable $ 334,604 $ 234,573 Unsecured lines of credit 87,956 148,519 Mortgage notes payable 80,849 42,471 Accounts payable and accrued expenses 15,211 11,550 Other liabilities 8,791 10,764 ----------- --------- Total liabilities 527,411 447,877 Third party investors' interest 3,000 3,000 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 1999 and 1998, respectively 20 20 Common stock, par value $.01 per share - authorized 150,000,000 shares, issued and outstanding 33,245,424 and 32,704,408 shares in 1999 and 1998 respectively 332 327 Paid-in capital 533,228 524,787 Accumulated deficit (7,089) (7,089) ----------- --------- 526,491 518,045 ----------- --------- $ 1,056,902 $ 968,922 =========== =========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 2 JDN REALTY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended June 30, 1999 1998 ----------- ----------- (In thousands) Revenues: Minimum and percentage rents $ 22,805 $ 16,979 Recoveries from tenants 3,133 2,211 Other revenue 2 19 ---------- --------- Total revenues 25,940 19,209 Operating expenses: Operating and maintenance 1,907 1,573 Real estate taxes 1,741 1,075 General and administrative 1,873 1,917 Depreciation and amortization 5,498 4,089 ---------- ---------- Total operating expenses 11,019 8,654 ---------- ---------- Income from operations 14,921 10,555 Other income (expense): Interest expense, net (3,973) (2,014) Other income, net 348 260 Equity in net income of unconsolidated entities 1,084 1,234 ---------- ----------- Income before minority interest in net income of consolidated subsidiary and net gain on real estate sales 12,380 10,035 Minority interest in net income of consolidated subsidiary (55) (67) ----------- ----------- Income before net gain on real estate sales 12,325 9,968 Net gain on real estate sales -- 85 ----------- ----------- Net income 12,325 10,053 Dividends to preferred shareholders (1,172) -- ----------- ----------- Net income attributable to common shareholders $ 11,153 $ 10,053 =========== =========== Net income per common share: Basic $ 0.34 $ 0.33 =========== =========== Diluted $ 0.33 $ 0.32 =========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 JDN REALTY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Six Months Ended June 30, 1999 1998 ------------- -------------- (In thousands) Revenues: Minimum and percentage rents $ 45,273 $ 32,296 Recoveries from tenants 6,345 3,879 Other revenue 12 80 ----------- ---------- Total revenues 51,630 36,255 Operating expenses: Operating and maintenance 4,063 2,734 Real estate taxes 3,378 1,999 General and administrative 4,040 3,443 Depreciation and amortization 10,777 7,588 ----------- ---------- Total operating expenses 22,258 15,764 ----------- ---------- Income from operations 29,372 20,491 Other income (expense): Interest expense, net (7,790) (3,826) Other income, net 768 421 Equity in net income of unconsolidated entities 2,231 2,090 ----------- ---------- Income before minority interest in net income of consolidated subsidiary and net gain on real estate sales 24,581 19,176 Minority interest in net income of consolidated subsidiary (105) (96) ----------- ---------- Income before net gain on real estate sales 24,476 19,080 Net gain on real estate sales -- 85 ----------- ---------- Net income 24,476 19,165 Dividends to preferred shareholders (2,344) -- ----------- ---------- Net income attributable to common shareholders $ 22,132 $ 19,165 =========== ========== Net income per common share: Basic $ 0.67 $ 0.64 Diluted $ 0.66 $ 0.63 =========== ===========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 JDN REALTY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 1999 1998 ---------- --------- (In thousands) Net cash provided by operating activities $ 31,800 $ 27,451 Cash flows from investing activities: Development of shopping center properties (66,938) (62,375) Improvements to shopping center properties (1,012) (901) Purchase of shopping center properties -- (92,772) Investments in and advances to unconsolidated entities (25,340) (50,367) Other 1,008 (7,614) --------- --------- Net cash used in investing activities (92,282) (214,029) Cash flows from financing activities: Proceeds from unsecured lines of credit 322,405 181,500 Proceeds from mortgage notes payable 39,454 -- Proceeds from issuance of unsecured notes payable 100,000 76,548 Principal payments on unsecured lines of credit (382,968) (126,000) Principal payments on mortgage notes payable (587) (212) Proceeds from issuance of common shares, net of underwriting commissions and offering expenses 11,165 66,603 Dividends paid to preferred shareholders (2,344) -- Dividends paid to common shareholders (25,094) (21,256) Other (1,549) (392) --------- --------- Net cash provided by financing activities 60,482 176,791 --------- --------- Decrease in cash and cash equivalents -- (9,787) Cash and cash equivalents, beginning of period -- 11,439 --------- --------- Cash and cash equivalents, end of period $ -- $ 1,652 ========= =========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 JDN REALTY CORPORATION Notes to Condensed Consolidated Financial Statements (Unaudited) June 30, 1999 1. THE COMPANY JDN Realty Corporation (the "Company") is a real estate company which specializes in the development and asset management of retail shopping centers anchored by value-oriented retailers. As of June 30, 1999 the Company owned and operated, either directly or through affiliated entities, a total of 101 shopping center properties and had 48 projects under construction. The Company has elected to be taxed as a real estate investment trust ("REIT") for federal income tax purposes. The Company owns an interest in JDN Development Company, Inc. ("Development Company"), which is structured such that the Company owns 99% of the economic interest while J. Donald Nichols, the Company's Chairman and Chief Executive Officer, owns the remaining 1% and controls Development Company's operations and activities through his voting common stock ownership. As of June 30, 1999, the Company had invested $9.6 million in Development Company in the form of equity capital, $122.3 million in the form of secured notes receivable and $29.8 million in the form of unsecured advances. 2. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The consolidated balance sheet at December 31, 1998 has been derived from the audited consolidated financial statements at that date. Operating results for the three and six month periods ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999 or any other interim period. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Income Taxes. The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). As a result, the Company will not be subject to federal income taxes to the extent that it distributes annually at least 95% of its taxable income to its shareholders and satisfies certain other requirements defined in the Code. Accordingly, no provision has been made for federal income taxes in the accompanying condensed consolidated financial statements for the periods presented. Earnings Per Share. Basic and diluted earnings per share were computed in accordance with the requirements of Statement of Financial Accounting Standards No. 128. Reclassifications. Certain amounts as previously reported have been reclassified to conform to the current period's presentation. 6 4. DISTRIBUTIONS On May 19, 1999, the Company's Board of Directors declared a cash distribution of $0.395 per share to common shareholders of record on June 10, 1999. This distribution was paid on June 24, 1999. On May 19, 1999, the Company's Board of Directors declared a cash distribution of $0.586 per share to holders of record of the Company's 9 3/8% Series A Cumulative Redeemable Preferred Stock on June 15, 1999. This distribution was paid on June 30, 1999. 5. UNSECURED LINE OF CREDIT On June 11, 1999, the Company amended its unsecured line of credit (the "Unsecured Line of Credit") as follows: (1) decreased maximum borrowings from $200,000,000 to $185,000,000 (expandable to $200,000,000); (2) extended the maturity date by one year from May 22, 2001 to May 22, 2002; and (3) increased the borrowing rate from LIBOR plus 1.00% to LIBOR plus 1.15%. 6. MORTGAGE NOTE PAYABLE On May 4, 1999, the Company borrowed $13.0 million from New York Life Insurance Company. The loan is evidenced by a mortgage note which is secured by real property containing a freestanding Lowe's store located in Lilburn, Georgia. The note bears a fixed interest rate of 6.70%, requires monthly payments of principal and interest in the amount of $101,617 and matures on February 10, 2018. The net proceeds from this loan were used to repay amounts outstanding under the Company's unsecured lines of credit. 7 7. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
Three months ended June 30, Six Months ended June 30, 1999 1998 1999 1998 ---- ---- ---- ---- Numerator: Net income $ 12,325 $ 10,053 $ 24,476 $ 19,165 Dividends to preferred shareholders (1,172) -- (2,344) -- ----------- ----------- ----------- ---------- Net income attributable to common shareholders $ 11,153 $ 10,053 $ 22,132 $ 19,165 =========== =========== =========== ========== Denominator: Weighted-average shares outstanding 33,239 30,978 33,199 29,939 Unvested restricted stock outstanding (83) (111) (93) (63) ----------- ----------- ----------- ---------- Denominator for basic earnings per share 33,156 30,867 33,106 29,876 Dilutive effect of stock options and unvested restricted stock 523 563 505 555 ----------- ----------- ----------- ---------- Denominator for diluted earnings per share 33,679 31,430 33,611 30,431 =========== =========== =========== ========== Net income per common share: Basic $ 0.34 $ 0.33 $ 0.67 $ 0.64 =========== =========== =========== ========== Diluted $ 0.33 $ 0.32 $ 0.66 $ 0.63 =========== =========== =========== ==========
Of total options outstanding, options to purchase 93,000 and 18,000 shares of common stock for the three months ended June 30, 1999 and 1998, respectively, were outstanding but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. The Company is the general partner in a limited partnership that issued limited partnership units valued at $3.0 million 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 beginning in February 1999. As of June 30, 1999, none of the limited partnership units have been exchanged for shares. Using the "if-converted" method, the effect of these units is antidilutive; therefore, they have been excluded from the computation of earnings per share. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview JDN Realty Corporation (the "Company") is a real estate company which specializes in the development and asset management of retail shopping centers anchored by value-oriented retailers. As of June 30, 1999, the Company owned and operated, either directly or through affiliated entities, a total of 101 shopping center properties and had 48 projects under construction. The Company has elected to be taxed as a real estate investment trust ("REIT") for federal income tax purposes. The Company owns an interest in JDN Development Company, Inc. ("Development Company"), which is structured such that the Company owns 99% of the economic interest while J. Donald Nichols, the Company's Chairman and Chief Executive Officer, owns the remaining 1% and controls Development Company's operations and activities through his voting common stock ownership. Current tax laws restrict the ability of REITs to engage in certain activities, such as the sale of certain properties and third-party fee development; because it is not a REIT, Development Company may engage in real estate development activities such as the sale of all or a portion of a development project or the purchase, redevelopment and sale of an existing real estate property. As of June 30, 1999, the Company had invested $9.6 million in Development Company in the form of equity capital, $122.3 million in the form of secured notes receivable and $29.8 million in the form of unsecured advances. Results of Operations Comparison of the Three Months Ended June 30, 1999 to the Three Months Ended June 30, 1998 During 1999 and 1998, the Company began operations at 31 properties which it developed totaling 3.8 million square feet (the "Development Properties"). In addition, during 1999 and 1998, the Company acquired 11 shopping center properties from third parties totaling 2.1 million square feet of gross leasable area (the "Acquisition Properties"). As indicated below, the Company's results of operations were affected by the Development Properties and the Acquisition Properties. Minimum and percentage rents increased $5.8 million or 34.3% to $22.8 million for the three months ended June 30, 1999 from $17.0 million for the same period in 1998. Of this increase, $4.1 million relates to the Development Properties and $1.5 million relates to the Acquisition Properties. The remaining increase relates to an increase in minimum and percentage rents at existing properties. Recoveries from tenants increased $922,000 or 41.8% to $3.1 million for the three months ended June 30, 1999 from $2.2 million for the same period in 1998. Of this increase, $309,000 relates to the Development Properties and $553,000 relates to the Acquisition Properties. The remaining increase relates to an increase in recoverable expenses at existing properties. Other revenue decreased $17,000 or 91.9% to $2,000 for the three months ended June 30, 1999 from $19,000 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 $334,000 or 21.2% to $1.9 million for the three months ended June 30, 1999 from $1.6 million for the same period in 1998. Of this increase, $191,000 relates to the Development Properties and $212,000 relates to the Acquisition Properties. These increases are offset by a decrease in operating and maintenance expenses at existing properties because the Company incurred painting and parking lot repair expenses for many of its existing properties in 1998 which it did not incur in 1999. Real estate taxes increased $666,000 or 62.0% to $1.7 million for the three months ended June 30, 1999 from $1.1 million for the same period in 1998. Of this increase, $191,000 relates to the Development Properties and $386,000 relates to the Acquisition Properties. The remaining increase in real estate taxes at existing properties is due to the fact that the Company is now responsible for paying 9 taxes on three anchor tenant tracts which in previous years were paid by the tenants. The Company will bill these additional expenses back to the tenants and has recognized this additional revenue in recoveries from tenants. General and administrative expenses decreased $44,000 or 2.3% for the three months ended June 30, 1999 over the same period in 1998. General and administrative expenses as a percent of minimum and percentage rents decreased to 8.2% for the three months ended June 30, 1999 from 11.3% for the same period in 1998. This decrease is due to a reduction in the costs associated with the annual report to shareholders, the annual meeting of shareholders and miscellaneous costs related to seminars and industry conventions. Depreciation and amortization expense increased $1.4 million or 34.5% to $5.5 million for the three months ended June 30, 1999 from $4.1 million for the same period in 1998. Of this increase, $967,000 relates to the Development Properties and $401,000 relates to the Acquisition 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 $2.0 million or 97.3% to $4.0 million for the three months ended June 30, 1999 from $2.0 million for the same period in 1998. This increase results primarily from an increase in average debt balances between 1999 and 1998. Other income, net increased $88,000 or 33.6% to $348,000 for the three months ended June 30, 1999 from $260,000 for the same period in 1998. This increase results from an increase in interest income from third-party notes receivable. Equity in net income of unconsolidated entities decreased $150,000 or 12.2% to $1.1 million for the three months ended June 30, 1999 from $1.2 million for the same period in 1998. This decrease results primarily from a decrease in net gains on land sales by Development Company. Minority interest in net income of consolidated subsidiary decreased $12,000 or 18.7% to $55,000 for the three months ended June 30, 1999 from $68,000 for the same period in 1998. Minority interest in net income of consolidated subsidiary represents the third-party investors' share of the net income of a limited partnership, which owns and operates a shopping center located in Milwaukee, Wisconsin, and the decrease relates to a decrease in related net income allocated to the third-party investors. Net gain on real estate sales for the three months ended June 30, 1998 of $85,000 represents a gain on the sale of an outparcel located in Hickory, North Carolina. There were no real estate sales during the three months ended June 30, 1999. Comparison of the Six Months Ended June 30, 1999 to the Six Months Ended June 30, 1998 Minimum and percentage rents increased $13.0 million or 40.2% to $45.3 million for the six months ended June 30, 1999 from $32.3 million for the same period in 1998. Of this increase, $8.1 million relates to the Development Properties and $4.1 million relates to the Acquisition Properties. The remaining increase relates to an increase in minimum and percentage rents at existing properties. Recoveries from tenants increased $2.5 million or 63.6% to $6.3 million for the six months ended June 30, 1999 from $3.9 million for the same period in 1998. Of this increase, $648,000 relates to the Development Properties and $1.6 million relates to the Acquisition Properties. The remaining increase relates to an increase in recoverable expenses at existing properties. Other revenue decreased $68,000 or 86.3% to $12,000 for the six months ended June 30, 1999 from $80,000 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 $1.3 million or 48.6% to $4.1 million for the six months ended June 30, 1999 from $2.7 million for the same period in 1998. Of this increase, $391,000 relates to the Development Properties and $981,000 relates to the Acquisition Properties. These increases are offset by a decrease in operating and maintenance expenses at existing properties because 10 the Company incurred painting and parking lot repair expenses for many of its existing properties in 1998 which it did not incur in 1999. Real estate taxes increased $1.4 million or 69.0% to $3.4 million for the six months ended June 30, 1999 from $2.0 million for the same period in 1998. Of this increase, $376,000 relates to the Development Properties and $785,000 relates to the Acquisition Properties. The remaining increase in real estate taxes at existing properties is due to the fact that the Company is now responsible for paying taxes on three anchor tenant tracts which in previous years were paid by the tenants due to one redevelopment where the anchor tenant changed and to an administrative issue from the taxing authority on one of the Company's shopping centers (containing two anchor tenants). General and administrative expenses increased $597,000 or 17.3% to $4.0 million for the six months ended June 30, 1999 from $3.4 million for the same period in 1998. General and administrative expenses as a percent of minimum and percentage rents decreased to 8.9% for the six months ended June 30, 1999 from 10.7% for the same period in 1998. 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 $3.2 million or 42.0% to $10.8 million for the six months ended June 30, 1999 from $7.6 million for the same period in 1998. Of this increase, $1.8 million relates to the Development Properties and $1.2 million relates to the Acquisition 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 $4.0 million to $7.8 million for the six months ended June 30, 1999 from $3.8 million for the same period in 1998. This increase results primarily from an increase in average debt balances between 1999 and 1998. Other income, net increased $347,000 or 82.4% to $768,000 for the six months ended June 30, 1999 from $421,000 for the same period in 1998. This increase results from a decrease in amounts written off for development and acquisition projects the Company determined not to pursue and an increase in interest income received from third-party notes receivable. Equity in net income of unconsolidated entities increased $141,000 or 6.7% to $2.2 million for the six months ended June 30, 1999 from $2.1 million for the same period in 1998. This increase results primarily from an increase in net gains on land sales by Development Company. Minority interest in net income of consolidated subsidiary increased $9,000 or 8.9% to $105,000 for the six months ended June 30, 1999 from $96,000 for the same period in 1998. Minority interest in net income of consolidated subsidiary represents the third-party investors' share of the net income of a limited partnership, which owns and operates a shopping center located in Milwaukee, Wisconsin. Net gain on real estate sales for the six months ended June 30, 1998 of $85,000 represents a gain on the sale of an outparcel located in Hickory, North Carolina. There were no real estate sales during the six months ended June 30, 1999. Funds From Operations 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, to incur and service debt, 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 11 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:
(Dollars in thousands) Three Months Ended June 30, 1999 1998 ---- ---- Net income attributable to common shareholders $ 11,153 $ 10,053 Depreciation of real estate assets 5,183 3,857 Amortization of tenant allowances and tenant improvements 53 44 Amortization of deferred leasing commissions 127 55 Net (gain) loss on real estate sales -- (85) Adjustments related to activities in unconsolidated entities 197 169 -------- ------- FFO $ 16,713 $ 14,093 ======== ======== Six Months Ended June 30, 1999 1998 ---- ---- Net income attributable to common shareholders $ 22,132 $ 19,165 Depreciation of real estate assets 10,156 7,177 Amortization of tenant allowances and tenant improvements 104 84 Amortization of deferred leasing commissions 250 109 Net (gain) loss on real estate sales -- (85) Adjustments related to activities in unconsolidated entities 436 334 ------- -------- FFO $ 33,078 $ 26,784 ======= ========
Leasing and Property Information As of June 30, 1999, Wal-Mart, Lowe's and Kroger represented 15.5%, 14.9% and 3.9%, respectively, of the combined annualized base rent of the Company, Development Company and affiliated entities (collectively, "Combined Annualized Base Rent"). In addition, at that date, anchor tenants represented 68.9% of Combined Annualized Base Rent and national and regional tenants represented 86.4% of Combined Annualized Base Rent. As of June 30, 1999, properties owned and operated by the Company, Development Company and affiliated entities were 96.0% leased. On a same property basis, net operating income increased 0.5% between the six months ended June 30, 1999 and the same period in 1998. Net operating income represents property revenues less property expenses except interest expense, depreciation and amortization. As of June 30, 1999, the Company, Development Company and affiliated entities operated in 15 states, and 41.0%, 15.3%, and 10.6% of Combined Annualized Base Rent was represented by shopping center properties located in Georgia, North Carolina and Tennessee, respectively. Forward-Looking Statements 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. Such statements are, by their nature, subject to certain risks and uncertainties. Among the factors that could cause actual results to differ materially from those projected are the following: business conditions and the general economy, especially as they affect interest rates and value-oriented retailers; the federal, state and local regulatory environment; availability of debt and equity capital with favorable terms and conditions including, without limitation, the availability of bank 12 credit facilities to fund development, redevelopment and acquisition activities; availability of new development and acquisition opportunities; changes in the financial condition or corporate strategy of the Company's primary retail tenants and in particular Wal-Mart and Lowe's; the failure of the Company's significant vendors or customers to accommodate the Year 2000 issue; ability to complete and lease existing development and redevelopment projects on schedule and within budget; and inability of the Company to maintain its qualification as a REIT. Other risks, uncertainties and factors that could cause actual results to differ materially than those projected are detailed from time to time in reports filed by the Company with the Securities and Exchange Commission, including Forms 8-K, 10-Q and 10-K. Liquidity and Capital Resources Sources and Uses of Funds - ------------------------- Historically, the Company's primary sources of funds have been cash provided by operating activities and proceeds from lines of credit, secured mortgage notes payable, debt offerings and equity offerings. The Company's primary uses of funds have been development, redevelopment and acquisition of shopping center properties, distributions to shareholders, repayment of outstanding indebtedness, scheduled debt amortization 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 to finance its development, redevelopment and acquisition activities. The Company has used proceeds from secured mortgage notes payable and debt and equity offerings to repay outstanding indebtedness and to fund its ongoing development, redevelopment and acquisition activities. During the first six months of 1999, the Company incurred $66.9 million in development costs and advanced $25.3 million to Development Company to fund its development and redevelopment activities. To fund its development activity in 1999, the Company has completed five capital markets transactions. On January 13, 1999, the Company issued 500,000 shares of its common stock, which netted proceeds to the Company of approximately $10.8 million. In February 1999, the Company closed an unsecured term loan (the "Term Loan") in the amount of $100.0 million with Wachovia Bank, N. A., as agent. The Term Loan bears interest at LIBOR plus 1.40% and matures in February 2002. During the first six months of 1999, the Company closed three secured mortgage notes payable with two institutional investors. The three secured mortgage notes payable netted aggregate proceeds to the Company of $38.6 million, require aggregate monthly payments of principal and interest in the amount of approximately $300,000, have a weighted average interest rate of 6.62%, mature in 2018 and 2019, and each of the notes is secured by real property containing Lowe's stores located in Woodstock, Georgia, Alpharetta, Georgia and Lilburn, Georgia. The net proceeds from these five transactions were used to repay amounts outstanding under the Company's unsecured lines of credit. During 1998, the Company entered into a Distribution Agreement with a group of agents led by Merrill Lynch relating to the proposed issue and sale from time to time of up to $505.5 million of the Company's Medium-Term Notes Due Nine Months or More From the Date of Issue (the "Medium-Term Notes Program"). The aggregate offering under the Medium-Term Notes Program is subject to reduction as a result of the sale by the Company of other securities described in its Prospectus dated October 30, 1997. The Medium-Term Notes Program provides an additional facility for funding the Company's acquisition and development activities. As of June 30, 1999, other than securities which are subject to exchange for limited partnership units, the Company had $265.8 million registered and available for issue under the Medium-Term Notes Program. 13 Indebtedness - ------------ The Company's total indebtedness as of June 30, 1999, consisted of the following:
Effective Percent Principal Interest Maturity of Total Months to Balance Rate Date Indebtedness Maturity ---------- --------- --------- ----------- --------- (in thousands) Fixed Rate - ---------- Mortgage note payable - Denver, Colorado $ 23,743 6.81% 17-Jul-01 4.7% 25 MandatOry Par Put Remarketed Securities ("MOPPRS")(1) 75,000 6.58%(2) 31-Mar-03 14.9% 45 Mortgage note payable - Richmond, Kentucky 6,215 6.88%(3) 01-Dec-03 1.2% 53 Seven Year Notes 74,820 7.10%(2) 01-Aug-04 14.9% 61 Ten Year Notes 84,784 7.23%(2) 01-Aug-07 16.8% 97 Mortgage note payable - Milwaukee, Wisconsin 4,984 7.75% 01-Aug-09 1.0% 121 Mortgage note payable - Jackson, Mississippi 6,945 9.25%(4) 01-Mar-17 1.4% 212 Mortgage note payable - Lilburn, Georgia 12,971 6.70%(2) 10-Feb-18 2.6% 224 Mortgage note payable - Woodstock, Georgia 12,196 6.55%(2) 15-Apr-18 2.4% 226 Mortgage note payable - Alpharetta, Georgia 13,795 6.62%(2) 15-Apr-19 2.7% 238 --------- ---- ---- --- 315,453 7.01% 62.7% 89 Floating Rate - ------------- Revolving Line of Credit 1,956 7.80%(5) 01-Sep-99 0.4% 2 Term Loan 100,000 6.61%(6) 15-Feb-02 19.9% 32 Unsecured Line of Credit 86,000 6.63%(7) 22-May-02 17.1% 35 --------- ---- ----- --- 187,956 6.63% 37.3% 33 --------- ---- ----- --- $ 503,409 6.87% 100.0% 68 ========= ==== ===== ===
(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 on this note 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) Stated rate of LIBOR plus 1.00% plus amortization of deferred loan costs. (6) Stated rate of LIBOR plus 1.40% plus amortization of deferred loan costs. (7) Stated rate of LIBOR plus 1.15% plus amortization of deferred loan costs. As of June 30, 1999, the Company had $99.0 million available under the Unsecured Line of Credit and approximately $18.0 million available under the Revolving Line of Credit. 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 in which it agrees to exchange combinations of fixed and/or variable interest rates on agreed upon notional amounts. Effective as of June 30, 1999, the Company had one interest rate swap agreement as described below. 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. Under the terms of the Company's 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 rate based on the notional amount in the contract of $50.0 million. The maturity date of the swap agreement is January 1, 2001. 14 Future Sources and Uses of Funds - -------------------------------- As of June 30, 1999, the Company, Development Company and affiliated entities had 48 projects under construction which are expected to add approximately 3.5 million square feet of gross leasable area which the Company expects to own. Of this 3.5 million square feet, the Company expects to place approximately 1.1 million square feet into operations during the remainder of 1999. Of these projects under construction, 16 are located in Georgia, six in Tennessee, five in North Carolina, four each in Florida and Texas, three in Pennsylvania, and two in Alabama. Of the total square feet under construction, 76.1% is either leased or committed to be leased or purchased by retailers. Additional funding needed to complete the construction of these projects is estimated to be $162.9 million. Management expects to fund the remaining costs of its current development projects and the costs of any future development projects or acquisitions with a combination of one or more of the following: . advances under its unsecured lines of credit; . additional issuances of securities under the Medium-Term Notes Program; . issuances of common or preferred stock; . issuances of debt securities; . issuances of limited partnership units in DownREIT structures; . advances under secured financings; . advances under term loans with financial institutions; . proceeds from asset sales or tax deferred exchanges; . proceeds from the contribution of assets to one or more joint ventures in which the Company, Development Company or affiliated entities participate; . formation of joint ventures with institutional investors. At June 30, 1999, the Company was negotiating to sell seven properties to four purchasers with a net book value of approximately $105.0 million for an estimated aggregate purchase price of $129.4 million. The Company expects to close the sales of these properties in the third and fourth quarters of 1999. The Company does not anticipate incurring a loss on any individual property sale and proceeds from the sale of the properties will be used to reduce amounts outstanding under the Company's unsecured lines of credit and to fund future development activity. The seven properties held for sale represent approximately 16.2% of net operating income for the six months ended June 30, 1999. Five of these properties are not, as yet, subject to definitive agreements and closing of these transactions is dependent upon, among other things, completion of due diligence and the ability of the purchasers to successfully obtain financing for these transactions. Therefore, there can be no assurance that any of these transactions will close when expected or at all. Failure to close these transactions could adversely affect the Company's ability to fund its ongoing development activities. The Company is currently negotiating a joint venture with an institutional investor which could provide the Company with additional capital. Under the proposed terms, Development Company and an institutional investor would contribute cash in order to develop properties in the joint venture. Upon completion, the developed properties would be transferred to the Company or a third party. The Company is in the preliminary stages of structuring one or more transactions of this nature and there can be no assurance that any such transactions will be consummated. In order for the Company to continue to qualify as a REIT, it must annually distribute to its shareholders at least 95% of its taxable income. Management believes that the Company will meet this requirement in 1999 with cash generated by operating activities. In addition, management believes that cash generated by operating activities will be adequate to fund improvements to the Company's shopping center properties, leasing costs and scheduled debt amortization in 1999. In order to meet the Company's long-term liquidity requirements, management anticipates that the Company's cash from operating activities will continue to increase as a result of new developments, redevelopments, acquisitions and improved operations at existing properties. These activities should 15 enable the Company to make its distributions to shareholders, maintain and improve its properties, make scheduled debt payments and obtain debt or equity financing for its development, redevelopment and acquisition projects. With the exception of four amortizing mortgage loans totaling $45.9 million, all of the Company's debt requires balloon payments in the future. The Revolving Line of Credit matures in 1999; a mortgage note payable of $23.7 million matures in 2001; the Unsecured Line of Credit matures in 2002; the Term Loan matures in 2002; the MOPPRS are subject to mandatory tender in 2003; a mortgage note payable of $6.2 million matures in 2003; the Seven Year Notes mature in 2004; the Ten Year Notes mature in 2007; and a mortgage note payable of $5.0 million matures in 2009. Management intends to refinance or repay these maturing debt instruments with proceeds from other sources of capital at or prior to their respective maturities. Management will evaluate various alternatives and select the best options based on market conditions at the time. Management expects to seek additional equity financing when market conditions are favorable in order to maintain its debt-to-total-market-capitalization ratio within acceptable limits. There can be no assurance that debt or equity markets will be favorable in the future, and unfavorable markets could limit the Company's ability to grow its business or repay or refinance maturing debt. Other - ----- On May 22, 1999, Development Company, through a newly formed wholly-owned subsidiary, acquired Goldberg Property Associates, Inc. ("Goldberg"), a real estate development and property management company in Denver, Colorado. This acquisition provides the Company with additional development opportunities and regional knowledge of the Intermountain states from the Goldberg organization and provides the Company with the opportunities to develop for additional regional retailers. In addition, this acquisition provides the Company with additional third-party leasing and property management activities. Certain Federal Income Tax Considerations The Real Estate Investment Trust Modernization Act of 1999 (the "RMA") was introduced in the House of Representatives (H.R. 1616) on April 28, 1999, and in the Senate of the United States (S. 1057) on May 14, 1999. The RMA was subsequently included, with two exceptions, in H.R. 2488, the Financial Freedom Act of 1999, which was passed by the House of Representatives on July 22, 1999, and in S. 1429, the Taxpayer Refund Act of 1999, which was passed by the Senate of the United States on July 30, 1999. These bills were combined into the Taxpayer Refund & Relief Act of 1999 and approved by the House of Representatives and the Senate of the United States on August 5, 1999. The RMA, as included in the above legislation, contains certain provisions that, if enacted, would significantly modify the REIT-related provisions of the Internal Revenue Code of 1986, as amended (the "Code"). In addition to the provisions that may directly affect the Company (discussed in detail below), the RMA also contains provisions related 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. Taxable REIT Subsidiaries - ------------------------- Under the RMA, a REIT would be permitted to operate taxable REIT subsidiaries through which the REIT could provide "non-customary" and other currently prohibited services with respect to REIT tenants and other customers. Many REITs, including the Company, currently own interests in subsidiaries, which conduct such activities. The RMA would prohibit new investments in such subsidiaries by limiting a REIT's ownership in these subsidiaries to 10% of voting securities or 10% of the value of the subsidiaries. A REIT would be allowed to retain its current ownership in such a subsidiary as long as 1.) the REIT doesn't acquire more of the subsidiary's securities (including debt and equity) other than through certain binding contracts and reorganizations, 2.) the subsidiary does not engage in a substantial new line of business, or 3.) the subsidiary doesn't acquire any substantial asset. 16 The RMA provides a three year period during which an existing subsidiary may be converted, tax-free, into a taxable REIT subsidiary. The value of the securities of all taxable REIT subsidiaries, as well as any grandfathered subsidiaries, would be limited, along with other non-real estate assets, to 25% of the value of the REIT's total assets. The RMA would also limit the deductibility of intercompany interest between a REIT and its taxable REIT subsidiaries (similar to the "earnings stripping" rules of Code Section 163(j)) and impose a 100% tax on non-arms length payments (a safe harbor for which is provided in the RMA) between a taxable REIT subsidiary and its affiliated REIT or that REIT's tenants. Distribution Requirements - ------------------------- Currently, in order to continue to maintain its qualification as a REIT, a REIT is required to distribute annually 95% of its REIT taxable income. The RMA would reduce the required distribution from 95% to 90% effective for taxable years beginning after December 31, 2000. If Congress enacts the provision related to taxable REIT subsidiaries, the ownership structure of Development Company would likely be restructured as a taxable REIT subsidiary. If the ownership structure of Development Company changes such that the Company owns 100% of Development Company, the Company would likely change its accounting for Development Company from the equity method to the consolidated method. Management believes that, if the RMA is enacted in its current form, the activities conducted by Development Company would not change materially. Management does not believe, however, that these changes would modify the way the Company conducts its business, nor would they have a material effect on the results of operations or financial condition of the Company. At this time, it is uncertain whether President Clinton will sign the bill when he receives it in September 1999. Year 2000 Readiness Disclosure Like most businesses, the Company is reliant upon technology to operate and manage its business. Many computer systems process dates using two digits to identify the year, and some systems are unable to properly process dates beginning with the year 2000. As a result of this potential problem, the Company began to assess its exposure to this issue in 1997. As a result of its ongoing assessment, the Company believes that it has identified all of its information technology ("IT") and non-IT systems with exposure to the Year 2000 problem. The Company's critical IT systems include, but are not limited to, accounting and reporting applications and all IT hardware, such as desktop computers, laptop computers and data networking equipment. The Company's critical non-IT systems include, but are not limited to, telephone systems, fax machines, copy machines as well as HVAC systems at the Company's properties. All of the Company's accounting and reporting software has been purchased from third-party vendors. The Company has requested and received certifications from its third-party vendors that all of its critical IT software adequately addresses problems created by the year 2000 such that there will be no significant operational problems ("Year 2000 Compliant"). The Company is currently in the process of determining its exposure to any critical non-IT systems that are not Year 2000 Compliant and will develop a contingency plan if one becomes necessary. The Company is undergoing an IT systems needs assessment unrelated to Year 2000 issues which may result in new accounting and reporting hardware and software being installed. The Company will ensure that all newly installed hardware and software are Year 2000 Compliant. The Company cannot ensure that various third parties with which it deals will be Year 2000 Compliant. Failure of various third parties such as banks, significant tenants and vendors to adequately address the Year 2000 problem could have an adverse impact on the Company's business. This impact could include the inability of the Company's banks to process receipt or disbursement of checks for a period of time, the inability to receive payments from its significant tenants for a period of time and the inability of its vendors to provide services or materials to complete its development projects on time and within budget. The Company has reviewed publicly available information on the Year 2000 readiness of 17 its banks and significant tenants and, based solely on a review of this information, has noted nothing indicating their failure to be Year 2000 Compliant in all material respects. The Company is not aware of any other significant suppliers or vendors with a Year 2000 issue that would materially impact the Company's results of operations, liquidity or capital resources. There can be no assurances, however, that the systems of other companies on which the Company relies will be timely converted and would not have an adverse effect on the Company's systems. The Company will continue to monitor the state of Year 2000 readiness of these and other significant third parties, and will develop a contingency plan if one becomes necessary. The Company believes it has an effective program in place that will resolve the Year 2000 issues in a timely manner. Aside from catastrophic failure of banks, utility companies or governmental agencies, the Company believes that it could continue its normal business operations even if compliance by the Company or its vendors, suppliers and customers is delayed. Aside from a catastrophic failure that would affect most businesses, the Company does not believe that the Year 2000 issue will materially impact its results of operations, liquidity or capital resources. Historic costs of addressing and solving the Company's Year 2000 problems have not been, and estimated costs are not expected to be, material. 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 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. 18 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK During the six months ended June 30, 1999, there were no material changes to the quantitative and qualitative disclosures about market risks presented in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. 19 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On May 19, 1999, the Company held its annual meeting of shareholders. The following were the results of the meeting: (1) The shareholders elected Elizabeth L. Nichols and Haywood D. Cochrane, Jr. as Class II directors until the annual meeting of shareholders in 2002 or until their successors are elected and shall have qualified. The votes were as follows: Elizabeth L. Haywood D. Nichols Cochrane Jr. ------------ ------------ Votes Cast For 27,910,556 27,912,702 Votes Cast Against -0- -0- Votes Withheld/Broker Non-Votes 147,691 145,545 (2) The shareholders approved the amendment and restatement of the JDN Realty Corporation 1993 Non-Employee Director Stock Option Plan. Votes Cast For 16,330,669 Votes Cast Against 2,271,479 Votes Withheld/Broker Non-Votes 345,894 (3) The shareholders approved the amendment and restatement of the JDN Realty Corporation 1995 Employee Stock Purchase Plan. Votes Cast For 17,073,151 Votes Cast Against 1,526,258 Votes Withheld/Broker Non-Votes 348,233 20 (4) The shareholders adopted the JDN Realty Corporation Long-Term Incentive Plan. Votes Cast For 24,561,079 Votes Cast Against 3,227,330 Votes Withheld/Broker Non-Votes 269,837 (5) The shareholders approved the amendment to increase the number of shares reserved for issuance under the JDN Realty Corporation 1993 Incentive Stock Option Plan. Votes Cast For 21,325,365 Votes Cast Against 6,405,461 Votes Withheld/Broker Non-Votes 327,421 (6) The shareholders ratified the appointment of Ernst & Young LLP as independent auditors of the Company for the year ending December 31, 1999. Votes Cast For 27,793,534 Votes Cast Against 46,098 Votes Withheld/Broker Non-Votes 218,615 ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 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 Herein and Wachovia Bank, N.A. as the Agent 12 Statement re: Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule (b) Reports on Form 8-K During the three months ended June 30, 1999, the Company did not file any reports on Form 8-K. 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. August 11, 1999 /s/ J. Donald Nichols - -------------------- ------------------------------------------------- (Date) J. Donald Nichols Chief Executive Officer August 11, 1999 /s/ William J. Kerley - -------------------- ------------------------------------------------- (Date) William J. Kerley Senior Vice President and Chief Financial Officer 22 INDEX TO EXHIBITS Exhibit Number Exhibit - ------ ------- 10.1 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 Herein and Wachovia Bank, N.A. as the Agent 12 Statement re: Computation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule 23 EX-10.1 2 AMENDED AND RESTATED CREDIT AGREEMENT FIRST AMENDMENT TO CREDIT AGREEMENT THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is dated as of the 11th day of June, 1999 among JDN REALTY CORPORATION (the "Borrower"), WACHOVIA BANK, N.A., as Agent (the "Agent") and WACHOVIA BANK, N.A., PNC BANK, NATIONAL ASSOCIATION, BANKERS TRUST COMPANY, COMMERZBANK, A.G., ATLANTA AGENCY, FOUR WINDS FUNDING CORPORATION, FIRST TENNESSEE BANK NATIONAL ASSOCIATION and SOUTHTRUST BANK, NATIONAL ASSOCIATION, (collectively, the "Banks"); W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Borrower, the Agent and the Banks executed and delivered that certain Amended and Restated Credit Agreement, dated as of September 2, 1998 (the "Credit Agreement"); WHEREAS, the Borrower has requested and the Agent and the Banks have agreed to certain amendments to the Credit Agreement, subject to the terms and conditions hereof; NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged by the parties hereto, the Borrower, the Agent and the Banks hereby covenant and agree as follows: 1. Definitions. Unless otherwise specifically defined herein, each term ----------- used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby. 2. Amendment to Section 1.01. Section 1.01 of the Credit Agreement ------------------------- hereby is amended by deleting the definitions of "Eligible Property", "Gross Asset Value" and "Termination Date" and by adding the following definitions in appropriate alphabetical sequence: "Consolidated Fixed Charges" means, for any period, determined on a consolidated basis in accordance with GAAP, the sum of (i) Consolidated Interest Expense for the Fiscal Quarter just ended and the 3 immediately preceding Fiscal Quarters, plus (ii) all dividends paid or declared but not yet paid by the Borrower on preferred stock during the Fiscal Quarter just ended and the 3 immediately preceding Fiscal Quarters, plus (iii) the aggregate amount of scheduled principal amortization paid in the Fiscal Quarter just ended and the 3 immediately preceding Fiscal Quarters as reflected on the Borrower's most recent quarterly financial statement submitted to the Banks, but excluding any principal payments under this Agreement or any other agreement pertaining to revolving debt permitted under Section 5.26, and excluding any balloon payments on other Debt. "Development SPE" means a special purpose entity approved by the Required Banks (which approval shall not be unreasonably withheld or delayed) formed by an unrelated party for the purpose of owning and developing property which may be purchased by the Borrower, any Guarantor or an Affiliate thereof and borrowing money for such purpose, which entity shall be restricted pursuant to its articles of incorporation from engaging in any business other than owning and developing property, and activities incidental thereto, and from incurring any Debt, other than Replacement Property Development Loans and other Debt incidental thereto. "Eligible Construction in Progress" means any Construction in Progress which is located at a Property in the continental United States of America and with respect to which at least 50% of the leasable space in such Property is pre-leased, including at least one anchor tenant. "Eligible Property" means any retail Property which is either (i) listed on Exhibit J, (ii) included in Eligible Construction in Progress or --------- (iii) which has been approved as an Eligible Property by the Required Banks, at the request of the Borrower, taking into account the following information concerning the Property provided to the Agent and the Banks by the Borrower: a physical description, applicable environmental reports, information regarding its age, location and occupancy, an operating statement and rent roll for the most recent Fiscal Quarter, and an operating budget for the current Fiscal Year. "Gross Asset Value" means, on a consolidated basis for the Borrower and the Guarantors, the sum of (without duplication with respect to any Property): (i) an amount equal to the product of (x) 10 (which is the capitalization rate), times (y) 4 (which is the annualization factor), times (z) the Net Operating Income for the 3 month period ending on the last day of the month just ended prior to the date of determination, from each Property owned by the Borrower or any Guarantor for at least one Fiscal Quarter; plus (ii) an amount equal to the book value as of the last day of the month just ended prior to the date of determination of Property owned by the Borrower or any Guarantor for less than a Fiscal Quarter; plus (iii) the book value of Construction in Progress on the last day of the Fiscal Quarter just ended; plus (iv) the aggregate amount of all restricted cash held by a Qualified Intermediary on behalf of the Borrower or any Guarantor, plus (v) the aggregate principal amount outstanding of all Replacement Property Development Loans as to which the development of the relevant property is controlled by the Borrower, a Guarantor or an Affiliate thereof. "Qualified Intermediary" means any Person serving as a "qualified intermediary" for purposes of a Section 1031 Exchange. "Relinquished Property" means a Property sold to a Person which is not the Borrower or an Affiliate thereof, and the proceeds of such sale are held in an exchange account by a Qualified Intermediary, as part of a Section 1031 Exchange. "Replacement Property" means a Property acquired as a replacement for a Relinquished Property as part of a Section 1031 Exchange. "Replacement Property Development Loan" means a loan by the Borrower or any Guarantor to a Development SPE, provided that (i) the proceeds of such loan are used solely for the development of a retail Property that may be purchased by the Borrower, any Guarantor or any Affiliate thereof, or that may be transferred to the Borrower, any Guarantor or any Affiliate thereof, as part of a Section 1031 Exchange, (ii) the principal amount of such loan outstanding at any time shall not exceed 100% of the aggregate costs actually incurred (including hard and soft costs) for development of such property, (iii) such loan 3 accrues interest at a rate which is not less than the interest rate in effect from time to time with respect to Loans under this Agreement, with such interest being capitalized during construction and then payable from available cash flow, (iv) such loan is secured by a first priority mortgage, deed to secure debt, deed of trust or similar instrument on such Property in favor of the Borrower or such Guarantor, (v) such loan matures no later than 35 months after the date such loan is made, (vi) 100% of the net proceeds of sale of portions of such property by the Development SPE shall be paid and applied as a prepayment on such loan, (vii) such loan is repayable in full at the earlier of maturity or sale or transfer of all of the remaining property by the Development SPE, and (viii) such loan remains a performing loan in all material respects. "Section 1031 Exchange" means a sale and exchange of a Relinquished Property for a Replacement Property pursuant to and qualifying for tax treatment under Section 1031 of the Code. "Termination Date" means whichever is applicable of (i) May 22, 2002, (ii) the date the Commitments are terminated pursuant to Section 6.01 following the occurrence of an Event of Default, or (iii) the date the Borrower terminates the Commitments entirely pursuant to Section 2.08. 3. Amendment to Section 2.05(b). Section 2.05(b) of the Credit Agreement ---------------------------- hereby is deleted and the following is substituted therefor: (b) Notwithstanding the foregoing, the outstanding principal amount of the Loans, if any, together with all accrued but unpaid interest thereon, if any, shall be due and payable on the Termination Date. 4. Amendment to Section 2.06(a). Section 2.06(a) of the Credit Agreement ---------------------------- hereby is amended by deleting the table contained therein and by substituting the following table therefor:
================================================================ Level I Level II Level III Level IV ================================================================ Debt (greater Rating than equals to)BBB+ BBB BBB- (less than)BBB- and/1/ and/1/ and/1/ and/1/ Baa1 Baa2 Baa3 Baa3 ---------------------------------------------------------------- Applicable ================================================================
____________________________ /1/ if applicable 4 ---------------------------------------------------------------- Margin 0.90% 1.00% 1.15% 1.50% ================================================================
5. Amendment to Section 2.14. Section 2.14 of the Credit Agreement ------------------------- hereby is deleted and the following is substituted therefor: SECTION 2.14. Additional Banks and Commitments. Upon (i) the -------------------------------- execution of a signature page to this Agreement by a new bank or financial institution (a "New Bank") and acceptance thereof by the Agent,(ii) execution and delivery by the Borrower of a Syndicated Loan Note and a Money Market Loan Note in favor of the New Bank, and (iii) delivery of notice to the Banks by the Agent setting forth the effective date of the addition of the New Bank hereunder and the amount of such New Bank's Commitment, such New Bank shall be for all purposes a Bank party to this Agreement to the same extent as if it were an original party hereto with a Commitment as set forth on the signature page executed by the New Bank; provided, however, (x) the total Commitments of all Banks shall not exceed in the aggregate $200,000,000 and (y) the Commitments and obligations of all Banks party hereto prior to the addition of any New Bank shall not be affected by the addition of such New Bank. 6. Amendment to Section 5.01(c). Section 5.01(c) of the Credit Agreement ---------------------------- hereby is deleted and the following is substituted therefor: (c) simultaneously with the delivery of each set of financial statements referred to in paragraphs (a) and (b) above, a certificate, substantially in the form of Exhibit F (a "Compliance Certificate"), of the --------- chief financial officer or the chief accounting officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.05, 5.15, 5.16, 5.17, 5.20 through 5.25, inclusive, and 5.30 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; 7. Amendment to Section 5.05. Section 5.05 of the Credit Agreement ------------------------- hereby is deleted and the following is substituted therefor: SECTION 5.05. Consolidations, Mergers and Sales of Assets. ------------------------------------------- Neither the Borrower nor any of the Guarantors will consolidate or merge with or into, or acquire all or substantially all of the assets or stock of any other Person, or sell, lease or otherwise transfer all or any 5 substantial part of its assets to, any other Person, provided that: -------- (i) the Borrower may merge with another Person if (x) such Person was organized under the laws of the United States of America or one of its states, (y) the Borrower is the corporation surviving such merger and (z) immediately after giving effect to such merger, no Default shall have occurred and be continuing; (ii) Guarantors may merge with one another, and the Guarantors may sell, lease or otherwise transfer assets to the Borrower; (iii) any sale for cash only of Property by JDN DCI, pursuant to reasonable terms which are no less favorable to JDN DCI than would be obtained in a comparable arm's length transaction with a Person which is not an Affiliate, for fair market value (as determined in good faith by the Board of Directors of JDN DCI or the Borrower or an Executive Committee thereof), provided that the proceeds thereof are -------- used by JDN DCI, or are distributed by JDN DCI to the Borrower or a Guarantor to be used by it, for the purchase of comparable property, to repay Debt or to fund new development, or otherwise to be retained by it for working capital; (iv) the sale by the Borrower or a Guarantor of a Relinquished Property as part of a Section 1031 Exchange; provided that such sale -------- is pursuant to reasonable terms which are no less favorable to the Borrower or such Guarantor than would be obtained in a comparable arm's length transaction with a Person which 6 is not an Affiliate, for fair market value (as determined in good faith by the Board of Directors of the Borrower or such Guarantor or an Executive Committee thereof), provided that the proceeds thereof -------- are used by the Borrower or such Guarantor for the purchase of Replacement Property; (v) the foregoing limitation on the acquisition of all or substantially all the assets or stock of another Person shall not prohibit, during any Fiscal Quarter, the acquisition of all or substantially all of the assets or stock of another Person unless the aggregate assets or stock acquired in a single acquisition or series of related acquisitions of all or substantially all of the assets or stock of another Person by the Borrower and the Guarantors during such Fiscal Quarter constituted more than 20% of Gross Asset Value at the end of the most recent Fiscal Quarter immediately preceding such Fiscal Quarter; (vi) the foregoing limitation on the sale, lease or other transfer of assets shall not prohibit, during any Fiscal Quarter, a transfer of assets (in a single transaction or in a series of related transactions) unless the aggregate assets to be so transferred, when combined with all other assets transferred, by the Borrower and the Guarantors during such Fiscal Quarter and the immediately preceding 3 Fiscal Quarters (but in each case excluding transfers permitted under clauses (i) through (iv) above), constituted more than 25% of Gross Asset Value at the end of the most recent Fiscal Quarter immediately preceding such Fiscal Quarter. In the case of any Guarantor which transfers substantially all of its assets pursuant to clause (vi) of the preceding sentence, and in the case of any Guarantor the stock of which is being sold and with respect to which clause (vi) would have been satisfied if the transaction had been a sale of assets of such Guarantor, such Guarantor may dissolve and shall be entitled to obtain from the Agent a written release from the Guaranty, provided that -------- it can demonstrate to the reasonable satisfaction of the Agent that (A) it has repaid in full all Debt owed to the Borrower or any other Guarantor and (B) such sale was for cash and in the case of an asset transfer, the net cash proceeds received in connection therewith are being distributed to the Borrower as part of such dissolution, and upon obtaining such written release, it shall no longer be a Guarantor for any purpose hereunder. 7 8. Amendment to Section 5.16. Section 5.16 of the Credit Agreement ------------------------- hereby is deleted and the following is substituted therefor: SECTION 5.16. Loans or Advances. Neither the Borrower nor any of ----------------- the Guarantors shall make loans or advances to any Person except as permitted by Section 5.17 and except: (i) loans or advances to employees and directors not exceeding $10,000,000 in the aggregate principal amount outstanding at any time; (ii) deposits required by government agencies or public utilities; (iii) Replacement Property Development Loans and loans or advances from the Borrower to a Guarantor or from a Guarantor to the Borrower or another Guarantor; and/or (iv) other loans and advances by the Borrower and the Guarantors to any JDN Venture which (x) are evidenced by notes (and, if requested by the Agent, acting at the direction of the Required Banks, with such notes, together with any related mortgage, have been assigned to and pledged with the Agent, for the benefit of itself and the Banks, as security for the payment of all obligations of the Borrower to the Agent and the Banks hereunder) and (y) are in an amount which, together with Investments permitted by clause (vi) of Section 5.17, do not exceed 15% of Gross Asset Value as of the end of the most recent Fiscal Quarter; provided that after giving effect to the making of any -------- loans, advances or deposits permitted by this Section, and no Default shall be in existence or be created thereby. 9. New Section 5.30. A new Section 5.30 hereby is added to the Credit ---------------- Agreement, as follows: SECTION 5.30 Ratio of EBITDA to Consolidated Fixed Charges. The --------------------------------------------- ratio of EBITDA to Consolidated Fixed Charges for the Fiscal Quarter just ended and the 3 immediately preceding Fiscal Quarters will not be less than 1.75 to 1.00, calculated at the end of each Fiscal Quarter. 10. Amendment to Section 6.01(b). Section 6.01(b) of the Credit Agreement ---------------------------- hereby is deleted and the following is substituted therefor: 8 (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.01(e), 5.01(i), 5.02(ii), 5.03 through 5.06, inclusive, or Sections 5.17 through 5.30, inclusive; or 11. Amendment to Exhibit F (Compliance Certificate). Exhibit F to the ----------------------------------------------- Credit Agreement hereby is deleted and Exhibit F attached hereto is substituted therefor. 12. Restatement of Representations and Warranties. The Borrower hereby ----------- -- --------------- --- ---------- restates and renews each and every representation and warranty heretofore made by it in the Credit Agreement and the other Loan Documents as fully as if made on the date hereof and with specific reference to this First Amendment and all other loan documents executed and/or delivered in connection herewith. 13. Effect of Amendment. Except as set forth expressly hereinabove, all ------ -- --------- terms of the Credit Agreement and the other Loan Documents shall be and remain in full force and effect, and shall constitute the legal, valid, binding and enforceable obligations of the Borrower. The amendments contained herein shall be deemed to have prospective application only, unless otherwise specifically stated herein. 14. Ratification. The Borrower hereby restates, ratifies and reaffirms ------------ each and every term, covenant and condition set forth in the Credit Agreement and the other Loan Documents effective as of the date hereof. 15. Counterparts. This First Amendment may be executed in any number of ------------ counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. 16. Section References. Section titles and references used in this First ------- ---------- Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby. 17. No Default. To induce the Agent and the Banks to enter into this -- ------- First Amendment and to continue to make advances pursuant to the Credit Agreement, the Borrower hereby acknowledges and agrees that, as of the date hereof, and after giving effect to the terms hereof, there exists (i) no Default or Event of Default and (ii) no right of offset, defense, counterclaim, claim or objection in favor of the Borrower arising out of or with respect to any of the Loans or other obligations of the Borrower owed to the Banks under the Credit Agreement. 9 18. Further Assurances. The Borrower agrees to take such further actions ------------------ as the Agent shall reasonably request in connection herewith to evidence the amendments herein contained to the Borrower. 19. Governing Law. This First Amendment shall be governed by and ------------- construed and interpreted in accordance with, the laws of the State of Georgia. 20. Conditions Precedent. This First Amendment shall become effective -------------------- only upon (i) execution and delivery of this First Amendment by the Borrower, the Agent and the Required Banks; (ii) execution and delivery of the Consent and Reaffirmation of Guarantor at the end hereof by JDN DCI; (iii) receipt by the Agent of customary closing documents (including such secretary's certificates, officer's certificates, good standing certificates and opinions of counsel as the Agent may reasonably require); (iv) payment to the Agent, for the ratable account of the Banks, of an extension fee in an amount equal to 0.10% of the aggregate amount of the Commitments; and (v) payment to the Agent, for the account of Wachovia Securities, Inc., of the arranger's structuring fee payable pursuant to the letter agreement between the Borrower, the Agent and Wachovia Securities, Inc. dated April 26, 1999. IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has caused this First Amendment to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. JDN REALTY CORPORATION, WACHOVIA BANK, N.A., as Borrower (SEAL) as Agent and as a Bank (SEAL) By:______________________ By:_____________________ Title: Title: PNC BANK, NATIONAL BANKERS TRUST COMPANY, ASSOCIATION, (SEAL) as a Bank (SEAL) as a Bank By:______________________ By:____________________ Title: Title: COMMERZBANK, A.G., ATLANTA FOUR WINDS FUNDING CORPORATION, AGENCY, as a Bank (SEAL) as a Bank (SEAL) By: ___________________________ By:_____________________ Title: Title: 10 By:___________________________ By: ____________________ Title: Title: FIRST TENNESSEE BANK NATIONAL SOUTHTRUST BANK, NATIONAL ASSOCIATION, (SEAL) ASSOCIATION, (SEAL) as a Bank as a Bank By:___________________________ By:_____________________ Title: Title: 11 EXHIBIT F --------- COMPLIANCE CERTIFICATE ---------------------- Reference is made to the Amended and Restated Credit Agreement dated as of September 2, 1998, as amended by First Amendment to Credit Agreement dated as of June 10, 1999 (as so amended and as hereafter modified and supplemented and in effect from time to time, the "Credit Agreement") by and among JDN Realty Corporation, the Banks from time to time parties thereto, and Wachovia Bank, N.A., as Agent. Capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement. Pursuant to Section 5.01(c) of the Credit Agreement, ______________, the duly authorized ______________________ of the Borrower, hereby (i) certifies to the Agent and the Banks that the information contained in the Compliance Check List attached hereto is true, accurate and complete as of __________, ____, and that no Default is in existence on and as of the date hereof and (ii) restates and reaffirms that the representations and warranties contained in Article IV of the Credit Agreement are true on and as of the date hereof as though restated on and as of this date. JDN REALTY CORPORATION By:___________________________ Its: 12 COMPLIANCE CHECK LIST JDN REALTY CORPORATION -------------------------- _____________, ____ 1. Ratio of Consolidated Total Liabilities to Gross Asset Value (Section 5.20) The ratio of Total Consolidated Liabilities to Gross Asset Value shall at all times be equal to or less than 0.55 to 1.0. (a) Total Consolidated Liabilities Schedule 1 $_________ (b) Gross Asset Value Schedule 2 $_________ (c) Actual ratio of (a) to (b) _______to 1.0 Maximum ratio 0.55 to 1.0 2. Ratio of Total Secured Debt to Gross Asset Value (Section 5.21) The ratio of Total Secured Debt to Gross Asset Value shall at all times be equal to or less than 0.40 to 1.0. (a) Total Secured Debt Schedule 3 $_________ (b) Gross Asset Value Schedule 2 $_________ (c) Actual ratio of (a) to (b) ______to 1.0 Maximum ratio 0.40 to 1.0 3. Ratio of EBITDA to Consolidated Interest Expense (Section 5.22) The ratio of EBITDA to Consolidated Interest Expense for the Fiscal Quarter just ended and the 3 immediately preceding Fiscal Quarters will not be less than 2.0 to 1.00, calculated at the end of each Fiscal Quarter. (a) EBITDA Schedule 4 $_________ (b) Consolidated Interest Expense/2/ $_________ _________________ /2/ During Fiscal Quarter just ended and immediately preceding 3 Fiscal Quarters 13 (c) actual ratio of (a) to (b) _____to 1.0 Minimum ratio 2.0 to 1.0 4. Ratio of Unencumbered Assets to Unsecured Funded Debt (Section 5.23) The ratio of Unencumbered Assets to Unsecured Funded Debt shall at all times be equal to or greater than 1.75 to 1.00. (a) Net Operating Income from each and owned for at least one Fiscal Quarter Schedule 5 $_________ (b) 10 times (a) $_________ (c) 4 times (b) $_________ (d) book value of each Property not subject to a Mortgage and owned for less than one Fiscal Quarter $_________ (e) book value of all Construction in Progress $_________ (f) sum of (c),(d) and (e) $_________ (g) Unsecured Funded Debt Schedule 6 $_________ (h) Actual ratio of (f) to (g) _____ to 1.0 Minimum ratio 1.75 to 1.0 5. Ratio of Unsecured Net Operating Income to Unsecured Interest Expense (Section 5.24) The ratio of Unsecured Net Operating Income to Unsecured Interest Expense shall at all times be equal to or greater than 1.75 to 1.0. (a) Unsecured Net Operating Income Schedule 5 $_________ (b) Unsecured Interest Expense/2/ $_________ (c) Actual ratio of (a) to (b) ____ to 1.0 Minimum ratio 1.75 to 1.0 ___________________ /2/ Include only Consolidated Interest Expense for Fiscal Quarter attributable to Unsecured Funded Debt. 14 6. Restricted Payments (Section 5.15)/3/ The Borrower's Restricted Payments in any calendar year shall not exceed 95% of Funds from Operations for such period, unless (i) the Borrower must pay out an amount in excess of 95% of Funds from Operations to permit the Borrower to preserve its status as a real estate investment trust under the applicable provision of the Code. (a) Restricted Payments for current calendar year $_________ (b) Funds from Operations for current calendar year Schedule 7 $_________ (c) 95% of (b) $_________ Limitation: (a) may not exceed (c) 7. Guarantees (Section 5.25) Neither the Borrower nor any Guarantor will create, assume or suffer to exist any Guarantees of Debt of other Persons, except (i) Guarantees in existence on May 23, 1997 in the aggregate as of August 31, 1998 of 21,770,661, (ii) Guarantees of Debt of the Borrower or other Guarantors and (iii) other Guarantees in an aggregate amount not exceeding at any time 10% of Gross Asset Value as of the last day of the Fiscal Quarter just ended. (a) Amount Guaranteed by other Guarantees not permitted by clauses (i) and (ii) $_________ (b) Gross Asset Value Schedule 2 $_________ (c) 10% of (b) $_________ Limitation: (a) may not exceed (c) 8. Consolidations, Mergers and Sales of Assets (Section 5.05) _____________________ /3/ Include this paragraph 6 and Schedule 7 only with the first Compliance Certificate furnished after the end of each Fiscal Year. Amounts included herein are for the year ended December 31, ____ 15 Neither the Borrower nor any of the Guarantors will consolidate or merge with or into, or acquire all or substantially all of the assets or stock of any other Person, or sell, lease or otherwise transfer all or any substantial part of its assets to, any other Person, provided that: -------- [(i) . . . (iv)] (v) the foregoing limitation on the acquisition of all or substantially all the assets or stock of another Person shall not prohibit, during any Fiscal Quarter, the acquisition of all or substantially all of the assets or stock of another Person unless the aggregate assets or stock acquired in a single acquisition or series of related acquisitions of all or substantially all of the assets or stock of another Person by the Borrower and the Guarantors during such Fiscal Quarter constituted more than 20% of Gross Asset Value at the end of the most recent Fiscal Quarter immediately preceding such Fiscal Quarter; (vi) the foregoing limitation on the sale, lease or other transfer of assets shall not prohibit, during any Fiscal Quarter, a transfer of assets (in a single transaction or in a series of related transactions) unless the aggregate assets to be so transferred, when combined with all other assets transferred, by the Borrower and the Guarantors during such Fiscal Quarter and the immediately preceding 3 Fiscal Quarters (but in each case excluding transfers permitted under clauses (i) through (iv) above), constituted more than 25% of Gross Asset Value at the end of the most recent Fiscal Quarter immediately preceding such Fiscal Quarter. (a) Aggregate amount of assets or stock acquired in a single acquisition or series of related acquisitions during Fiscal Quarter just ended $_________ (b) Gross Asset Value Schedule 2 $_________ (c) 20% of (b) $_________ Limitation: (a) may not exceed (c) (d) Aggregate amount of assets sold during Fiscal Quarter just ended $_________ (e) Aggregate amount of assets sold during 3 prior Fiscal Quarters $_________ 16 (f) Sum of (d) and (e) $_________ (g) 25% of (b) $_________ Limitation: (f) may not exceed (g) 9. Loans or Advances (Section 5.16) Neither the Borrower nor any of the Guarantors shall make loans or advances to any Person except as permitted by Section 5.17 and except: (i) loans or advances to employees and directors not exceeding $10,000,000 in the aggregate principal amount outstanding at any time; [(ii) . . . (iii)] (iv) other loans and advances by the Borrower and the Guarantors to any JDN Venture which (x) are evidenced by notes (and, if requested by the Agent, acting at the direction of the Required Banks, with such notes, together with any related mortgage, have been assigned to and pledged with the Agent, for the benefit of itself and the Banks, as security for the payment of all obligations of the Borrower to the Agent and the Banks hereunder) and (y) are in an amount which, together with Investments permitted by clause (vi) of Section 5.17, do not exceed 15% of Gross Asset Value as of the end of the most recent Fiscal Quarter; (a) Loans and advances to officers and directors $_________ Limitation $10,000,000 (b) Other loans and advances evidenced by notes (and, if required, pledged with Agent) and not permitted by clauses (i) through (iii) $________ (c) See line (e) and "Limitation" of paragraph 10 below 10. Investments (Section 5.17) Investments of the Borrower as of the Closing Date (other than in Subsidiaries, which are set forth in Schedule 4.08), are set forth on Schedule 5.17. Neither the Borrower nor any of the Guarantors 17 shall make Investments after the Closing Date in any Person except as permitted by Section 5.16 and except Investments in: [(i) . . . (v)] (vi) other Investments by the Borrower and the Guarantors in an amount which, (x) together with loans and advances permitted by clause (iv) of Section 5.16, do not exceed 15% of Gross Asset Value as of the end of the most recent Fiscal Year, and (y) with respect to Investments in Persons over which, after giving effect to such Investment, the Borrower or the Guarantors do not have Control, do not exceed 5% of Gross Asset Value as of the end of the most recent Fiscal Year; (a) Line (b) of paragraph 9 above $_________ (b) Other Investments not permitted by clauses (i) through (v) $_________ (c) Sum of (a) and (b) $_________ (d) Gross Asset Value Schedule 2 $_________ (e) 15% of (d) $_________ Limitation: (c) may not exceed (e) (f) Investments included in line (b) in Persons over which the Borrower or the Guarantors do not have control $_________ (g) 5% of (d) $_________ Limitation: (f) may not exceed (g) 11. Ratio of EBITDA to Consolidated Fixed Charges (Section 5.30) The ratio of EBITDA to Consolidated Fixed Charges for the Fiscal Quarter just ended and the 3 immediately preceding Fiscal Quarters will not be less than 1.75 to 1.00, calculated at the end of each Fiscal Quarter. (a) EBITDA Schedule 4 $_________ (b) Consolidated Interest Expense/4/ $_________ (c) dividends paid or declared ______________________ /4/ During Fiscal Quarter just ended and immediately preceding 3 Fiscal Quarters 18 but not yet paid on preferred stock/4/ $_________ (d) aggregate amount of scheduled principal amortization paid /5/ $_________ (e) sum of (b) through (d) $_________ (f) actual ratio of (a) to (e) ____ to 1.0 Minimum ratio 1.75 to 1.0 _________________________ /5/ During Fiscal Quarter just ended and immediately preceding 3 Fiscal Quarters, but excluding any principal payments under this Agreement or any other agreement pertaining to revolving debt permitted under Section 5.26 and excluding any balloon payments on other Debt. 19 Schedule 1 ---------- Total Consolidated Liabilities ------------------------------ (a) Consolidated Liabilities $_________ (b) Debt Guaranteed by Borrower or any Guarantor $_________ (c) face amount of all letters of credit issued for the account of the Borrower or any Guarantor $_________ TOTAL CONSOLIDATED LIABILITIES (sum of (a) through (c) $__________ 20 Schedule 2 ---------- Gross Asset Value ----------------- (a) Net Operating Income for the 3 month period ending on the last day of the month just ended prior to the date of determination, from each Property owned by the Borrower or any Guarantor for at least one Fiscal Quarter $__________ (b) 40 times (a) $__________ (c) book value of each Property owned by the Borrower or any Guarantor for less than one Fiscal Quarter $__________ (d) book value of Construction in Progress of each Property owned by the Borrower or any Guarantor $__________ (e) aggregate amount of all restricted cash held by a Qualified Intermediary on behalf of the Borrower or any Guarantor $__________ (f)) aggregate principal amount outstanding of all Replacement Property Development Loans as to which the development of the relevant property is controlled by the Borrower, a Guarantor or an Affiliate thereof. $__________ GROSS ASSET VALUE (sum of (b) through (f)) $__________ 21 Schedule 3 ---------- Total Secured Debt/6/ ---------------------
INTEREST FINAL RATE/7/ MATURITY TOTAL ------- -------- ----- Money Borrowed - -------------- _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________ Total Money Borrowed $_________ Deferred Purchase Price/8/ - -------------------------- _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________ Total Deferred Purchase Price $_________ Capital Leases in which Borrower is the Tenant - ---------------------------------------------- ____________________________________________________________ $_________ ____________________________________________________________ $_________ Total Capital Leases $_________ Letter of Credit Reimbursement Obligations - ----------- ____________________________________________________________ $_________ ____________________________________________________________ $_________ Total Letter of Credit Reimbursement Obligations $_________ Guarantees of Debt of Persons other than Borrower and Guarantors - ---------------------------------------------------------------- _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________
__________________________ /6/ Include only Debt secured by a Mortgage /7/ If rate is fixed, insert contract rate. If rate is floating, state that. /8/ Exclude trade accounts payable in the ordinary course of business. 22 _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________ _____________________________ __________ __________ $_________ TOTAL SECURED DEBT $_________
23 Schedule 4 ---------- EBITDA ------ ____ quarter ____ consolidated net income $________ less extraordinary gains ($________) plus extraordinary losses $________ plus Consolidated Interest Expense $________ plus taxes on income $________ plus depreciation and amortization $________ plus other non-cash charges $________ Total $________ ____ quarter ____ consolidated net income $________ less extraordinary gains ($________) plus extraordinary losses $________ plus Consolidated Interest Expense $________ plus taxes on income $________ plus depreciation and amortization $________ plus other non-cash charges $________ Total $________ ____ quarter ____ consolidated net income $________ less extraordinary gains ($________) plus extraordinary losses $________ plus Consolidated Interest Expense $________ plus taxes on income $________ plus depreciation and amortization $________ plus other non-cash charges $________ Total $________ ____ quarter ____ consolidated net income $________ less extraordinary gains ($________) plus extraordinary losses $________ plus Consolidated Interest Expense $________ plus taxes on income $________ plus depreciation and amortization $________ plus other non-cash charges $________ Total $________ EBITDA $ ========
24 Schedule 5 ---------- Net Operating Income/9/ ----------------------- (for Fiscal Quarter just ended) ____ quarter ____ Property revenues $________ less Property expenses (excluding depreciation, amortization and debt service) ($________) less management fee (3% of gross rental income, excluding percentage rents) ($________) less capital reserve ($0.15 per leasable square foot) ($________) NET OPERATING INCOME $________ ______________________________ /9/ Include only Properties not subject to a Mortgage and owned for at least one Fiscal Quarter 25 Schedule 6 ---------- Unsecured Funded Debt/10/ -------------------------
INTEREST FINAL RATE/11/ MATURITY TOTAL -------- -------- ----- Money Borrowed - -------------- _____________________________ __________ _________ $_________ _____________________________ __________ _________ $_________ _____________________________ __________ _________ $_________ _____________________________ __________ _________ $_________ _____________________________ __________ _________ $_________ Total Money Borrowed $_________ _______ Deferred Purchase Price/12/ - --------------------------- _____________________________ __________ _________ $_________ _____________________________ __________ _________ $_________ _____________________________ __________ _________ $_________ _____________________________ __________ _________ $_________ Total Deferred Purchase Price $_________ Capital Leases in which the Borrower is the tenant - -------------------------------------------------- ___________________________________________________________ $_________ ___________________________________________________________ $_________ Total Capital Leases $_________ Letter of Credit Reimbursement
_________________________ /10/ Include only Debt not secured by a Mortgage /11/ If rate is fixed, insert contract rate. If rate is floating, state that. /12/ Exclude trade accounts payable in the ordinary course of business. 26 Obligations - ----------- ___________________________________________________________ $_________ ___________________________________________________________ $_________ Total Letter of Credit Reimbursement Obligations $_________
Guarantees of Debt of Persons other than Borrower and Guarantors - ---------------------------------------------------------------- _____________________________ ___________ __________ __________ _____________________________ ___________ __________ __________ _____________________________ ___________ __________ __________ _____________________________ ___________ __________ __________ _____________________________ ___________ __________ __________ TOTAL UNSECURED FUNDED DEBT $ ==========
27 Schedule 7/13/ -------------- Funds from Operations/1/ ------------------------ (for Fiscal Year just ended) Net income $________ plus depreciation and amortization of real estate assets $________ plus net loss/(gain) on real estate sales $________ plus loss/(gains) on extraordinary items $________ plus depreciation of real estate assets held in unconsolidated entities $________ FUNDS FROM OPERATIONS $________ _______________________________ /13/ Include only with the first Compliance Certificate furnished after the end of each Fiscal year. 28 CONSENT AND REAFFIRMATION OF GUARANTOR The undersigned (i) acknowledges receipt of the foregoing First Amendment to Credit Agreement (the "First Amendment"), (ii) consents to the execution and delivery of the First Amendment by the parties thereto and (iii) reaffirms all of its obligations and covenants under the Guaranty Agreement dated as of September 2, 1998 executed by it, and agrees that none of such obligations and covenants shall be affected by the execution and delivery of the First Amendment. JDN DEVELOPMENT COMPANY, INC. (SEAL) By: ______________________ Title: _________________________ 29 EX-12 3 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES JDN Realty Corporation Computation of Ratio of Earnings to Fixed Charges Exhibit 12
Three months ended June 30, Six months ended June 30, 1999 1998 1999 1998 ---- ---- ---- ---- Fixed Charges: Interest Expense (including amortization of deferred debt cost) $ 6,745 $ 4,198 $ 13,103 $ 7,553 Interest Capitalized 1,809 1,417 3,283 2,721 ----------- ----------- ----------- ----------- Total Fixed Charges $ 8,554 $ 5,615 $ 16,386 $ 10,274 =========== =========== =========== =========== Earnings: Net (loss) before income tax benefit, net gain (loss) on real estate sales extraordinary items and cumulative effect of change in accounting principle $ 12,325 $ 9,968 $ 24,476 $ 19,080 Fixed Charges 8,554 5,615 16,386 10,274 Capitalized Interest (1,809) (1,417) (3,283) (2,721) ----------- ----------- ----------- ----------- Total Earnings $ 19,070 $ 14,166 $ 37,579 $ 26,633 =========== =========== =========== =========== Ratio of Earnings to Fixed Charges 2.23 2.52 2.29 2.59
EX-27 4 FINANCIAL DATA SCHEDULE
5 6-MOS 6-MOS DEC-31-1999 DEC-31-1998 JAN-01-1999 JAN-01-1998 JUN-30-1999 JUN-30-1998 0 1,652 0 0 8,681 5,408 0 0 0 0 0 0 910,951 709,920 60,782 45,675 1,056,902 811,290 0 0 234,604 234,542 0 0 20 0 332 310 526,139 437,100 1,056,902 811,290 0 0 51,630 36,255 0 0 0 0 22,258 15,764 0 0 7,790 3,826 24,476 19,165 0 0 24,476 19,165 0 0 0 0 0 0 22,132 19,165 0.67 0.64 0.66 0.63
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