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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-9496
BODDIE-NOELL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1574675
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3710 One First Union Center, Charlotte, NC 28202-6032
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704/333-1367
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
Common Stock, Par Value $.01 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant at March 15, 1996 was approximately $36,171,000.
The number of shares of Registrant's Common Stock outstanding on March 15,
1996 was 3,016,740
Index to Exhibits at Page 40 Total number of Pages 115
BODDIE NOELL PROPERTIES, INC.
TABLE OF CONTENTS
Item No. FINANCIAL INFORMATION Page No.
PART I
1 Business ........................................................... 3
2 Properties ......................................................... 6
3 Legal Proceedings .................................................. 8
4 Submission of Matters to a Vote of Security Holders ................ 8
X Executive Officers of the Registrant ............................... 8
PART II
5 Market for Registrant's Common Equity and Related Stockholder
Matters ............................................................ 10
6 Selected Financial Data ............................................ 10
7 Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................... 12
8 Financial Statements and Supplementary Data ........................ 17
9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure ........................................... 18
PART III
10 Directors and Executive Officers of the Registrant ................. 19
11 Executive Compensation ............................................. 19
12 Security Ownership of Certain Beneficial Owners and Management...... 19
13 Certain Relationships and Related Transactions ..................... 19
PART IV
14 Exhibits, Financial Statement Schedules, and Reports on Form
8-K ................................................................ 20
PART I
ITEM 1. BUSINESS
History and Development of Boddie-Noell Properties, Inc.
Boddie-Noell Properties, Inc., (the "Company") is a self-advised and
self-managed equity real estate investment trust ("REIT"). The Company, formerly
known as Boddie-Noell Restaurant Properties, Inc., was formed in 1987 with an
initial public offering of 2,850,000 shares of common stock. The Company's
shares are listed on the American Stock Exchange. Its executive offices are
located at 3710 One First Union Center, Charlotte, North Carolina 28202-6032
(704-333-1367).
From its inception through 1992 the Company's investment strategy was limited to
the purchase and ownership of 47 restaurant properties leased on a triple net
basis to Boddie-Noell Enterprises, Inc. ("BNE"). During this period the Company
operated as an advised REIT with all management and administrative functions
being performed by BNE Advisory Group, Inc. (an affiliate of BNE) under an
advisory contract. While the Company was able to maintain a relatively stable
dividend throughout this period, it experienced virtually no growth in its
operating results, and its common stock did not perform as well as that of
larger, self-managed, self-advised REITs holding other types of properties and
having more emphasis on long-term growth.
In 1992, the Company began to explore ways to increase shareholder value.
Following an extensive review of its options, the Company concluded that it was
in the best interest of its shareholders to change the focus of the Company to
emphasize apartment properties; reorganize into a self-managed, self-advised
REIT; and to implement a long-term growth strategy of acquiring apartment
properties with a goal of increasing funds from operations ("FFO") and its
annual dividend payment. To this end, the Company, in December 1992, entered a
letter of intent to acquire BT Venture Corporation ("BTVC") and its managed
properties (the "roll-up" transaction). BTVC was a fully integrated apartment
management and development company located in Charlotte, North Carolina, which
owned one apartment property and managed nine other apartment properties for
limited partnerships (collectively the "managed properties"), the general
partner of which was an affiliate of BTVC and an affiliate of certain principals
of BNE. Under the proposed transaction the owners of BTVC and the affiliated
limited partnerships would have received shares of the Company's common stock in
exchange for their respective ownership interests in BTVC and the managed
properties. Management of the Company believed that this transaction would have
resulted in the Company achieving a number of its goals. Following the
transaction over two-thirds of its assets would have been apartments and, using
personnel obtained with the purchase of BTVC, the Company would have become
self-managed and self-advised. Management believed that this transaction would
have placed the Company in a better position to attain long-term growth in its
operating results.
As proposed, the transaction constituted a "roll-up" as defined by the
Securities and Exchange Commission ("SEC") and was subject to a special set of
rules governing the merger of multiple limited partnerships into a single
publicly traded entity (the roll-up rules). These rules govern and specify the
type and extent of disclosure required and mandate certain terms and conditions
for transactions such as that contemplated by the Company. At the time the
Company entered this transaction, there had not been a transaction completed
under the SEC's roll-up rules.
In May 1993, the Company entered into a contract to purchase BTVC and the
managed properties and, in August 1993, filed a registration statement together
with supporting documents with the SEC. With the passage of time, it became
clear that, due to the complexity of the roll-up rules and changes in the market
for apartment properties, the difficulty, time and cost required to complete a
roll-up transaction such as that contemplated by the Company was significantly
more than originally estimated. In early 1994 the Company's Board of Directors
came to the conclusion that, as a result of changes in the apartment sector of
the real estate industry and the burden of compliance with the disclosure
requirements, it was highly unlikely that the proposed roll-up transaction could
be completed in an acceptable period of time and at an acceptable cost. As a
result of this determination, the Company withdrew its registration statement in
March 1994.
Subsequent to the withdrawal of the Registration Statement, the Company explored
alternatives to the original roll-up transaction that would help the Company
achieve its goals without the cost, time and uncertainty attendant to the
roll-up transaction. As a result, in June 1994, the Company entered a contract
to purchase BTVC in a private transaction for a combination of stock and cash.
Pursuant to a Proxy Statement filed June 15, 1994, the purchase of BTVC was
approved by the Company's shareholders on August 4, 1994. The purchase was
completed on October 1, 1994. As part of the purchase of BTVC, the Company
acquired Latitudes Apartments, a 448-unit apartment community located in
Virginia Beach, Virginia; management rights and responsibility for ten apartment
communities located in North Carolina and Virginia (containing a total of 1,947
apartments) and three shopping centers located in North Carolina and Virginia
(containing a total of 238,550 square feet); and the employees of BTVC,
including all administrative and management staff. Simultaneously with the
acquisition of BTVC, the Company changed its name to Boddie-Noell Properties,
Inc., and moved its corporate headquarters from Rocky Mount, North Carolina, to
Charlotte, North Carolina.
Throughout the time that the Company was involved with the roll-up transaction
and the subsequent purchase of BTVC, the Company was pursuing apartment
acquisitions. In June 1993, the Company acquired Paces Commons Apartments, a
336-unit apartment community located in Matthews, North Carolina (a suburb of
Charlotte). In June 1994, the Company acquired Oakbrook Apartments, a 162-unit
apartment community located in Charlotte, North Carolina. These acquisitions
were identified by and were made with the assistance of BTVC personnel.
Subsequent to the acquisition of BTVC, in December 1994, the Company acquired
Harris Hill Apartments, a 184-unit apartment community located in Charlotte,
North Carolina.
Current Operations
As a result of these acquisitions, the Company now owns 47 restaurant properties
and four apartment communities, containing a total of 1,130 apartments. Through
its unconsolidated subsidiary, BNP Management, Inc., the Company manages an
additional nine apartment communities, containing a total of 1,713 apartments,
and two shopping centers, containing a total of 113,800 square feet. All of the
properties presently owned or managed by the Company are located in the states
of North Carolina and Virginia, with multi-family residential operations in the
North Carolina cities of Raleigh, Durham, Cary, Chapel Hill, and Charlotte, as
well as Virginia Beach, Virginia.
The Company has 80 employees, including administrative, management, accounting,
legal, acquisitions, development, property management, leasing, and maintenance
personnel. The Company operates as a self-advised and self-managed REIT.
With the addition of four apartment properties in June 1993 and June, October,
and December 1994, apartment rental income accounts for a significant portion of
revenues, totaling $8.5 million in 1995 compared to $3.9 million in 1994 and
$1.2 million in 1993. 1995 apartment rental income represents approximately 62
percent of total revenues.
Each apartment community is operated by an on-site manager assisted by staff
trained by the Company in sales, management, accounting, maintenance and other
procedures. On-site managers report directly to property managers who operate
from the Company's corporate offices. This flat organization provides for
efficient staffing levels, reduces overhead expenses and enables the Company to
be responsive to the needs of residents and on-site employees. Employees of the
Company supervise all renovation and repair activities, which are generally
completed by outside contractors.
Restaurant properties are leased on a triple net basis to BNE, a privately held
company, which is the second largest Hardee's franchisee in the United States
with approximately 365 stores. The Company's lease agreement with BNE (the
"master lease"), as amended in December 1995, has a primary term expiring
December 2007, grants BNE three five-year renewal options and provides for rent
equal to 9.875 percent of restaurant sales as defined, subject to a minimum
annual rent of $4,500,000 per year. Under the terms of the master lease, BNE is
responsible for all aspects of the operation, maintenance and upkeep of the
restaurant properties. Restaurant rental income totaled $4.6 million in 1995
compared to $5.0 million in 1994 and $5.2 million in 1993. 1995 restaurant
rental income represents
approximately 34 percent of total revenues. (See Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations for discussion of
restaurant sales trends.)
Business Strategy
Building upon the acquisition of its four apartment communities and BTVC, the
Company intends to continue to acquire high quality apartment properties. The
Company currently has no plans to add to or dispose of its restaurant properties
and will not seek additional third-party management contracts except as part of
a plan to acquire additional properties.
The Company believes that its strategy of combining the restaurant properties
with increasing investment in apartment communities will provide for growth in
FFO and enhance shareholder value. The Company will seek to acquire multi-family
properties located primarily in the states of North Carolina, South Carolina and
Virginia from unaffiliated third parties and as well as some or all of the
affiliated properties it currently manages. The Company will also selectively
consider opportunities for development of new apartment communities. The
Company's management has developed 781 apartment units and believes that its
development experience will enable it to build additional apartment communities
at such time as economic conditions and available capital make development
attractive.
In evaluating potential properties for acquisition, the Company will consider
such factors as (1) the current and anticipated cash flow of the property and
its adequacy to meet operational needs and other obligations and to facilitate
the Company's ability to pay dividends; (2) the geographic area and demographic
profile; (3) the location, construction quality, condition and design of the
property (generally properties will be or have the potential to become Class A
apartment communities); (4) the potential for increasing cash flow by means of
increasing rental rates and reducing operating expenses; (5) the potential for
capital appreciation; (6) the growth, tax and regulatory environment of the
community in which the property is located; (7) occupancy and demand for the
property; and (8) prospects for eventual sale or refinancing. Generally, an
apartment property will be acquired only where the operating history indicates
that the property will contribute immediately to the cash flow of the Company
and there is a strong likelihood of increasing cash flow.
Prior to acquiring its first apartment community, the Company's capital
requirements were minimal as all capital expenses related to the restaurants
were borne by BNE under the terms of the master lease. In order to acquire Paces
Commons, Oakbrook, BTVC, Latitudes and Harris Hill, the Company has incurred
additional debt and issued additional common stock. The additional debt consists
of first mortgages secured by the acquired apartment communities and draws
against the Company's credit lines. In order for the Company to continue to
acquire apartment properties, it is essential that it obtain additional equity
capital. The Company is actively exploring available sources of equity capital.
It is likely that the Company will incur additional long-term debt as part of
any apartment acquisitions. While short-term variable rate debt may be used to
facilitate an acquisition, the preferred permanent financing will be long-term,
fixed rate, and self-amortizing.
The Company is committed to reducing its exposure to variable rate debt. The
Company converted $31.1 million and $29.3 million of variable rate debt to fixed
rates during 1994 and 1995, respectively.
The Company has elected and expects to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended. As such the
Company generally will not be subject to federal or state income taxes on net
income. REITs are subject to a number of organizational and operational
requirements, including a requirement that they currently distribute 95 percent
of their ordinary taxable income as dividends. The Company intends to pay
dividends quarterly, expects that these dividends will substantially exceed the
95 percent taxable income test, and anticipates that all dividends will be paid
from current funds from operations.
In addition to the 95 percent taxable income test, the Company is subject to a
"non-qualifying" income test which requires that no more than 5 percent of total
revenue come from sources deemed to be "non-qualifying." Failure to comply with
this requirement may result in the loss of the Company's REIT status. Revenue
from third-party property management contracts assumed at the acquisition of
BTVC in 1994 is considered to be non-qualifying income. As a result, the
Company, in 1994, had non-qualifying income of approximately 3 percent of total
revenue. To ensure that
non-qualifying income does not exceed 5 percent of its total revenue, in May
1995 the Company transferred the third-party management contracts to a newly
formed unconsolidated management subsidiary, BNP Management, Inc., which is
subject to federal and state income taxes. This structure is currently being
used by a number of other REITs.
The Company expects to meet its short-term liquidity requirements generally
through net cash provided by operations and utilization of credit facilities.
The Company believes that its net cash provided by operations will be adequate
and anticipates that it will continue to be adequate to meet both operating
requirements and payment of dividends by the Company in accordance with REIT
requirements in both the short and the long term. The Company anticipates
funding its acquisition activities, if any, primarily by using short-term credit
facilities or secured debt. The Company expects to meet certain of its long-term
liquidity requirements, such as scheduled debt maturities and repayment of
short-term financing of possible property acquisitions, through long-term
secured and unsecured borrowings and the issuance of debt securities or
additional equity securities of the Company. The Company believes that it has
sufficient resources to meet its short- and long-term liquidity requirements.
ITEM 2. PROPERTIES
The Company owns 47 restaurant properties and four apartment communities. All of
the Company's properties are located in the states of North Carolina and
Virginia. The properties are held subject to loans, discussed in Notes to the
Financial Statements included in Item 14 of this Annual Report.
Restaurant Properties
The locations of the Company's 47 restaurant properties are listed in Schedule
III included in Item 14 of this Annual Report. The restaurant properties are
leased on a triple net basis to BNE pursuant to a master lease. The master
lease, as amended in December 1995, provides for a primary term expiring
December 2007, grants BNE three five-year renewal options and provides for rent
equal to 9.875 percent of restaurant sales as defined, subject to a minimum
annual rent of $4,500,000. The average price for the restaurant properties was
approximately $920,000 per property. Under the terms of the master lease, BNE is
responsible for all aspects of the operation, maintenance and upkeep of the
restaurant properties. A copy of the master lease is included as Exhibit 10.1 to
this Annual Report.
The restaurant properties are operated by BNE as Hardee's restaurants pursuant
to franchise agreements. These agreements require that the properties conform to
a standard design specified by Hardee's Food Systems, Inc. ("Hardees"). The
current design consists of a one-story brick, stucco or wood building that
embodies a contemporary style with substantial plate glass window areas. The
buildings average 3,300 square feet and are located on sites ranging from 1 to
1.3 acres. The buildings are suitable for conversion to a number of uses, but
the interiors must be substantially modified prior to utilization in
non-restaurant applications. Hardee's owns a design patent on certain elements
of the building and requires franchisees to make certain exterior modifications
if the location is discontinued as a Hardee's restaurant.
Under the master lease BNE is responsible for all normal maintenance and repair
of the restaurant properties. In addition, BNE is responsible for the cost of
any improvement, expansion, remodeling or replacement required to keep the
properties competitive or in conformity with Hardee's building standards. The
decision to modify a particular restaurant property is based on a number of
factors, including the date of its last modification and the number, age and
design features of competing restaurants located in the market area of the
particular property.
Since the Company's inception in 1987, 16 restaurants have been renovated,
including one that was completely rebuilt. All renovations have been made at
BNE's expense.
Apartment Properties
The Company owns four apartment properties containing a total of 1,130 units. Of
these, three properties containing a total of 682 apartments are located in
Charlotte, North Carolina, and one property with 448 apartments is located in
Virginia Beach, Virginia. Summary information concerning each apartment property
follows:
Paces Commons Apartments. Located in Charlotte, North Carolina, Paces Commons
was constructed in 1988 on 24.8 acres. The property consists of 18 two and three
story masonry and wood frame buildings containing 336 garden type apartments, a
clubhouse, a family center, two pools, a whirlpool, car wash and two tennis
courts. The community offers eight different one, two and three bedroom floor
plans with an average size of 862 square feet. The property was acquired by the
Company on June 8, 1993, for a contract price of $14,250,000. The property
appraised for $16,763,000 in August 1994. Occupancy statistics are summarized as
follows:
December December
Average Average Revenue Average Average Revenue
Economic per Occupied Physical per Occupied
Occupancy* Unit Occupancy Unit
Year ended December 31, 1995 94% $655 93% $679
Year ended December 31, 1994 95% $611 95% $646
June 8 thru December 31, 1993 95% $576 94% $589
*Average Economic Occupancy is defined as gross potential rent less vacancy
divided by gross potential rent.
Oakbrook Apartments. Located in Charlotte, North Carolina, Oakbrook was
constructed in 1985 on a 16.37 acre site. The property consists of 17 two story
wood frame buildings with cedar siding and brick veneer containing 162 garden
and townhouse style apartment units. The property offers eight different one,
two and three bedroom floor plans averaging 1,100 square feet. The property was
acquired by the Company on June 7, 1994, for a contract price of $9,250,000. The
property appraised for $9,832,000 in April 1994. Occupancy statistics are
summarized as follows:
December December
Average Average Revenue Average Average Revenue
Economic per Occupied Physical per Occupied
Occupancy* Unit Occupancy Unit
Year ended December 31, 1995 98% $750 97% $765
June 7 thru December 31, 1994 98% $711 97% $740
*Average Economic Occupancy is defined as gross potential rent less vacancy
divided by gross potential rent.
Latitudes Apartments. Located in Virginia Beach, Virginia, Latitudes was
constructed in 1989 on a 24.86 acre site. The property consists of 20 two and
three story wood frame buildings with vinyl siding containing 448 garden style
apartment units. The property offers six different one, two and three bedroom
floor plans averaging 800 square feet. The property was acquired by the Company
on October 1, 1994, as part of the acquisition of BTVC. The property was
purchased by BTVC on December 3, 1992, for a contract price of $19,000,000. The
property appraised for $22,150,000 in January 1994. Occupancy statistics are
summarized as follows:
December December
Average Average Revenue Average Average Revenue
Economic per Occupied Physical per Occupied
Occupancy* Unit Occupancy Unit
Year ended December 31, 1995 95% $613 93% $614
Year ended December 31, 1994 93% $606 96% $610
Year ended December 31, 1993 90% $593 85% $585
*Average Economic Occupancy is defined as gross potential rent less vacancy
divided by gross potential rent.
Harris Hill Apartments. Located in Charlotte, North Carolina, Harris Hill was
constructed in 1988 on a 18.37 acre site. The property consists of 19 two and
three story wood frame buildings with wood siding containing 184 garden style
apartment units. The property offers four different one and two bedroom floor
plans averaging 912 square feet. The property was acquired by the Company on
December 28, 1994, at a contract price of $8,900,000. The property appraised for
$9,500,000 in October 1994. Occupancy statistics are summarized as follows:
December December
Average Average Revenue Average Average Revenue
Economic per Occupied Physical per Occupied
Occupancy* Unit Occupancy Unit
Year ended December 31, 1995 96% $683 92% $741
December, 1994 95% $641
*Average Economic Occupancy is defined as gross potential rent less vacancy
divided by gross potential rent.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a variety of legal proceedings arising in the ordinary
course of its business. In addition, the Company has become a successor
party-in-interest to certain legal proceedings as a result of its acquisition of
BTVC. These matters arose in the ordinary course of BTVC's business either as an
owner of an apartment community or as a property management company. All of
these matters, individually and in aggregate, are not expected to have a
material adverse impact on the Company.
In the event a claim were successful, the Company believes that it is adequately
covered by insurance and indemnification agreements. The Company has insurance
coverage on each of its apartment properties. The Company's restaurant
properties are subject to an indemnification agreement whereby BNE, the lessee,
is responsible for all claims arising from a restaurant property. In addition,
BNE is required to provide insurance on each restaurant property which
identifies the Company as a named insured. Each property which is managed, but
not owned by the Company, is covered by an insurance policy under which the
Company is a named insured. As to claims to which the Company has become a
successor party-in-interest to BTVC, the Company received, as part of the
acquisition of BTVC, an indemnification agreement from B. Mayo Boddie and
Nicholas B. Boddie (the sole shareholders of BTVC) whereby the Company is,
subject to certain limitations, indemnified from loss arising out of a claim
against BTVC.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1995.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is a listing and brief biography of each of the executive
officers of the Company at March 15, 1996.
- ------------------------------ ------------------------------------------------ --------------
Name Age Position Officer Since
- ------------------------------ ------------------------------------------------ --------------
D. Scott Wilkerson 38 President and Chief Executive Officer October, 1994
Philip S. Payne 44 Executive Vice President, Treasurer and Chief October, 1994
Financial Officer
Douglas E. Anderson 48 Vice President, Secretary 1987
W. Craig Worthy 43 Vice President 1987
Lisa K. McCourt 32 Vice President for Property Management Services October, 1994
Pamela B. Novak 42 Vice President, Controller October, 1994
- ------------------------------ ------------------------------------------------ --------------
D. Scott Wilkerson - President and Chief Executive Officer. From 1980 to 1986,
Mr. Wilkerson was with Arthur Andersen LLP, Charlotte, North Carolina, serving
as tax manager from 1985 to 1986. His specialization was in the representation
of real estate syndicators, developers and management companies. He joined BT
Venture Corporation ("BTVC") in 1987 and served in various officer level
positions, including vice president of administration and finance and vice
president for acquisitions and development before becoming president in January
1994. He was named Chief Executive Officer of the Company in April 1995. Mr.
Wilkerson received a B.S. degree in accounting from the University of North
Carolina at Charlotte in 1980. He is a licensed C.P.A. and licensed real estate
broker. He has been active in various professional, civic and charitable
activities.
Philip S. Payne - Executive Vice President, Treasurer and Chief Financial
Officer. Mr. Payne joined BTVC in 1990 as vice president of capital market
activities and became executive vice president and chief financial officer in
January 1993. He was named Treasurer of the Company in April 1995. From 1987 to
1990 he was a principal in Payne Knowles Investment Group, a financial planning
firm. From 1983 to 1987 he was a registered representative with Legg Mason Wood
Walker. From 1978 to 1983, Mr. Payne practiced law. He received a B.S. degree
from the College of William and Mary in 1973 and a J.D. degree in 1978 from the
same institution.
Douglas E. Anderson - Vice President and Secretary. Mr. Anderson has served as
Vice President and Secretary of the Company since its inception in 1987. He has
been with BNE since 1977 and is currently a director, executive vice president
and secretary of BNE. Mr. Anderson is also president of BNE Land and Development
Company, the real estate development division of BNE. He serves as a director of
Wachovia Bank of Rocky Mount, North Carolina, the Educational Foundation of the
University of North Carolina and is a former director of Golden Corral Real
Estate Investment Trust. He received a B.S. degree in accounting from the
University of North Carolina at Chapel Hill in 1970.
W. Craig Worthy - Vice President. Mr. Worthy has served as Vice President of the
Company since its inception in 1987 and served as Treasurer of the Company from
its inception until April 1995. He is a licensed certified public accountant and
has been employed by BNE since 1979. Mr. Worthy is currently senior vice
president and chief financial officer of BNE. He serves as a director of First
Union Bank of Rocky Mount, North Carolina. He received a B.A. degree from the
University of Virginia in 1974 and a Master of Accountancy and of Business
Administration from the University of South Carolina in 1977.
Lisa K. McCourt - Vice President, Property Management Services. Ms. McCourt
joined BTVC in 1989 as a community manager and was promoted to regional property
manager and oversaw all apartment and shopping center operations in the
Raleigh-Durham-Chapel Hill area of North Carolina and Virginia Beach, Virginia;
she became vice president of property management in 1993. Prior to joining the
Company, she worked for eight years in property management with fee-managed
properties for Boyd & Hassell Property Management Company.
Pamela B. Novak - Vice President and Controller. A licensed certified public
accountant, Ms. Novak joined BTVC in 1993 as controller. From 1984 to 1993, she
was employed by Ernst & Young, as an audit manager from 1987 through 1993. She
received a B.S. in accounting from the University of North Carolina at Charlotte
in 1984.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded on the American Stock Exchange under
the symbol "BNP". There were approximately 1,610 shareholders of record at March
15, 1996. The table below sets forth for the periods indicated the range of
high, low and closing sale prices of the Common Stock as reported by the
American Stock Exchange. As of March 15, 1996, the closing price of the
Company's Common Stock was $13.50 per share.
- -----------------------------------------------------------------------------
Stock Price Dividends
High Low Close Paid Per Share
- -----------------------------------------------------------------------------
1995
First quarter $13 7/8 $12 1/8 $13 3/8 $ .31
Second quarter 13 5/8 11 1/4 12 7/8 .31
Third quarter 13 5/8 12 1/4 12 7/8 .31
Fourth quarter 13 1/8 12 1/8 12 1/2 .31
$1.24
1994
First quarter 15 3/4 13 5/8 13 7/8 $ .31
Second quarter 14 3/8 13 1/2 14 1/4 .31
Third quarter 14 3/8 13 1/2 14 1/4 .31
Fourth quarter 14 1/2 12 1/2 12 1/2 .31
$1.24
- -----------------------------------------------------------------------------
The Company has a dividend reinvestment plan which is available to all
shareholders of record. Under this plan, the plan administrator, First Union
National Bank of North Carolina, will reinvest dividends on behalf of plan
participants by buying shares of the Company's stock on the open market. In
addition, shareholders who participate in the plan may elect to supplement their
reinvestment program with cash contributions of any amount from $25 to $3,000
per quarter.
The Company has elected and expects to be taxed as a real estate investment
trust ("REIT") under the Internal Revenue Code. REITs are subject to a number of
organizational and operational requirements, including a requirement that they
currently distribute at least 95 percent of their ordinary taxable income as
dividends. The Company intends to pay dividends quarterly, expects that these
dividends will substantially exceed the 95 percent taxable income test, and
anticipates that all dividends will be paid from current funds from operations.
ITEM 6. SELECTED FINANCIAL DATA
From its inception through 1992 the Company's investment strategy was limited to
the purchase and ownership of 47 restaurant properties leased on a triple net
basis. In June 1993, the Company acquired Paces Commons Apartments, a 336-unit
apartment community. In June 1994, the Company acquired Oakbrook Apartments, a
162-unit apartment community. In October 1994, the Company acquired by merger BT
Venture Corporation ("BTVC"), including a fully integrated apartment management
and development operation and Latitudes Apartments, a 448-unit apartment
community. In December 1994, the Company acquired Harris Hill Apartments, a
184-unit apartment community. (See discussion of History and Development of
Boddie-Noell Properties, Inc. included in Item 1 of this Annual Report.)
- ----------------------------------- -----------------------------------------------------------------------------
For the years ended December 31,
1995 1994 1993 1992 1991
- ----------------------------------- --------------- --------------- --------------- --------------- --------------
Operating Data
Revenues $13,725,638 $9,258,246 $6,425,852 $5,373,305 $5,108,207
Net income (1) 1,628,268 2,301,919 2,455,451 3,158,521 2,924,242
Net income per share $.54 $.80 $.86 $1.11 $1.03
Weighted average number of shares
3,005,809 2,885,248 2,850,000 2,850,000 2,850,000
Distributions per share:
Ordinary income $ .60 $ .63 $1.09 $1.11 $1.03
Return of capital .64 .61 .15 .13 .27
Total $1.24 $1.24 $1.24 $1.24 $1.30
Balance Sheet Data (at year end)
Total assets $94,351,776 $95,954,214 $54,642,613 $40,465,345 $40,837,589
Notes payable 67,161,785 66,883,556 26,894,378 12,000,000 12,000,000
Shareholders' equity 26,199,938 27,967,909 27,251,996 28,330,545 28,706,024
Other Data
Funds from operations (2) $4,449,671 $4,291,439 $4,028,885 $3,943,175 $3,717,646
- ----------------------------------- --------------- --------------- --------------- --------------- --------------
(1) 1995, 1994 and 1993 net income includes a special charge of $321,000,
$377,000 and $600,000, respectively, to write off certain acquisition costs .
(2) The Company considers funds from operations ("FFO") to be an appropriate
measure of the performance of an equity REIT. FFO is generally defined as net
income (loss) plus certain non-cash items, primarily depreciation. Adjustments
for all periods shown consisted only of depreciation, amortization of an
intangible asset related to acquisition of management operations, and write-off
of deferred acquisition and financing costs. All FFO amounts reflect the
definition recommended by the National Association of Real Estate Investment
Trusts, as modified in 1995 to eliminate amortization of deferred financing
costs previously added back to net income when computing FFO. The following
table reflects the effect of this change in definition and reconciles FFO as
previously defined to FFO amounts identified above.
FFO, as FFO, as
previously Effect of currently
defined revision defined
1995:
First quarter $1,045,523 $ (53,883) $ 991,640
Second quarter 1,193,473 (34,715) 1,158,758
Third quarter 1,106,745 (29,060) 1,077,685
Fourth quarter 1,251,031 (29,443) 1,221,588
4,596,722 (147,101) 4,449,671
1994:
First quarter 902,755 (37,128) 865,627
Second quarter 1,090,308 (38,100) 1,052,208
Third quarter 1,139,076 (48,794) 1,090,282
Fourth quarter 1,335,916 (52,594) 1,283,322
4,468,055 (176,616) 4,291,439
1993 4,121,286 (92,401) 4,028,885
1992 3,957,023 (13,848) 3,943,175
1991 3,731,494 (13,848) 3,717,646
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Balance Sheets,
Statements of Operations and Statements of Cash Flows included in Item 14 of
this Report.
Results of Operations
Revenues. The Company's revenues come from two primary sources - restaurant
rental income and apartment rental income. Prior to 1993 the Company's primary
source of revenue was restaurant rental income. In June 1993, the Company
acquired Paces Commons Apartments, which generated apartment rental income of
$1.2 million in seven months. Revenues in 1994 were $9.3 million, an increase of
44 percent over 1993, primarily attributable to the impact of acquisitions of
BTVC property management operations and three apartment communities during 1994
(Oakbrook Apartments--June 1994; Latitudes Apartments--October 1994, and Harris
Hill Apartments--December 1994) and full year operations of Paces Commons
Apartments. For the year 1995, revenues increased 48 percent to $13.7 million,
again primarily attributable to the impact of acquisitions of and continued
improvements in operations at the Company's four apartment communities.
Apartment rental income accounts for 62 percent of total revenues in 1995
compared to 42 percent in 1994 and 20 percent in 1993, indicative of the
Company's focus on growth in apartment operations. Increases in revenues
attributable to the Company's apartment operations were offset somewhat by
declines in restaurant rental income in 1994 and 1995 and the creation of a
property management subsidiary in May 1995.
Revenues from Company-owned apartments increased 212 percent and 118 percent in
1994 and 1995, respectively. While this increase is primarily attributable to
acquisitions, apartment operations reflect continued improvement. Occupancy
remained consistently high at an average of approximately 95 percent since the
first apartment acquisition in mid-1993. Average monthly revenue per occupied
unit grew from $613 in January 1995 to $676 in December 1995.
(See discussion of Apartment Properties included in Item 2 of this Report.)
Restaurant rental income payments are comprised of the greater of minimum or
percentage rent based on food sales of 47 restaurants under a single master
lease. Until 1992, restaurant rental income had remained generally consistent
since the inception of the Company in 1987. In 1992, restaurant rental income
increased by 5 percent over 1991, primarily attributable to the introduction by
Boddie-Noell Enterprises, Inc. ("BNE"), the lessee, of fried chicken at the
Company's properties. Restaurant rental income subsequently declined by 3
percent in 1993 and 2 percent in 1994. The 1993 decline reflected the return to
a more normal sales level following the 1992 increase occasioned by introduction
of new products, while the 1994 decline was attributed primarily to closing of
seven restaurants at various times during the year for remodeling.
The Company continued to experience negative comparisons for restaurant rental
income in 1995, with an 8 percent decline from 1994. "Same-store" restaurant
sales for locations open for the full periods in both years declined by 9
percent for the year. The difference in trends for rental income and
"same-store" sales can be attributed to 1994 closings for scheduled remodeling
(all stores were open throughout 1995). Widespread price discounting in the
quick-service restaurant industry and the lack of a strong hamburger product on
the Hardee's menu appear to be the principal reasons for the decline in
restaurant sales volume and related rental income. BNE and Hardee's Food
Systems, the
restaurant franchisor, are taking aggressive steps to improve restaurant sales.
This includes a new advertising campaign, introduction of several new food
items, and a return to the charbroil cooking method for hamburger products.
While it is too early to judge the impact of these steps, management is
cautiously optimistic that, by the end of 1996, the Company will begin to see
improving restaurant sales.
Effective December 22, 1995, the Company and BNE entered into a modified and
restated master lease which increases the required minimum rent from $3.46
million per year to $4.5 million per year and extends the primary term from May
2002 to December 2007. The percentage rent remains set at 9.875 percent of gross
food sales. The modified master lease effectively limits the impact of any
further decline in restaurant sales to a maximum further decline of
approximately $150,000, or 3 percent, in restaurant rental income.
As part of the acquisition of BTVC in October 1994, the Company received
third-party property management contracts for ten apartment communities and
three shopping centers. In May 1995, the Company established BNP Management,
Inc. (the "Management Company"), a subsidiary in which the Company owns a 95
percent economic interest and a 1 percent voting interest. As of October 1,
1995, the Company has transferred all third-party management contracts to this
subsidiary, and all third-party management activities are now conducted by the
Management Company. On November 1, 1995, one of the managed apartment properties
was sold, and the management contract was terminated. In February 1996, one of
the managed shopping centers was sold, and that management contract was likewise
terminated. As the Company expects to receive significantly all net income of
the subsidiary, management does not expect the formation or operation of the
management subsidiary to have a significant effect on the financial position or
operating results of the Company. Management fees totaled $276,000 in three
months of 1994 and $515,000 in nine months of 1995. Equity in the income of the
Management Company totaled approximately $48,000 in 1995. The Company accounts
for its investment in the Management Company using the equity method of
accounting; therefore, 95 percent of the net income of the Management Company
flows through to the Company's financial statements as a single line item.
Expenses. For the years 1988 through 1992, total expenses remained relatively
constant at approximately $2.2 million per year. In 1993, total expenses
increased to $4.0 million, primarily attributable to acquisition of Paces
Commons. For 1994, total expenses were $7.0 million, an increase of 75 percent
over 1993, due to the inclusion of Paces Commons for the entire period and the
acquisition of BTVC and Oakbrook, Latitudes and Harris Hill apartments. Total
expenses were $12.1 million in 1995, reflecting a full year's operations of all
four apartment communities and administrative functions.
Increases in depreciation and amortization over the three-year period are
directly attributable to the impact of acquisitions of apartment properties in
1993 and 1994 and an intangible asset recorded in conjunction with acquisition
of management operations in October 1994. Restaurant rental property ($43
million) and related depreciation charges (approximately $800,000 per year) were
unchanged throughout the three-year period, while apartment rental property grew
from none at the end of 1992 to over $55 million by the end of 1995, with
related 1995 depreciation of approximately $1.4 million. Amortization of the
intangible related to management operations totaled $56,000 in 1994 and $258,000
in 1995; the balance of amortization expense relates to loan costs.
Operating expenses at the Company's apartment properties were generally in line
with management's expectations. Increases in apartment operations expenses of
206 percent in 1994 and 125 percent in 1995 reflect full year's operations of
Paces Commons (acquired June 1993) and acquisitions of Oakbrook (June 1994),
Latitudes (October 1994), and Harris Hill (December 1994). Operating expenses
relating to restaurant properties are insignificant because of the restaurant
properties' triple net lease arrangement.
Increases in administrative expenses of 153 percent in 1994 and 106 percent in
1995 are due primarily to implementation of directors' and officers' insurance
coverage effective October 1993 and assumption of management activities in
October 1994. These costs declined in the last half of 1995 ($538,000 during the
last six months compared to $748,000 during the first six months), a trend that
management expects will continue in 1996, as expenses related to third-party
property management operations were transferred to the Management Company.
Throughout 1993 and through third quarter of 1994, the Company paid property
management fees (5 percent of rental revenues collected) to BTVC for management
of its apartment properties and advisory fees (4.65 percent of net cash
available for distribution as defined by the advisory agreement) to BNE Advisory
Group. With the acquisition of BTVC, the Company terminated its advisory
contract and became self-advised and self-managed, thereby eliminating future
property management and advisory fees.
Increases in interest expense are primarily attributable to increases in
outstanding indebtedness incurred in connection with acquisitions of Paces
Commons in 1993 ($14.9 million) and BTVC's management operations, Oakbrook,
Latitudes, and Harris Hill in 1994 ($40.0 million) and the impact of higher
variable interest rates in 1994. During fourth quarter of 1994 and second
quarter of 1995 the Company refinanced all variable rate debt related to
apartment properties to fixed rate loans, and in December 1995, the Company
refinanced its variable rate credit facility to a fixed rate loan. (See further
discussion below included in discussion of Liquidity and Capital Resources.)
During the fourth quarters of 1993, 1994, and 1995, the Company recorded
write-offs of $600,000, $377,000, and $321,000 related to deferred acquisition
costs. Significantly all of these costs arose in 1992 and 1993 in conjunction
with the "roll-up" transaction the Company began in 1993 and ultimately
abandoned in December 1995. All deferred costs related to the "roll-up"
transaction have now been expensed. (See discussion of History and Development
of Boddie-Noell Properties, Inc. included in Item 1 of this Report.)
Summary Results of Operations. Funds from operations ("FFO") is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as "net income
(computed in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures". In 1995 NAREIT provided additional guidance
for interpretation of this definition which specifies that only depreciation and
amortization of real estate assets should be added back to net income in
calculating FFO. At December 31, 1995, the Company has adopted this
interpretation and restated FFO amounts previously reported.
The Company considers FFO in evaluating property acquisitions and its operating
performance and believes that FFO should be considered along with, but not as an
alternative to, net income and cash flows as a measure of the Company's
operating performance and liquidity. FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs.
A reconciliation of net income, funds from operations, and net cash provided by
operating activities is as follows (all amounts in thousands):
1995 1994 1993
Net income $1,628 $2,301 $2,455
Depreciation 2,204 1,415 973
Amortization of management intangible 258 56 -
Write-off deferred loan costs at refinancing 38 142 -
Write-off deferred acquisition costs 321 377 600
Funds from operations 4,450 4,291 4,029
Equity in income of Management Company (48) - -
Amortization of deferred financing costs 147 177 92
Changes in operating assets and liabilities (73) 28 (55)
Net cash provided by operating activities $4,476 $4,496 $4,066
To a large extent, the addition of apartment properties and improvement in
apartment operations have offset the decline in restaurant rental income,
producing increases in FFO of 7 percent in 1994 and 4 percent in 1995. As
expected, net income declined 6 percent in 1994 and 29 percent in 1995,
reflecting the effect of non-cash charges for depreciation and amortization of
assets related to apartment property acquisitions in 1993 and 1994. Changes in
operating assets and liabilities reflect timing of rent receipts and payments
for trade payables, taxes, and escrow funds, etc.
Dividends. The Company paid dividends of $1.24 per share in 1993, 1994, and
1995. The Company's dividend payout ratio (the ratio of dividends paid to FFO on
a per share basis) was 88 percent in 1993, 83 percent in 1994, and 84 percent in
1995.
Liquidity and Capital Resources
Capitalization. Prior to acquiring its first apartment community, the Company's
capital requirements were minimal as all capital expenses related to the
restaurants were borne by BNE under the terms of the master lease. In order to
acquire Paces Commons, Oakbrook, BTVC, Latitudes and Harris Hill, the Company
incurred additional debt and issued additional common stock. The additional debt
consists of first mortgages secured by the acquired apartment communities and
draws against the Company's credit lines. As the Company continues to acquire
apartment properties, it is likely that the Company will incur additional
long-term debt and seek additional equity capital.
At December 31, 1995, the Company's total book capitalization was $93.4 million,
comprised of $26.2 million of shareholders' equity and $67.2 million of debt. At
December 31, 1994, the Company's total book capitalization was $94.9 million,
comprised of $28.0 million of shareholders' equity and $66.9 million of debt. At
December 31, 1993, the Company had 2,850,000 shares of common stock outstanding.
On October 1, 1994, an additional 140,990 shares were issued in conjunction with
the acquisition of BTVC. In March, April and July 1995, the Company issued a
total of 25,750 shares of common stock to the former BTVC shareholders in
conjunction with an earn-out provision of that acquisition agreement. Under the
terms of the acquisition agreement, the former BTVC shareholders are due
additional consideration totaling $283,000 as of December 31, 1995. The Company
may, at its election, make this payment in cash or up to 22,645 shares of common
stock. At December 31, 1995, assuming the full contingent purchase price is
earned and paid in common stock, it is anticipated that the Company could issue
approximately 100,000 additional shares of common stock in conjunction with the
acquisition.
Consistent with management's plan to reduce the Company's exposure to variable
rate debt, during fourth quarter of 1994 and second quarter of 1995, the Company
refinanced $37.6 million in variable rate debt related to apartment properties
to fixed rate loans with maturities in 2000 through 2020. On December 27, 1995,
the Company established a credit line with SouthTrust Bank of Alabama in the
amount of $25.5 million at a fixed rate of 8.0 percent for a term of three
years. The Company used an initial draw of $23.25 million to retire its existing
short-term variable rate credit facility. The balance of the credit line will be
available for general corporate purposes. With the implementation of the new
credit facility the Company's only exposure to variable rate loans is two term
notes payable to affiliates totaling $7,056,000 which are capped at an interest
rate of 8.0 percent and due in full May, 1999. As of December 31, 1995, the
Company has no loans which mature in less than three years or which are subject
to material interest rate adjustments in less than two years.
A summary of long-term debt as of December 31, 1995 and 1994 has been included
in the Notes to the Financial Statements included in Item 14 of this Report. At
December 31, 1995, the weighted average interest rate on debt outstanding was
8.1 percent. A 1 percent increase in variable interest rates would impact the
Company by increasing interest expense by approximately $49,000 on an annual
basis; conversely, a 1 percent decrease in variable interest rates would impact
the Company by decreasing interest expense by approximately $71,000 on an annual
basis.
In addition to the credit facility, the Company had an unsecured revolving line
of credit of $2.0 million with BNE. Draws totaling $1.1 million were made and
repaid in full during 1994. In conjunction with modification of the master lease
agreement, this line of credit was terminated in December 1995.
Cash Flow and Liquidity Requirements. For the years 1988 through 1992, cash flow
from operating activities was generally consistent, at approximately $3.8
million in all years except 1991, in which cash flow from operating activities
was approximately $3.4 million. In each of those years the Company utilized its
cash flow principally to fund dividend payments.
During 1993, the Company generated $4.1 million of net cash provided by
operating activities, an increase of 6 percent over 1992. The increase was
primarily attributable to the acquisition of Paces Commons Apartments in June
1993.
Net cash provided by operating activities increased by 11 percent to $4.5
million in 1994. The increase was attributable to Paces Commons having been
included for the entire period and cash flow from the properties acquired in
1994 (BTVC and Oakbrook, Latitudes and Harris Hill apartments) which more than
offset a $119,000 decrease in restaurant rental income. In 1995 the Company was
able to maintain $4.5 million in net cash provided by operating activities
despite a $398,000 decline in restaurant rental income, again attributable to
favorable performance of apartment properties.
The company applied cash generated by operating activities to pay dividends of
$3.5 million, $3.6 million, and $3.7 million in 1993, 1994, and 1995,
respectively. Dividends paid per share remained stable at $1.24. As discussed
above, during 1994 and 1995 the Company issued 166,740 shares of common stock
under the earn-out provision of the BTVC acquisition agreement. Also in 1995 the
Company applied $150,000 to advances to the Management Company subsidiary formed
mid-year.
During 1993, the Company applied $14.7 million net proceeds of financing
transactions to $16.2 million in apartment acquisition activity. In 1994, the
Company applied $18.6 million net proceeds of financing transactions to $18.7
million of acquisition activity and additions to apartment properties. Payments
for acquisition activities and additions to apartment properties totaled
$682,000 in 1995, with cash payments for debt reduction and financing costs
exceeding net proceeds by $166,000.
Subsequent to December 31, 1995, the Company entered into an agreement to
purchase an additional apartment community. The Company has placed a $150,000
at-risk binder in an escrow account held by a title insurance company.
The Company is currently exploring various financing options.
The Company has elected and expects to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended. As such the
Company generally will not be subject to federal or state income taxes on net
income. REITs are subject to a number of organizational and operational
requirements, including a requirement that they currently distribute 95 percent
of their ordinary taxable income as dividends. The Company intends to pay
dividends quarterly, expects that these dividends will substantially exceed the
95 percent taxable income test and anticipates that all dividends will be paid
from current FFO.
The Company continues to produce sufficient cash flow to fund its regular
dividend and has positioned itself for future growth. The Company expects to
meet its short-term liquidity requirements generally through net cash provided
by operations and utilization of credit facilities. The Company believes that
its net cash provided by operations will be adequate and anticipates that it
will continue to be adequate to meet both operating requirements and payment of
dividends by the Company in accordance with REIT requirements in both the short-
and the long term. The Company anticipates funding its acquisition activities,
if any, primarily by using short-term credit facilities or secured debt. The
Company expects to meet certain of its long-term liquidity requirements, such as
scheduled debt maturities and repayment of short-term financing of possible
property acquisitions, through long-term secured and unsecured borrowings and
the issuance of debt securities or additional equity securities of the Company.
The Company believes that it has sufficient resources to meet its short- and
long-term liquidity requirements.
Approximately 34 percent of the Company's 1995 revenue was derived from BNE's
payment of rent for the use of the Company's restaurant properties. In addition,
BNE is responsible for all of the cost associated with the maintenance and
operations of these properties. As a result, the financial well being of the
Company is, to a large extent, dependent on BNE's ability to meet its
obligations under the terms of the master lease. The ability of BNE to satisfy
the requirements of the master lease depend on its liquidity and capital
resources. Historically, BNE has been able to meet its liquidity needs through
cash flow generated from operations and through reliance on its credit facility.
BNE's principal line of business is the operation of approximately 365 Hardee's
restaurants, 47 of which are owned by the Company. The continued decline in
restaurant sales (see "Revenues" above) has had a material impact on BNE's
operating cash flow. Management has reviewed BNE's unaudited financial
statements, cash flow analysis, restaurant contribution analysis, sales trend
analysis and projections and believes that with the refinance of its credit
facility (discussed below) BNE will have sufficient liquidity and capital
resources to meet its obligations under the master lease and credit facility as
well as its general corporate operating needs.
The principal debt facility on which BNE has relied has been a $140 million
credit agreement. This facility matured on December 31, 1995, but has been
temporarily extended pending renewal. BNE has received and executed a commitment
from the bank group issuing the facility specifying the terms and conditions of
a renewal, and BNE is currently assembling the required documentation. Both BNE
and representatives of the bank group have indicated that they expect the
facility to be renewed and that a final closing of the renewal will occur in the
near future.
The table below sets forth certain information with respect to the liquidity and
capital resources of BNE. The information is derived from BNE's unaudited
financial statements for the fiscal year ended December 31, 1995, available as
of March 8, 1996. BNE is an S Corporation for federal and state income tax
purposes; therefore, its cash flow generated from operations does not include a
deduction for corporate income tax payments.
Current assets $ 13,350,000
Total assets 296,339,000
Current liabilities 37,732,000
Total debt, including current portion of $8,291,000 140,346,000
Shareholders' equity 92,117,000
Net cash provided by operating activities 13,766,000
Capitalization of Fixed Assets and Property Improvements. The Company has
established a policy of capitalizing those expenditures relating to acquiring
new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset. In 1994 and 1993,
apartment carpet, vinyl and wallpaper replacements were generally expensed as
incurred ($23,000 in 1994 and none in 1993), except when those replacements were
made in conjunction with a plan of acquisition. In 1995, the Company capitalized
all apartment carpet, vinyl and wallpaper replacements. Management believes that
such capitalization of carpet, vinyl and wallpaper, depreciated over five years,
more appropriately reflects the useful life of these assets and is consistent
with prevailing industry practice.
A summary of capitalized apartment property additions, replacements and
improvements has been included in the Notes to the Financial Statements included
in Item 14 of this Report.
Inflation. Management does not believe that inflation poses a material risk to
the Company. The leases at the Company's apartment properties are short-term in
nature. The majority of the apartment leases are for terms of one year or less,
with none longer than two years. All apartment leases allow, at the time of
renewal, for adjustments in the rent payable thereunder and thus enable the
Company to seek increases in rents to compensate for increases in expenses
brought about by inflation. In addition, the apartment lease agreements give the
Company the right to terminate any lease at the end of its term on 60 days
notice. The restaurant properties are leased on a triple-net basis, which places
the risk of rising operating and maintenance cost on the lessee.
Environmental matters. Phase I environmental studies have been performed on the
Company's apartment properties. Such studies found ground water contamination at
sites near Latitudes and Paces Commons, but none determined to exist on the
properties. The Company believes that the matters raised by such reports will
not have a material adverse effect on the Company's results of operations,
liquidity or capital resources. Environmental transaction screens were obtained
for each of the restaurant properties in 1995. These environmental reports did
not indicate existence of any environmental problems that warranted further
investigation. BNE has indemnified the Company for environmental problems
associated with the restaurant properties under its master lease with the
Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed under Item 14(a) and
filed as part of this Annual Report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section under the heading "Election of Directors" of the Proxy Statement for
Annual Meeting of Stockholders to be held May 23, 1996, (the "Proxy Statement")
is incorporated herein by reference for information on Directors of the
Registrant. See Item X in Part I of this Annual Report for information regarding
Executive Officers of the Registrant.
ITEM 11. EXECUTIVE COMPENSATION
The section under the heading "Election of Directors" entitled "Compensation of
Directors" of the Proxy Statement and the section entitled "Executive
Compensation" of the Proxy Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section under the heading "Security Ownership of Certain Beneficial Owners
and Management" of the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Relationships and Related Transactions" of the
Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial Statements and Schedules
The financial statements and schedules listed below are filed as part of this
Annual Report on the pages indicated.
INDEX TO FINANCIAL STATEMENTS
PAGE
Financial Statements and Notes:
Report of Independent Accountants 23
Balance Sheets as of December 31, 1995 and 1994 24
Statements of Operations for the Years Ended December 31, 1995, 1994, and 1993 25
Statements of Shareholders' Equity for the Years Ended
December 31, 1995, 1994, and 1993 26
Statements of Cash Flows for the Years Ended December 31, 1995, 1994, and 1993 27
Notes to Financial Statements 28
Schedules:
Schedule III - Real Estate and Accumulated Depreciation 37
The financial statements and schedule are filed as part of this report. All
other schedules are omitted because they are not applicable or the required
information is included in the financial statements or notes thereto.
(a) 3. Exhibits
The Registrant agrees to furnish a copy of all agreements related to long-term
debt upon request of the Commission.
Exhibit
No.
2* Agreement and Plan of Merger between BT Venture Corporation and
Boddie-Noell Restaurant Properties, Inc. (filed as Exhibit (2)-2 to
Boddie-Noell Properties, Inc. Current Report on Form 8-K dated
October 1, 1994, and incorporated herein by reference)
3.1* Articles of Incorporation (filed as Exhibit 3(a) to Registration
Statement No. 33-13155 on Form S-11 and incorporated herein by
reference)
3.2 By-Laws
10.1 Amended and Restated Master Lease Agreement dated December 21, 1995
between Boddie-Noell Properties, Inc. and Boddie-Noell Enterprises,
Inc.
10.2 Loan Agreement dated December 27, 1995 between Boddie-Noell
Properties, Inc. and SouthTrust Bank of Alabama, N.A.
10.3* Acquisition Agreement by and among Boddie-Noell Restaurant
Properties, Inc., BT Venture Corporation and Related Entities dated
June 7, 1994 (filed as an exhibit in Schedule 14A of Proxy
Statement dated June 15, 1994 and incorporated herein by reference)
10.4* Boddie-Noell Restaurant Properties, Inc. 1994 Stock Option and
Incentive Plan effective August 4, 1994 (filed as an exhibit in
Schedule 14A of Proxy Statement dated June 15, 1994 and
incorporated herein by reference)
10.5* Form and description of Incentive Stock Option Agreements dated
October 17, 1994 between the Company and certain officers (filed as
Exhibit 10.8 to Boddie-Noell Properties, Inc. Annual Report on Form
10-K dated December 31, 1994 and incorporated herein by reference)
10.6* Form and description of Nonqualified Stock Option Agreements dated
October 17, 1994 between the Company and certain officers (filed as
Exhibit 10.9 to Boddie-Noell Properties, Inc. Annual Report on Form
10-K dated December 31, 1994 and incorporated herein by reference)
10.7* Form and description of Employment Agreements dated October 1, 1994
between the Company and certain officers (filed as Exhibit 10.10 to
Boddie-Noell Properties, Inc. Annual Report on Form 10-K dated
December 31, 1994 and incorporated herein by reference)
11 Computation of Per Share Earnings
21 Subsidiaries of the Registrant
27 Financial Data Schedule (electronic filing)
* Incorporated herein by reference
Exhibits 10.4 through 10.7 are management contracts or compensatory plans.
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BODDIE-NOELL PROPERTIES, INC.
Date: March 25, 1996 /s/ Philip S. Payne
Philip S. Payne
Executive Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature: Title: Date:
/s/ D. Scott Wilkerson President and March 25, 1996
D. Scott Wilkerson Chief Executive Officer
/s/ Philip S. Payne Executive Vice President and March 25, 1996
Philip S. Payne Chief Financial Officer
/s/ Pamela B. Novak Vice President and March 25, 1996
Pamela B. Novak Controller
/s/ B. Mayo Boddie Chairman of the Board March 25, 1996
B. Mayo Boddie
/s/ Nicholas B. Boddie Vice Chairman of the Board and March 25, 1996
Nicholas B. Boddie Director
/s/ William H. Stanley Director March 25, 1996
William H. Stanley
/s/ Richard A. Urquhart, Jr. Director March 25, 1996
Richard A. Urquhart, Jr.
/s/ Donald R. Pesta, Jr. Director March 25, 1996
Donald R. Pesta, Jr.
Arthur Andersen LLP
Report of Independent Public Accountants
To the Shareholders of
Boddie-Noell Properties, Inc.:
We have audited the accompanying balance sheets of Boddie-Noell Properties, Inc.
(a Delaware corporation) as of December 31, 1995 and 1994, and the related
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
and the schedule referred to above are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Boddie-Noell Properties, Inc.
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in Item 14 is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic financial statements. The schedule has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
January 31, 1996.
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Balance Sheets
December 31,
1995 1994
------------------ ------------------
Assets
Real estate investments at cost:
Restaurant properties $43,205,075 $43,205,075
Apartment properties 55,315,686 54,723,503
------------------ ------------------
98,520,761 97,928,578
Less accumulated depreciation (9,020,948) (6,827,337)
------------------ ------------------
89,499,813 91,101,241
Cash and cash equivalents 700,863 952,363
Accounts receivable under restaurants master lease 236,121 388,293
Apartments rent and other receivables 8,696 105,013
Prepaid expenses and other assets 165,655 226,565
Security deposit funds held in trust 127,894 140,188
Investment in and advances to Management Company 326,767 -
Other assets, net of applicable amortization:
Intangible related to acquisition of management operations 2,560,254 2,318,335
Deferred acquisition costs - 255,999
Deferred financing costs 725,713 466,217
================== ==================
Total assets $94,351,776 $95,954,214
================== ==================
Liabilities and Shareholders' Equity
Mortgage and other notes payable $60,105,485 $59,827,256
Notes payable to affiliates 7,056,300 7,056,300
Accounts payable and accrued expenses 129,908 447,271
Accrued interest on mortgage and other notes payable 269,373 257,575
Accrued interest on notes payable to affiliates 132,231 122,392
Additional consideration due to former BTVC shareholders 283,334 49,648
Escrowed security deposits and deferred revenue 175,207 225,863
------------------ ------------------
Total liabilities 68,151,838 67,986,305
------------------ ------------------
Commitments and contingencies - Note 11 Shareholders' equity:
Common stock, $.01 par value, 10,000,000 shares authorized, 3,016,740 shares
issued and outstanding at December 31, 1995, 2,990,990 shares issued and
outstanding at December 31, 1994 30,167 29,910
Additional paid-in capital 33,785,335 33,452,611
Dividends distributed in excess of net income (7,615,564) (5,514,612)
------------------ ------------------
Total shareholders' equity 26,199,938 27,967,909
------------------ ------------------
Total liabilities and shareholders' equity $94,351,776 $95,954,214
================== ==================
The accompanying notes to financial statements are an integral part of these
balance sheets.
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Statements of Operations
Years ended December 31,
1995 1994 1993
---------------- ---------------- ----------------
Revenues
Restaurant rental income $ 4,649,250 $ 5,046,837 $5,165,432
Apartment rental income 8,476,268 3,889,277 1,244,803
Management fees 514,872 276,157 -
Equity in income of Management Company 48,063 - -
Interest and other income 37,185 45,975 15,617
---------------- ---------------- ----------------
$ 13,725,638 $ 9,258,246 $ 6,425,852
---------------- ---------------- ----------------
Expenses
Depreciation 2,204,199 1,414,800 973,434
Amortization 405,182 232,856 92,401
Apartment operations 2,480,920 1,101,370 360,447
Administrative 1,285,509 622,605 245,660
Property management and advisory fees - 264,322 256,793
Interest on notes payable to affiliates 540,572 139,973 -
Interest - other 4,821,865 2,661,921 1,441,666
Write-off of deferred loan costs upon refinancing 37,723 141,582 -
Write-off of deferred acquisition costs 321,400 376,898 600,000
---------------- ---------------- ----------------
12,097,370 6,956,327 3,970,401
---------------- ---------------- ----------------
Net income $ 1,628,268 $ 2,301,919 $ 2,455,451
================ ================ ================
Net income per share $ 0.54 $ 0.80 $ 0.86
================ ================ ================
Weighted average number of shares outstanding 3,005,809 2,885,248 2,850,000
================ ================ ================
The accompanying notes to financial statements are an integral part of these
statements.
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Statements of Shareholders' Equity
Dividends
Additional distributed
Common Stock paid-in in excess of
Shares Amount capital net income Total
------------- ------------- ---------------- ---------------- --------------
Balance at December 31, 1992 2,850,000 $ 28,500 $ 31,462,322 $ (3,160,277) $ 28,330,545
Net income 2,455,451 2,455,451
Dividends paid
($1.24 per share) (3,534,000) (3,534,000)
------------- ------------- ---------------- ---------------- --------------
Balance at December 31, 1993 2,850,000 28,500 31,462,322 (4,238,826) 27,251,996
Net income 2,301,919 2,301,919
Common stock issued 140,990 1,410 1,990,289 1,991,699
Dividends paid
($1.24 per share) (3,577,705) (3,577,705)
------------- ------------- ---------------- ---------------- --------------
Balance at December 31, 1994 2,990,990 29,910 33,452,611 (5,514,612) 27,967,909
Net income 1,628,268 1,628,268
Common stock issued 25,750 257 332,724 332,981
Dividends paid
($1.24 per share) (3,729,220) (3,729,220)
============= ============= ================ ================ ==============
Balance at December 31, 1995 3,016,740 $ 30,167 $ 33,785,335 $ (7,615,564) $ 26,199,938
============= ============= ================ ================ ==============
The accompanying notes to financial statements are an integral part of these
statements.
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Statements of Cash Flows
Years ended December 31,
1995 1994 1993
---------------- ---------------- ----------------
Cash flows from operating activities:
Net income $ 1,628,268 $ 2,301,919 $ 2,455,451
Adjustments to reconcile net income to
net cash provided by operations:
Equity in income of Management Company (48,063) - -
Depreciation and amortization 2,609,381 1,647,656 1,065,835
Write-off of deferred loan costs 37,723 141,582 -
Write-off of deferred acquisition costs 321,400 376,898 600,000
Changes in operating assets and liabilities:
Rent and other receivables 248,489 (78,046) 56,398
Prepaid expenses and other assets (66,088) (5,584) (225,899)
Accounts payable and accrued expenses (204,726) 150,443 84,114
Escrowed security deposits and deferred revenue (50,656) (38,407) 30,325
---------------- ---------------- ----------------
Net cash provided by operating activities 4,475,728 4,496,461 4,066,224
---------------- ---------------- ----------------
Cash flows from investing activities:
Acquisitions of apartment properties - (18,055,659) (14,302,078)
Acquisition of BT Venture Corp., net of cash payment - 164,838 -
Additions to apartment properties (525,516) (161,294) (50,090)
Payment of deferred acquisition costs (156,401) (677,006) (1,804,827)
Advances to Management Company (150,000) - -
---------------- ---------------- ----------------
Net cash used in investing activities (831,917) (18,729,121) (16,156,995)
---------------- ---------------- ----------------
Cash flows from financing activities:
Payment of dividends (3,729,220) (3,577,705) (3,534,000)
Proceeds from notes payable 33,925,000 53,600,000 18,950,000
Principal payments on notes payable (33,646,771) (34,449,203) (4,055,622)
Payment of deferred financing costs (444,320) (509,599) (208,689)
---------------- ---------------- ----------------
Net cash provided by (used in) financing activities (3,895,311) 15,063,493 11,151,689
---------------- ---------------- ----------------
Increase (decrease) in cash and cash equivalents (251,500) 830,833 (939,082)
Cash and cash equivalents at beginning of year 952,363 121,530 1,060,612
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 700,863 $ 952,363 $ 121,530
================ ================ ================
Supplemental disclosures of cash flow information:
Cash payments for interest:
To affiliates 530,733 17,581 -
Other 4,810,067 2,539,445 1,402,257
---------------- ---------------- ----------------
Total $ 5,340,800 $ 2,557,026 $ 1,402,257
================ ================ ================
The accompanying notes to financial statements are an integral part of these
statements.
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Notes to Financial Statements
December 31, 1995
Note 1. Organization and Summary of Significant Accounting and Reporting
Policies
Organization and History. Boddie-Noell Restaurant Properties, Inc. (the
"Company") was incorporated on April 1, 1987. On October 1, 1994, the Company
changed its name to Boddie-Noell Properties, Inc.
In April 1987, the Company acquired 47 existing Hardee's restaurant properties
located in Virginia and North Carolina, operated by Boddie-Noell Enterprises,
Inc. ("BNE") under franchise agreements with Hardee's Food Systems, Inc.
Simultaneously with their purchase, the properties were leased to BNE under a
master lease agreement.
In June 1993, the Company acquired Paces Commons Apartments, a 336-unit
apartment property in Charlotte, North Carolina. In June 1994, the Company
acquired Oakbrook Apartments, a 162-unit apartment property in Charlotte, North
Carolina. Effective October 1, 1994, the Company acquired by merger BT Venture
Corporation ("BTVC"), an integrated real estate management, development and
acquisition company and owner of the Latitudes Apartments, a 448-unit apartment
property in Virginia Beach, Virginia. As of October 1, 1994, the Company
succeeded to BTVC's third-party management business, terminated its advisory
agreement with BNE Advisory Group, Inc., and began operations as a
self-administered and self-managed real estate investment trust. In December
1994, the Company acquired Harris Hill Apartments, a 184-unit apartment property
in Charlotte, North Carolina.
In May 1995, the Company formed BNP Management, Inc. (the "Management Company").
The Company has a 1 percent voting interest and 95 percent economic interest.
This investment is recorded using the equity method of accounting.
Capital Stock. In June 1995, the Company's shareholders approved amendments to
the Company's bylaws and certificate of incorporation to allow the Board of
Directors to authorize the issuance of up to an additional 90,000,000 shares of
Common Stock and 10,000,000 shares of Preferred Stock, issuable in series the
characteristics of which would be set by the Board of Directors. As of December
31, 1995, no such shares have been authorized or issued.
Real Estate Investments. Restaurant properties, which include only real
property, are carried at cost. Cost of repairs and maintenance and capital
improvements are borne by BNE. Depreciation of the buildings is computed using
the straight-line method over the estimated useful lives (40 years) of the
respective properties.
Apartment properties are carried at cost. Ordinary repairs and maintenance costs
are expensed as incurred while significant improvements, renovations and
replacements are capitalized. Depreciation is computed using the straight-line
method over the estimated useful lives of the related assets, which are 40 years
for buildings, 20 years for land improvements, and 10 years for fixtures and
equipment, and five years for carpet, vinyl, and wallpaper replacements.
Cash and Cash Equivalents. The Company considers all highly liquid investments
with maturities of three months or less when purchased to be cash equivalents.
Deferred Costs. The intangible asset related to the acquisition of management
operations acquired by merger is amortized using the straight-line method over a
period of ten years. Accumulated amortization on this asset totaled $314,000 and
$56,000 at December 31, 1995 and 1994, respectively.
Deferred acquisition costs represent costs incurred in connection with the
proposed acquisition of properties and the associated offering costs. Such costs
are deferred until such time as the acquisition is consummated. Upon completion
of the acquisition, the costs will be capitalized to the underlying assets
and/or charged to shareholders' equity. At such time as an acquisition is deemed
not probable, the costs are charged to expense.
Financing costs are deferred and amortized using the straight-line method over
the terms of the related notes. Accumulated amortization on these assets totaled
$61,000 and $205,000 at December 31, 1995 and 1994, respectively.
Income Taxes. The Company operates as and elects to be taxed as a Real Estate
Investment Trust ("REIT") under the Internal Revenue Code. Accordingly, the
Company will not be subject to Federal or state income taxes on amounts
distributed to shareholders, provided it distributes at least 95 percent of its
REIT taxable income and meets certain other requirements for qualifying as a
REIT. Accordingly, no provision has been made for federal or state income taxes.
Net Income Per Share. Net income per share for the years ended December 31,
1995, 1994, and 1993 is calculated based on the weighted average number of
shares outstanding during the respective periods.
Fair Values of Financial Instruments. The following methods and assumptions are
used by the Company in estimating its fair value disclosures for financial
instruments.
Cash and cash equivalents: The carrying amount reported on the balance sheet for
cash and cash equivalents approximates fair value.
Notes payable: The fair value of the Company's fixed rate mortgage notes is
estimated using discounted cash flow analysis, based on the Company's current
incremental borrowing rates. The carrying amounts of the Company's borrowings
under its variable rate notes payable approximate fair value.
Reclassifications. Certain amounts in the 1994 and 1993 financial statements
have been reclassified to conform to the 1995 presentation.
Note 2. Real Estate Investments
Real estate investments consist of the following at December 31, 1995 and 1994:
1995 1994
Restaurants
Land $12,068,737 $12,068,737
Buildings and land improvements 31,136,338 31,136,338
less accumulated depreciation (6,778,604) (6,000,196)
36,426,471 37,204,879
Apartments
Land 6,642,291 6,642,291
Buildings and land improvements 46,517,150 46,205,625
Fixtures, equipment, and other personal property 2,156,245 1,875,587
less accumulated depreciation (2,242,344) (827,141)
53,073,342 53,896,362
$89,499,813 $91,101,241
The Company has established a policy of capitalizing those expenditures relating
to acquiring new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset. In 1995 the
Company capitalized all apartment carpet, vinyl and wallpaper replacements. In
1994 and 1993 apartment carpet, vinyl, and wallpaper replacements were generally
expensed as incurred ($23,000 in 1994 and none in 1993), except when these
replacements were made in conjunction with a plan of acquisition.
Capitalized apartment property additions, replacements and improvements are
summarized as follows:
1995 1994 1993
Property acquisitions through purchase $ --- $18,243,374 $14,302,078
Property acquisitions through merger --- 21,950,000 ---
Allocation of additional consideration
for property acquisitions through merger 66,668 16,667 ---
Capitalized carpet, vinyl, and
wallpaper replacements 210,430 91,434 24,274
Other property additions and improvements 315,085 53,193 25,816
$592,183 $40,354,668 $14,352,168
Note 3. Investment in and Advances to Management Company
In May 1995, the Management Company was formed to provide management services to
non-Company owned properties. The Company contributed approximately $119,000,
primarily in office equipment, to the formation of the Management Company and
transferred the rights to certain third-party property leasing and management
contracts to the Management Company for a 1 percent voting interest and 95
percent economic interest. The remaining interest in the Management Company is
held by certain officers of the Company. Because the Company exercises
significant influence over the financial and operating policies of the
Management Company, it is reflected in the accompanying financial statements
using the equity method. At December 31, 1995, the Management Company provides
leasing and property management services to nine apartment properties and three
shopping centers owned by limited partnerships of which Boddie Investment
Company ("BIC") is the general partner.
During 1995 the Company advanced a total of $150,000 to the Management Company.
These advances accrued interest at 12 percent. 1995 interest on these advances
totaled $9,736 and was outstanding at December 31, 1995.
Summary financial information of the Management Company at December 31, 1995,
and for the eight months then ended is as follows:
Current assets $221,758
Property and equipment, net 122,430
Other assets 7,028
Total assets $351,216
Current liabilities $ 21,919
Advances and accrued interest due to
Boddie-Noell Properties, Inc. 159,736
Shareholders' equity 169,561
Total liabilities and shareholders' equity $351,216
Revenues $327,488
Operating expenses (254,659)
Interest (9,736)
Net income before income taxes 63,093
Provision for income taxes 12,500
Net income $ 50,593
Note 4. Notes Payable
Notes payable consist of the following at December 31, 1995 and 1994:
1995 1994
Note payable to a bank in the principal sum of up to $25,500,000 due December
1998, interest on the outstanding principal balance payable monthly at an
effective rate of 8.11%, secured by deeds of trust on 47 restaurant properties
and assignment of rents under the Amended and Restated Master Lease Agreement
for those restaurants. The principal balance of the loan may be prepaid, in
whole or part, subject to certain
restrictions and penalties. $23,250,000 $ ---
Fixed rate notes payable comprised of four loans at December 31, 1995 (three
loans at December 31, 1994), payable in monthly installments totaling
approximately $292,000 including principal and interest at rates ranging from
7.86% to 8.55%, with maturities in 2000 (balloon of approximately $12,500,000)
through 2020. The notes are secured by deeds of
trust and assignments of rents of four apartment properties. 36,855,485 31,077,256
Variable rate revolving line of credit, originally at $15,000,000 increased to
$24,000,000, retired December, 1995. Interest was charged and payable monthly,
at the Company's option, at LIBOR plus 1.625%, floating CD rate plus 1.625%, or
prime rate. Lender had the right to require Boddie-Noell
Enterprises, Inc. to purchase 24 restaurants in the event of a default. --- 18,250,000
8.625% note, payable in equal annual installments plus interest payable monthly,
secured by a mortgage on 14 restaurant properties and assignment of the master
lease as it related to such properties. The note was retired
June, 1995. --- 4,000,000
Variable rate note, payable in monthly principal installments based on a 25-year
amortization schedule (approximately $7,000) plus interest at 30-day LIBOR plus
1.85%, secured by a deed of trust and assignment of rents
of an apartment property. The note was retired May, 1995. --- 6,500,000
Variable rate notes payable to affiliates comprised of two loans due May, 1999,
interest at the lower of 30-day LIBOR plus 1.5% (7.3% at December 31, 1995) or
8%, payable quarterly. Liability for these notes was assumed at
the acquisition of BTVC. 7,056,300 7,056,300
$67,161,785 $66,883,556
As of December 31, 1995, scheduled principal payments are approximately as
follows: 1996 - $476,000; 1997 - $517,000; 1998 - $23,811,000; 1999 -
$7,665,000; 2000 - $12,906,000; thereafter - $21,787,000.
The loan agreement related to the $25,500,000 note payable to a bank includes
covenants and restrictions relating to, among other things, specified levels of
debt service coverage, leverage and net worth.
During 1995 the Company applied $29,425,000 proceeds of fixed rate loans to
retire a fixed rate mortgage note and pay off variable rate notes payable and a
variable rate revolving line of credit totaling approximately $29,250,000. In
conjunction with these refinancing transactions, unamortized loan costs of
approximately $38,000 were charged to expense.
During 1994 the Company applied $31,100,000 proceeds of three fixed rate loans
to pay off variable rate notes payable totaling approximately $30,300,000. In
conjunction with these refinancing transactions, unamortized loan costs of
approximately $142,000 were charged to expense.
At December 31, 1995, the Company has recorded deferred financing costs of
approximately $266,000 related to the $25,500,000 term loan which was executed
December 29, 1995. Management anticipates that financing costs associated with
this loan will total approximately $410,000, to be amortized over the three-year
term of the loan.
Note 5. Dividends
Dividends of $1.24 per share were paid during 1995, 1994, and 1993. The
allocation of these dividends between non-taxable return of capital and taxable
ordinary dividend income to shareholders was as follows.
1995 1994 1993
Non-taxable return of capital 51.8% 49.3% 12.5%
Taxable ordinary dividend income 48.2 50.7 87.5
A regular quarterly dividend of $.31 per share was declared by the Board of
Directors on January 16, 1996, payable on February 15, 1996, to shareholders of
record on February 1, 1996.
Note 6. Rental Operations
Restaurant Properties - Master Lease Agreement. In conjunction with the
$25,500,000 loan agreement with a bank, in December 1995, the Company entered
into an Amended and Restated Master Lease Agreement with BNE which extended the
term of the original lease to an initial term ending in December 2007 and
increased minimum annual rent to $4,500,000. Prior to amendment, the master
lease required the lessee to pay minimum annual rent equal to an annualized rate
of 8.0 percent of the aggregate purchase price of the properties ($3,459,433 in
1995, 1994, and 1993 respectively), and percentage rent of 9.875 percent of the
quarterly aggregate net sales from restaurant operations on the properties less
the aggregate minimum rent payable for such calendar quarter.
As amended, the lease requires the lessee to pay monthly installments of minimum
annual rent equal to $4,500,000, and percentage rent at 9.875 percent of
quarterly aggregate net sales from restaurant operations on the properties less
minimum rent paid for such calendar quarter, subject to an annual calculation of
the greater of minimum or percentage rent. The lessee is responsible for all
taxes, utilities, renovations, insurance and maintenance expenses relating to
the operation of the restaurant properties. The lessee may extend the lease for
up to a maximum of three five-year renewal terms. Under certain conditions as
defined in the agreement, BNE and the Company each have the right to substitute
another restaurant property for a property covered by the lease. The master
lease provides that after December 31, 2007 (the beginning of the first renewal
period), BNE has the right to terminate the lease on up to five restaurant
properties per year by offering to purchase them under specified terms. In
addition, the Company and BNE have entered into a separate agreement which,
after December 31, 1997, allows BNE to purchase under specified terms up to
seven restaurant properties deemed to be uneconomic.
The components of rental income were as follows:
1995 1994 1993
Minimum rent $3,459,433 $3,459,433 $3,459,433
Percentage rent 1,189,817 1,587,404 1,705,999
$4,649,250 $5,046,837 $5,165,432
Future minimum rentals to be received by the Company under the master lease
agreement are $4,500,000 per year through 2007. These amounts above do not
include percentage rentals which may be received in addition to minimum rent.
Approximately 34 percent of the Company's 1995 revenue was derived from BNE's
payment of rent for the use of the Company's restaurant properties. In addition,
BNE is responsible for all of the cost associated with the maintenance and
operation of these properties. As a result, the financial well being of the
Company is to a large extent dependent on BNE's ability to meet its obligations
under the terms of the master lease. The ability of BNE to satisfy the
requirements of the master lease depend on its liquidity and capital resources.
Historically, BNE has been able to meet its liquidity needs through cash flow
generated from operations and through reliance on its credit facility.
BNE's principal line of business is the operation of approximately 365 Hardee's
restaurants, 47 of which are owned by the Company. The continued decline in
restaurant sales has had a material impact on BNE's operating cash flow.
Management has reviewed BNE's unaudited financial statements, cash flow
analysis, restaurant contribution analysis, sales trend analysis and projections
and believes that with the refinance of its credit facility BNE will have
sufficient liquidity and capital resources to meet its obligations under the
master lease and credit facility as well as its general corporate operating
needs. The principal debt facility on which BNE has relied has been a
$140,000,000 credit agreement. This facility matured on December 31, 1995, but
has been temporarily extended pending renewal. BNE has received and executed a
commitment from the bank group issuing the facility specifying the terms and
conditions of a renewal, and BNE is currently assembling the required
documentation. Both BNE and representatives of the bank group have indicated
that they expect the facility to be renewed and that a final closing of the
renewal will occur in the near future.
Apartment Properties. The Company leases its residential apartments under
operating leases with monthly payments due in advance. The majority of the
apartment leases are for terms of one year or less, with none longer than two
years. Rental and other revenues are recorded as earned.
Note 7. Related Party Transactions
Certain directors and officers of the Company hold similar positions with BNE
and BNE Advisory Group, Inc. (an affiliate of BNE), and held similar positions
with BTVC.
The Company purchased the 47 Hardee's restaurant properties from BNE Realty
Partners, Limited Partnership (an affiliate of BNE) for $43,243,000 in 1987.
The Company had an agreement through September 30, 1994, under which BNE
Advisory Group, Inc. provided all administrative services and was responsible
for the day-to-day operations of the Company. The agreement provided for
compensation to BNE Advisory Group, Inc. at an annual fee equal to 4.65 percent
of the Company's net cash available for distribution (as defined in the
agreement) before the advisory fee. Advisory fee expense totaled $153,000 and
$201,000 in 1994, and 1993, respectively. Effective with the merger of BTVC on
October 1, 1994, the agreement with BNE Advisory Group, Inc. was terminated.
Prior to the Company's acquisition of BTVC, the Company paid BTVC $112,000 and
$56,000 for property management services in 1994 and 1993, respectively.
BNE had extended to the Company an unsecured revolving line of credit up to
$2,000,000. Draws totaling $1,100,000 were made and repaid in full during 1994.
At December 31, 1994, there was no obligation outstanding. In conjunction with
modification of the master lease agreement (see Note 6), this line of credit was
terminated in December 1995.
Note 8. Acquisitions
On June 8, 1993, the Company acquired Paces Commons Apartments, a residential
apartment community located in Charlotte, North Carolina for a total purchase
cost of $14,302,000. The purchase was financed primarily through bank and
mortgage borrowings. The results of operations of Paces Commons are included in
the financial statements from June 8, 1993.
On June 7, 1994, the Company acquired Oakbrook Apartments, a residential
apartment community located in Charlotte, North Carolina for a total purchase
cost of $9,372,000. The purchase was financed primarily through bank and
mortgage borrowings. The results of operations of Oakbrook are included in the
financial statements from June 7, 1994.
On October 1, 1994, the Company acquired by merger BTVC, including Latitudes
Apartments, for an initial purchase price including $91,000 in cash, $21,251,000
through assumption of liabilities, and 134,610 shares of the Company's common
stock valued at $1,899,000. The acquisition agreement provides for contingent
purchase price payments ("additional consideration") of up to $1,700,000 if
certain future financial targets are attained. The additional consideration is
payable in shares of common stock or cash, at the option of the Company, on a
quarterly basis over a period of up to 14 quarters commencing with the quarter
ended December 31, 1994. The acquisition was accounted for by the purchase
method of accounting, and the total acquisition cost of $26,326,000 (assuming
full earn-out of additional consideration and including approximately $1,385,000
in acquisition costs) approximates the fair value of assets acquired.
Significant assets acquired include the Latitudes Apartments and an intangible
related to management operations, initially recorded at $21,950,000 and
$2,250,000, respectively. Additional consideration payments will be allocated
primarily to the intangible related to management operations and amortized over
ten years. The results of operations of Latitudes and management operations are
included in the financial statements from October 1, 1994.
On December 28, 1994, the Company acquired Harris Hill Apartments, a residential
apartment community located in Charlotte, North Carolina for a total purchase
cost of $8,871,000. The purchase was financed primarily through bank and
mortgage borrowings. The results of operations of Harris Hill are included in
the financial statements from December 28, 1994.
In conjunction with the BTVC acquisition and based on an earlier estimate, the
Company issued 140,990 shares, including 6,380 "excess shares" to the BTVC
shareholders in October, 1994. During the fourth quarter of 1994 and in each
quarter of 1995 the financial target for additional consideration was met.
During 1995 the Company recorded additional consideration of approximately
$567,000, paid in part by issuance of 25,750 shares of common stock. At December
31, 1995, the BTVC shareholders are due additional consideration totaling
$283,334. At December 31, 1994 the BTVC shareholders were due additional
consideration of $49,648 ($141,667 less the value of excess shares previously
issued), subsequently paid in the form of 3,712 shares of common stock during
the first quarter of 1995.
At December 31, 1995, assuming the full contingent purchase price is earned and
paid in common stock, it is anticipated that the Company could issue
approximately 100,000 additional shares of common stock in conjunction with the
acquisition.
The following unaudited pro forma summary presents the results of operations as
if the acquisitions had occurred at the beginning of periods presented and does
not purport to be indicative of what would have occurred had the acquisitions
been made as of those dates or of results which may occur in the future.
1994 1993
Total revenues $13,994,000 $13,401,000
Net income $2,160,000 $2,452,000
Net income per common share $0.72 $0.82
Note 9. Profit Sharing Plan
The employees of the Company are participants in a profit sharing plan pursuant
to Section 401 of the Internal Revenue Code. The Company makes limited matching
contributions based on the level of employee participation as defined.
Note 10. Stock Option and Incentive Plan
In 1994 the Company established an employee Stock Option and Incentive Plan
under which 280,000 shares of the Company's common stock are reserved for
issuance. On October 17, 1994, options to purchase 160,000 shares were granted
to certain eligible employees at $13.75 per share, the fair value of the
Company's stock on the date the options were granted. The options vest and are
exercisable one-fourth per year beginning October 17, 1995, and expire October
17, 2004. At December 31, 1995, options for 40,000 shares have vested and no
options have been exercised. Subsequent to December 31, 1995, the options were
repriced at $12.50, the fair value of the Company's common stock on the date of
repricing.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which establishes financial
accounting and reporting standards for stock-based compensation plans. The
statement defines a fair value based method of accounting for an employee stock
option or similar equity instrument and encourages the adoption of that method
of accounting. However, the statement also allows entities to continue to
account for such plans under Accounting Principles Board Opinion No. 25.
Entities electing to remain with the accounting in Opinion 25 must make pro
forma disclosures of net income and earnings per share as if the fair value
based method of accounting defined in the statement had been applied. The
Company has not decided if it will adopt SFAS No. 123 or continue to account for
stock-based compensation plans under the provisions of Opinion 25. However, the
accounting and disclosure requirements of SFAS No. 123 will have no impact on
recognition of the options which have been granted at December 31, 1995, and
therefore no impact on the Company's financial position or results of operations
as of December 31, 1995.
Note 11. Commitments and Contingencies
Subsequent to December 31, 1995, the Company entered into an agreement to
purchase an additional apartment community. The Company has placed a $150,000
at-risk binder in an escrow account held by a title insurance company.
The Company is currently exploring various financing options.
The Company has agreements with two of its executive officers which provide for
cash compensation and other benefits in the event that a change in control of
the Company occurs.
The Company is a party to a variety of legal proceedings arising in the ordinary
course of its business. Management believes that such matters will not have a
material effect on the financial position of the Company.
Note 12. Quarterly Financial Data (Unaudited)
Set forth below is selected financial data (unaudited) for the years ended
December 31, 1995 and 1994:
Net income
Revenues Net income per share
1995
First quarter $ 3,353,182 $ 388,106 $0.13
Second quarter 3,528,028 526,125 0.18
Third quarter 3,530,374 467,140 0.16
Fourth quarter (1), (2) 3,314,054 246,897 0.07
$13,725,638 $1,628,268 $0.54
1994
First quarter $1,693,400 $ 584,239 $0.20
Second quarter 2,021,918 761,094 0.27
Third quarter 2,279,216 641,049 0.22
Fourth quarter (1) 3,263,712 315,537 0.11
$9,258,246 $2,301,919 $0.80
(1) Net income includes a special charge of $321,000 and $377,000 to write off
certain deferred acquisition costs in 1995 and 1994, respectively. (2) Net
income includes an adjustment to capitalize approximately $85,000 of
expenditures for carpet, vinyl and wallpaper previously charged to expense in
the first three quarters of 1995.
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
Year Ended December 31, 1995
Costs Gross Amount at Which
Description Encumb. Initial Costs Capitalized Carried at Close of Period
Buildings & Subsequent Buildings &
Land Improvem'ts to Acquisition Land Improvem'ts Total
Hardee's Restaurant Properties:
North Carolina:
Bessemer City (1) $152,079 $391,060 $ - $152,079 $391,060 $543,139
Burlington (1) 162,411 417,629 - 162,411 417,629 580,040
Chapel Hill (1) 273,556 703,430 - 273,556 703,430 976,986
Denver (1) 275,484 708,387 - 275,484 708,387 983,871
Eden (1) 253,282 651,296 - 253,282 651,296 904,578
Fayetteville (Ramsey) (1) 260,135 668,919 - 260,135 668,919 929,054
Fayetteville (N.Eastern) (1) 308,271 792,696 - 308,271 792,696 1,100,967
Fayetteville (Bragg) (1) 235,951 606,730 - 235,951 606,730 842,681
Gastonia (E. Franklin) (1) 230,421 592,511 - 230,421 592,511 822,932
Gastonia (N. Chester) (1) 199,133 512,055 - 199,133 512,055 711,188
Hillsborough (1) 290,868 747,948 - 290,868 747,948 1,038,816
Kinston (W. Vernon) (1) 237,135 609,777 - 237,135 609,777 846,912
Kinston (Richlands) (1) 231,678 595,743 - 231,678 595,743 827,421
Mt. Airy (1) 272,205 699,955 - 272,205 699,955 972,160
Newton (1) 223,453 574,594 - 223,453 574,594 798,047
Siler City (1) 268,312 689,945 - 268,312 689,945 958,257
Spring Lake (1) 218,925 562,949 - 218,925 562,949 781,874
Thomasville (E. Main) (1) 253,716 652,411 - 253,716 652,411 906,127
Thomasville (Randolph) (1) 327,727 842,726 - 327,727 842,726 1,170,453
----------------------------------------- -------------------------------------------
4,674,742 12,020,761 - 4,674,742 12,020,761 16,695,503
----------------------------------------- -------------------------------------------
Virginia:
Ashland (1) 296,509 762,452 - 296,509 762,452 1,058,961
Blackstone (1) 275,565 708,596 - 275,565 708,596 984,161
Bluefield (1) 205,700 528,947 - 205,700 528,947 734,647
Chester (1) 300,165 771,852 - 300,165 771,852 1,072,017
Clarksville (1) 211,545 543,972 - 211,545 543,972 755,517
Clintwood (1) 222,673 572,588 - 222,673 572,588 795,261
Dublin (1) 364,065 936,168 - 364,065 936,168 1,300,233
Franklin (1) 287,867 740,230 - 287,867 740,230 1,028,097
Galax (1) 309,578 796,057 - 309,578 796,057 1,105,635
Hopewell (1) 263,939 678,701 - 263,939 678,701 942,640
Lebanon (1) 266,340 684,876 - 266,340 684,876 951,216
Lynchburg (Langhorne) (1) 249,865 642,509 - 249,865 642,509 892,374
Lynchburg (Timberlake) (1) 276,153 710,107 - 276,153 710,107 986,260
Norfolk (1) 325,822 837,829 - 325,822 837,829 1,163,651
Orange (1) 244,883 629,699 - 244,883 629,699 874,582
Petersburg (1) 357,984 920,531 - 357,984 920,531 1,278,515
Richmond (Forest Hill) (1) 196,084 504,216 - 196,084 504,216 700,300
Accumulated Date of Date Life
Description Depreciation Constr. Acquired (Years)
Hardee's Restaurant Properties:
North Carolina:
Bessemer City $ 85,137 Nov-77 Apr-87 40
Burlington 90,920 Oct-85 Apr-87 40
Chapel Hill 153,142 Aug-64 Apr-87 40
Denver 154,221 Jul-83 Apr-87 40
Eden 141,792 Jun-73 Apr-87 40
Fayetteville (Ramsey) 145,629 Oct-73 Apr-87 40
Fayetteville (N.Eastern) 172,576 Sep-83 Apr-87 40
Fayetteville (Bragg) 132,090 Jan-85 Apr-87 40
Gastonia (E. Franklin) 128,994 Apr-63 Apr-87 40
Gastonia (N. Chester) 111,478 Jan-78 Apr-87 40
Hillsborough 162,833 Mar-78 Apr-87 40
Kinston (W. Vernon) 132,753 Jul-62 Apr-87 40
Kinston (Richlands) 129,697 Dec-81 Apr-87 40
Mt. Airy 152,385 May-73 Apr-87 40
Newton 125,094 Mar-76 Apr-87 40
Siler City 150,206 May-79 Apr-87 40
Spring Lake 122,558 Mar-76 Apr-87 40
Thomasville (E. Main) 142,035 Feb-66 Apr-87 40
Thomasville (Randolph) 183,467 Apr-74 Apr-87 40
----------
2,617,007
----------
Virginia:
Ashland 165,992 Apr-87 Apr-87 40
Blackstone 154,267 Sep-79 Apr-87 40
Bluefield 115,155 Feb-85 Apr-87 40
Chester 168,038 May-73 Apr-87 40
Clarksville 118,427 Oct-85 Apr-87 40
Clintwood 124,656 Jan-81 Apr-87 40
Dublin 203,810 Jul-83 Apr-87 40
Franklin 161,154 Feb-75 Apr-87 40
Galax 173,307 Jun-74 Apr-87 40
Hopewell 147,758 Jun-78 Apr-87 40
Lebanon 149,103 Jun-83 Apr-87 40
Lynchburg (Langhorne) 139,878 Sep-82 Apr-87 40
Lynchburg (Timberlake) 154,595 Aug-83 Apr-87 40
Norfolk 182,401 Aug-84 Apr-87 40
Orange 137,090 Aug-74 Apr-87 40
Petersburg 200,407 Mar-74 Apr-87 40
Richmond (Forest Hill) 109,772 Nov-74 Apr-87 40
BODDIE-NOELL PROPERTIES, INC.
- -------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
Year Ended December 31, 1995
Costs Gross Amount at Which
Description Encumb. Initial Costs Capitalized Carried at Close of Period
Buildings & Subsequent Buildings &
Land Improvem'ts to Acquisition Land Improvem'ts Total
Richmond (Midlothian) (1) 270,736 696,179 - 270,736 696,179 966,915
Richmond (Myers) (1) 321,946 827,861 - 321,946 827,861 1,149,807
Roanoke (Hollins) (1) 257,863 663,076 - 257,863 663,076 920,939
Roanoke (Abenham) (1) 235,864 606,507 - 235,864 606,507 842,371
Rocky Mount (1) 248,434 638,829 - 248,434 638,829 887,263
Smithfield (1) 223,070 573,608 - 223,070 573,608 796,678
Staunton (1) 260,569 670,035 - 260,569 670,035 930,604
Verona (1) 191,631 492,765 - 191,631 492,765 684,396
Virginia Beach (Lynnhaven) (1) 271,570 698,322 - 231,731 698,322 930,053
Virginia Beach (Holland) (1) 277,943 714,710 - 277,943 714,710 992,653
Wise (1) 219,471 564,355 - 219,471 564,355 783,826
----------------------------------------------------------------------------------------
7,433,834 19,115,577 - 7,393,995 19,115,577 26,509,572
-------------------------------------------------------------------------------------------------------
Total Restaurant Properties 23,250,000 12,108,576 31,136,338 - 12,068,737 31,136,338 43,205,075
-------------------------------------------------------------------------------------------------------
Apartment Properties:
North Carolina:
Paces Commons, Charlotte 10,834,150 1,430,157 12,871,424 334,175 1,430,157 13,205,599 14,635,756
Oakbrook, Charlotte 6,568,683 848,835 8,523,384 90,791 848,835 8,614,175 9,463,010
Harris Hill, Charlotte 6,152,385 1,003,298 7,867,857 180,392 1,003,298 8,048,249 9,051,547
----------------------------------------------------------------------------------------
3,282,290 29,262,665 605,358 3,282,290 29,868,023 33,150,313
----------------------------------------------------------------------------------------
Virginia:
Latitudes, Virginia Beach 13,300,267 3,360,000 18,606,667 158,706 3,360,000 18,805,373 22,165,373
-------------------------------------------------------------------------------------------------------
Total Apartment Properties 36,855,485 6,642,290 47,869,332 804,064 6,642,290 48,673,396 55,315,686
-------------------------------------------------------------------------------------------------------
Total Real Estate $ 60,105,485 $18,750,866 $79,005,670 $804,064 $ 18,711,027 $ 79,809,734 $ 98,520,761
======================================================================================================
Accumulated Date of Date Life
Description Depreciation Constr. Acquired (Years)
Richmond (Midlothian) 151,563 Jan-74 Apr-87 40
Richmond (Myers) 180,231 Apr-83 Apr-87 40
Roanoke (Hollins) 144,357 Feb-73 Apr-87 40
Roanoke (Abenham) 132,041 Nov-82 Apr-87 40
Rocky Mount 139,077 May-80 Apr-87 40
Smithfield 124,878 Apr-77 Apr-87 40
Staunton 145,872 Sep-83 Apr-87 40
Verona 107,278 Jan-85 Apr-87 40
Virginia Beach (Lynnhaven) 152,030 Jun-80 Apr-87 40
Virginia Beach (Holland) 155,598 Aug-83 Apr-87 40
Wise 122,862 Jun-80 Apr-87 40
-----------
4,161,597
-----------
Total Restaurant Properties 6,778,604
-----------
Apartment Properties:
North Carolina:
Paces Commons, Charlotte 910,400 1988 Jun-93 40
Oakbrook, Charlotte 367,058 1985 Jun-94 40
Harris Hill, Charlotte 249,824 1988 Dec-94 40
-----------
1,527,282
-----------
Virginia:
Latitudes, Virginia Beach 715,062 1989 Oct-94 38
-----------
Total Apartment Properties 2,242,344
-----------
Total Real Estate $9,020,948
===========
Notes: (1) Indicates the 47 restaurants encumbered by the bank term loan of up
to $25,500,000; $23,250,000 outstanding at 12/31/95
BODDIE-NOELL PROPERTIES, INC.
- ------------------------------------------------------------------------------
Schedule III - Real Estate and Accumulated Depreciation
Years ended December 31,
1995 1994 1993
-------------- -------------- ---------------
Real estate investments:
Balance at beginning of year $97,928,578 $57,557,243 $43,205,075
Additions during year
Acquisitions by merger - 21,966,667 -
Other acquisitions - 18,243,374 14,301,581
Improvements, etc. 592,183 161,294 50,587
Deductions during year - - -
============== ============== ===============
Balance at close of year $98,520,761 $97,928,578 $57,557,243
============== ============== ===============
Accumulated depreciation:
Balance at beginning of year $ 6,827,337 $ 5,416,818 $ 4,443,384
Provision for depreciation 2,193,611 1,410,519 973,434
Deductions during year - - -
============== ============== ===============
Balance at close of year $ 9,020,948 $ 6,827,337 $ 5,426,818
============== ============== ===============
INDEX TO EXHIBITS
Exhibit
No. Page
2* Agreement and Plan of Merger between BT Venture Corporation and
Boddie-Noell Restaurant Properties, Inc. (filed as Exhibit (2)-2
to Boddie-Noell Properties, Inc. Current Report on Form 8-K dated
October 1, 1994, and incorporated herein by reference)
3.1* Articles of Incorporation (filed as Exhibit 3(a) to Registration
Statement No. 33-13155 on Form S-11 and incorporated herein by
reference)
3.2 By-Laws 41
10.1 Amended and Restated Master Lease Agreement dated December 21, 1995
between Boddie-Noell Properties, Inc. and Boddie-Noell Enterprises,
Inc. 55
10.2 Loan Agreement dated December 27, 1995 between Boddie-Noell
Properties, Inc. and SouthTrust Bank of Alabama, N.A. 84
10.3* Acquisition Agreement by and among Boddie-Noell Restaurant
Properties, Inc., BT Venture Corporation and Related Entities
dated June 7, 1994 (filed as an exhibit in Schedule 14A of Proxy
Statement dated June 15, 1994 and incorporated herein by reference)
10.4* Boddie-Noell Restaurant Properties, Inc. 1994 Stock Option and
Incentive Plan effective August 4, 1994 (filed as an exhibit in
Schedule 14A of Proxy Statement dated June 15, 1994 and
incorporated herein by reference)
10.5* Form and description of Incentive Stock Option Agreements dated
October 17, 1994 between the Company and certain officers (filed as
Exhibit 10.8 to Boddie-Noell Properties, Inc. Annual Report on Form
10-K dated December 31, 1994 and incorporated herein by reference)
10.6* Form and description of Nonqualified Stock Option Agreements dated
October 17, 1994 between the Company and certain officers (filed as
Exhibit 10.9 to Boddie-Noell Properties, Inc. Annual Report on Form
10-K dated December 31, 1994 and incorporated herein by reference)
10.7* Form and description of Employment Agreements dated October 1, 1994
between the Company and certain officers (filed as Exhibit 10.10 to
Boddie-Noell Properties, Inc. Annual Report on Form 10-K dated
December 31, 1994 and incorporated herein by reference)
11 Computation of Per Share Earnings 113
21 Subsidiaries of the Registrant 114
27 Financial Data Schedule (electronic filing) 115
* Incorporated herein by reference