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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, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission file number 001-07859
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IRT PARTNERS L.P.
(Exact name of Registrant as specified in its charter)
Georgia 52-2404832
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(State or other jurisdiction of ( I.R.S. Employer Identification No.)
incorporation or organization)
1696 N.E. Miami Gardens Drive,
North Miami Beach, FL 33179
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(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (305) 947-1664
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Securities registered pursuant to Section 12(b) of the Act:
None None
- ----------------------- --------------------------------------
(Title of each class) (Name of exchange on which registered)
None
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Securities registered pursuant to Section 12(g) of the Act:
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 this Form 10-K or any amendment to this
Form 10-K [X].
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]
There is no established market for the partnership units of IRT Partners
L.P. ("OP Units"). Accordingly, it is not possible to state the aggregate market
value of such OP Units held by non-affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Certain sections of the definitive Proxy Statement for Equity One, Inc.'s,
the Registrant's sole general partner, 2004 Annual Meeting of Stockholders are
incorporated by reference in Part III of this Annual Report on Form 10-K to the
extent stated herein.
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IRT PARTNERS L.P.
TABLE OF CONTENTS
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Part I
Page
------
Item 1. Business......................................................... 2
Item 2. Properties....................................................... 4
Item 3. Legal Proceedings................................................ 6
Item 4. Submission of Matters to a Vote of Security Holders.............. 6
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Purchase of Equity Securities...................... 7
Item 6. Selected Financial Data.......................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 8
Item 7A. Quantitative and Qualitative Disclosures About Market Risk....... 18
Item 8. Financial Statements and Supplementary Data...................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................... 18
Item 9A. Controls and Procedures.......................................... 19
Part III
Item 10. Directors and Executive Officers of the Registrant............... 19
Item 11. Executive Compensation........................................... 19
Item 12. Security Ownership of Certain Beneficial Owners and Management... 19
Item 13. Certain Relationships and Related Transactions................... 19
Item 14. Principal Accountant Fees and Services........................... 20
Part IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.. 20
Signatures....................................................... 22
FORWARD-LOOKING INFORMATION
Certain matters discussed in this Form 10-K and the information
incorporated by reference herein contain "forward-looking statements" for
purposes on Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements are based on current expectations and are not guarantees of future
performance.
All statements other than statements of historical facts are
forward-looking statements, and can be identified by the use of forward-looking
terminology such as "may," "will," "might," "would," "expect," "anticipate,"
"estimate," "would," "could," "should," "believe," "intend," "project,"
"forecast," "target," "plan," or "continue" or the negative of these words or
other variations or comparable terminology, are subject to certain risks, trends
and uncertainties that could cause actual results to differ materially from
those projected. Because these statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by the forward-looking statements. We caution you not to place undue
reliance on those statements, which speak only as of the date of this report.
Among the factors that could cause actual results to differ materially are:
o general economic conditions, and the effect of these conditions on
rental rates in the markets where our shopping centers are located;
o risks that tenants will not remain in occupancy or pay rent;
o management's ability to successfully combine and integrate the
properties and operations of separate companies that we have acquired
in the past or may acquire in the future;
o interest rate levels and the availability of financing;
o potential environmental liability and other risks associated with the
ownership, development and acquisition of shopping center properties;
o greater than anticipated construction or operating costs;
o inflationary and other general economic trends;
o the effects of hurricanes and other natural disasters; and
o other risks detailed from time to time in the reports filed by us or
Equity One, Inc., our general partner, with the Securities and
Exchange Commission.
Except for ongoing obligations to disclose material information as required
by the federal securities laws, we undertake no obligation to release publicly
any revisions to any forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Unless the context otherwise requires, all references to "we," "our" or
"us" in this report refer collectively to IRT Partners, L.P. ("LP" or the
"Partnership") and its sole general partner, Equity One, Inc. (the "Company" or
the "Successor" general partner of LP).
The Company is the sole general partner of LP and conducts the business of
LP. In connection with your review of this report, you should also carefully
review the Company's Annual Report on Form 10-K for the year ended December 31,
2003, which contains additional information that may be important to you.
Part I
ITEM 1. BUSINESS
General
IRT Partners L.P. ("LP"), a Georgia limited partnership, was formed on July
15, 1998 in order to enhance the acquisition opportunities of its general
partner through a downREIT structure. This structure offers potential sellers
the ability to make a tax-deferred transfer of their real estate properties in
exchange for partnership units ("OP Units") of LP.
On February 12, 2003, Equity One, Inc. completed a statutory merger with
IRT Property Company ("IRT" or the "Predecessor" general partner of LP). As a
result of the merger, the Company acquired the general partnership interests in
LP held by IRT. The Company now owns approximately 94.4% of LP's partnership
interests. As a result of the substantial change in ownership from this
transaction, "push-down" accounting has been applied to LP's financial
statements, and the assets and liabilities of LP were restated to fair value in
the same manner as IRT's assets and liabilities were recorded by the Company
subsequent to the merger.
The results of the operations for the period from January 1, 2003 through
February 11, 2003, the date of the merger, and for the years ended December 31,
2002 and 2001, have been recorded based on the historical values of the assets
and liabilities of LP prior to the merger. For the period from February 12, 2003
through December 31, 2003, the results of operations have been recorded based on
the fair values assigned to the assets and liabilities of LP after the Company's
merger with IRT.
LP is obligated to redeem each OP Unit held by a person other than the
Company, at the sole request of the holder, for cash equal to the fair market
value of a share of the Company's common stock at the time of such redemption.
However, the Company may elect, at its option, to acquire any such OP Unit
presented for redemption for one common share of the Company's stock or cash.
At December 31, 2003, LP owned 23 neighborhood and community shopping
centers located in Florida, Tennessee, Georgia and North Carolina. The shopping
centers are anchored by necessity-oriented retailers such as supermarkets, drug
stores and other discount stores. During the year ended December 31, 2003, LP
did not acquire or dispose of any properties. As of December 31, 2003, LP had
one property classified as held for sale.
Industry and Competitive Conditions
The results of LP's operations depend upon the performance of its existing
investment portfolio, the availability of suitable opportunities for new
investments, the yields available on such new investments and the Company's cost
of capital. Yields will vary with the type of investment involved, the condition
of the financial and real estate markets, the nature and geographic location of
2
the investment, competition and other factors. The performance of a real estate
investment company is strongly influenced by the cycles of the real estate
industry generally. As financial intermediaries providing equity funds for real
estate projects, real estate investment companies are generally subject to the
same market and economic forces as other real estate investors.
In seeking new investment opportunities, LP competes with other real estate
investors, including pension funds, foreign investors, real estate partnerships,
real estate investment trusts, including the Company, and other domestic real
estate companies. With respect to properties presently owned by LP or in which
it has investments, LP and its tenants compete with other owners of like
properties for tenants and/or customers depending on the nature of the
investment. Management believes that LP is well positioned to compete
effectively for new investments and tenants.
Financing Strategy
LP is the entity through which the Company conducts a portion of its
business and owns a portion of its assets. As a result, all decisions are made
by the Company on behalf of LP. LP was formed in order to enhance the
acquisition opportunities the Company through a downREIT structure. As a
partnership under the Internal Revenue Code, no federal or state income tax is
reflected in the accompanying financial statements as the partners are required
to include their respective share of profits and losses in their income tax
returns. Additionally, LP is required to make distribution payments to the
Limited Partners based on the number of outstanding partnership units ("OP
Units") held at the time of distribution.
Risk Factors
The risks related to the business and operations of LP are substantially
the same as the risk associated with the Company's operations. Please see the
section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for
the year ended December 31, 2003 for a description of these risks.
Competition
There are numerous commercial developers, real estate companies, including
REITs such as Regency Centers Corporation, Weingarten Realty Investors and New
Plan Excel Realty Trust, and other owners of real estate in the areas in which
our properties are located that compete with us in seeking land for development,
properties for acquisition, financing and tenants. Many of such competitors have
substantially greater resources than we have. All of our existing properties are
located in developed areas that include other shopping centers and other retail
properties. The number of retail properties in a particular area could
materially adversely affect our ability to lease vacant space and maintain the
rents charged at our existing properties.
We believe that the principal competitive factors in attracting tenants in
our market areas are location, price, anchor tenants and maintenance of
properties. We also believe that our competitive advantages include the
favorable locations of our properties, our ability to provide a retailer with
multiple locations with anchor tenants and the practice of continuous
maintenance and renovation of our properties.
Regulations
Regulations. Retail properties are subject to various laws, ordinances and
regulations. We believe that each of our existing properties maintains all
required material operating permits and approvals.
3
Americans with Disabilities Act. Our properties are subject to the
Americans with Disabilities Act of 1990. Under this act, all places of public
accommodation are required to comply with federal requirements related to access
and use by disabled persons. The act has separate compliance requirements for
"public accommodations" and "commercial facilities" that generally require that
buildings and services, including restaurants and retail stores, be made
accessible and available to people with disabilities. The act's requirements
could require removal of access barriers and could result in the imposition of
injunctive relief, monetary penalties or, in some cases, an award of damages. We
believe that our properties are in substantial compliance with the requirements
under the American with Disabilities Act and have no reason to believe that
these requirements or the enforcement of these requirements will have a
materially adverse impact on our business.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations, we
may be liable for the cost to remove or remediate certain hazardous or toxic
substances at our shopping centers. These laws often impose liability without
regard to whether we knew of, or were responsible for, the presence of the
hazardous or toxic substances. The cost of required remediation and our
liability for remediation could exceed the value of the property and/or our
aggregate assets. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect our ability to sell or rent the
property or borrow using the property as collateral. We have several properties
that will require or are currently undergoing varying levels of environmental
remediation. In some cases, contamination has migrated or is expected to migrate
into the groundwater beneath our properties from adjacent properties, such as
service stations. In other cases, contamination has resulted from on-site uses
by current or former owners or tenants, such as gas stations or dry cleaners,
which have released pollutants such as gasoline or dry-cleaning solvents into
the soil or groundwater. We believe that, based on environmental studies
conducted to date, none of these environmental problems is likely to have a
material adverse effect on our financial condition. However, no assurances can
be given that environmental studies obtained by us reveal all environmental
liabilities, that any prior owner of land or a property owned or acquired by us
did not create any material environmental condition not known to us, or that a
material environmental condition does not otherwise exist, or may not exist in
the future.
Employees
LP conducts its business through the Company and thus, at December 31,
2003, LP did not have any employees.
ITEM 2. PROPERTIES
The following table and notes thereto describe the properties in which LP
had a fee or leasehold interest at December 31, 2003. These tables should be
read in conjunction with the financial statements and notes thereto included
elsewhere in this report.
GLA Annualized Average Minimum Percent
(Sq. Ft.) Number Minimum Rent Rent Per Leased Leased at
Year at Dec. of as of December Sq. Ft. at Dec. 31, Anchor Stores and
Property Acquired 31, 2003 Tenants(1) 31, 2003(2) Dec. 31, 2003 2003 Certain Tenants
- ----------------- -------- -------- ----------- -------------- ---------------- ----------- ---------------------
Central Florida
Unigold
Winter Park 1987 106,185 20 $ 955,644 $ 10.14 88.8% Winn-Dixie
Florida West Coast
Bay Pointe Plaza Publix, Eckerd (Bealls
St. Petersburg 1984/2002 103,986 24 919,362 9.60 92.1% Outlet), West Marine
Carrollwood
Tampa 1970/2002 94,203 36 873,356 10.86 85.4% Eckerd
Charlotte Square Seafood Buffet, Pet
Port Charlotte 1980 96,188 27 742,556 7.87 98.1% Supermarket
4
GLA Annualized Average Minimum Percent
(Sq. Ft.) Number Minimum Rent Rent Per Leased Leased at
Year at Dec. of as of December Sq. Ft. at Dec. 31, Anchor Stores and
Property Acquired 31, 2003 Tenants(1) 31, 2003(2) Dec. 31, 2003 2003 Certain Tenants
- ----------------- -------- -------- ----------- -------------- ---------------- ----------- ---------------------
Florida Treasure
Coast
Treasure Coast
Vero Beach 1983 133,781 25 1,063,966 8.55 93.0% Winn-Dixie, TJ Maxx
South Florida/
Atlantic Coast
Lago Mar
Miami 1995 82,613 21 939,811 12.33 92.3% Publix
Fresh Market, Bed Bath &
Pine Ridge Square 1983/1998, Beyond, Off Main
Coral Springs 1999 117,399 35 1,520,522 13.05 99.2% Furniture
Riverside Square
Coral Springs 1987 110,541 36 1,353,481 13.35 91.7% Publix, Tuesday Morning
Tamarac Town
Square
Tamarac 1987 127,635 39 1,056,525 10.35 79.9% Publix
Atlanta, Georgia
Williamsburg @
Dunwoody
Dunwoody 1983 44,928 27 704,851 17.27 90.8%
North Carolina
Centre Pointe Plaza Wal-Mart (Belk's,
Smithfield 1989 163,642 19 714,150 5.71 76.4% Goody's)
Chestnut Square
Brevard 1985 39,640 7 261,660 6.88 96.0% Eckerd (Dollar General)
Galleria
Wrightsville Beach 1986/1990 92,114 40 741,955 9.39 85.7% Harris Teeter, Eckerd
Parkwest Crossing
Durham 1990 85,602 18 843,220 10.01 98.4% Food Lion
Plaza North
Hendersonville 1986 47,240 9 334,277 7.26 97.5% Bi-Lo, CVS Pharmacy
Providence Square
Charlotte 1973 85,930 25 664,123 8.22 94.1% Harris Teeter, Eckerd
Riverview Shopping
Center Kroger, Upchurch Drugs
Durham 1973/1995 127,106 11 839,571 7.20 91.7% Riverview Furniture
Salisbury
Marketplace Food Lion, CVS Pharmacy
Salisbury 1987 82,578 17 724,326 9.22 95.2% Big Lots, Aaron Rents
Shelby Plaza
Shelby 1972 103,200 8 298,046 3.13 92.2% (Hancock Fabrics)
Stanley Market Place Winn-Dixie, Family
Stanley 1980,1987 40,400 3 220,692 5.46 100.0% Dollar
Willowdale Shopping Harris Teeter, Carmike
Center Cinemas Eckerd (Family
Durham 1986 120,984 26 970,076 8.74 91.7% Dollar)
Tennessee
Forrest Gallery Kroger, Wal-mart (Tractor
Tullahoma 1987 214,450 30 1,180,928 5.60 98.4% Suppply Goodwill)
Smyrna Village
Smyrna 1992 83,334 12 582,528 7.98 87.6% Kroger
-------- ---- -----------
2,303,679 515 $18,505,626 $8.79 91.4%
========= ==== =========== ======= =======
(1) Number of tenants includes both occupied and vacant units.
(2) Calculated by annualizing the tenant's monthly base rent payment at
December 31, 2003, excluding expense reimbursements, percentage rent
payments and other charges.
Most of our leases provide for the monthly payment in advance of fixed
minimum rentals, the tenants' pro rata share of ad valorem taxes, insurance
(including fire and extended coverage, and liability insurance) and common area
maintenance for the property. They may also provide for the payment of
additional rentals based on a percentage of the tenants' sales. Utilities are
generally paid directly by tenants except where common metering exists with
respect to a property. In this case, we make the payments for the utilities and
are reimbursed by the tenants on a monthly basis. Generally, our leases prohibit
the tenant from assigning or subletting its space. They also require the tenant
to use its space for
5
the purpose designated in its lease agreement and to operate its business on a
continuous basis. Some of the lease agreements with major tenants contain
modifications of these basic provisions in view of the financial condition,
stability or desirability of those tenants. Where a tenant is granted the right
to assign its space, the lease agreement generally provides that the original
lessee will remain liable for the payment of the lease obligations under that
lease agreement.
Lease Expirations
The following table sets forth the anticipated expirations of the LP's
tenant leases properties as of December 31, 2003 for each year from 2004 through
2012 and thereafter:
Percent of
Aggregate Average Annual
Annualized Annualized Minimum Rent
Number of GLA Percent of Minimum Rent at Minimum Rent per Square Foot
Year Leases (square feet) Total GLA Expiration at Expiration at Expiration
- ----------------- ---------- ------------- ------------ --------------- --------------- -----------------
M-T-M 28 49,689 2.2% $ 247,384 1.31% $ 4.98
2004 100 260,891 11.3% 2,598,421 13.78% 9.96
2005 100 271,832 11.8% 3,185,428 16.89% 11.72
2006 95 342,715 14.9% 3,844,425 20.39% 11.22
2007 41 318,168 13.8% 2,350,387 12.46% 7.39
2008 44 183,387 7.9% 1,841,149 9.76% 10.04
2009 6 116,450 5.1% 556,528 2.95% 4.78
2010 5 66,842 2.9% 481,796 2.55% 7.21
2011 3 85,445 3.7% 546,920 2.90% 6.40
2012 4 85,414 3.7% 686,133 3.64% 8.03
Thereafter 13 324,362 14.1% 2,521,792 13.37% 7.77
---------- ----------- ------------ --------------- --------------- -----------------
Sub-total/Average 439 2,105,195 91.4% $ 18,860,363 100.00% $ 8.96
Vacant 76 198,484 8.6% - - -
---------- ----------- ------------ --------------- --------------- -----------------
Total/Average 515 2,303,679 100.0% $ 18,860,363 100.00% $ 8.19
========== =========== ============ =============== =============== =================
We may incur substantial expenditures in connection with the re-leasing of
our retail space, principally in the form of tenant improvements and leasing
commissions. The amounts of these expenditures can vary significantly, depending
on negotiations with tenants and the willingness of tenants to pay higher base
rents over the life of the leases. We also incur expenditures for certain
recurring capital expenses. We expect to pay for re-leasing and recurring
capital expenditures out of cash from operations.
Insurance
Our tenants are generally responsible under their leases for providing
adequate insurance on the property they lease. We believe that our properties
are covered by adequate fire, flood and property insurance, all provided by
reputable companies. However, certain of our properties are not covered by
disaster insurance with respect to certain hazards (such as hurricanes) for
which coverage is not available or available only at rates, which in our opinion
are not economically justifiable.
ITEM 3. LEGAL PROCEEDINGS
Neither we nor our properties are subject to any litigation which we
believe will have a material adverse affect on our business financial
conditional or results of operations or cash flows. Furthermore, to the best of
our knowledge, except as described above with respect to environmental matters,
there is no litigation threatened against us or any of our properties, other
than routine litigation and administrative proceedings arising in the ordinary
course of business, which collectively are not expected to have a material
adverse effect on our business, financial condition, results of operations or
cash flows.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our security holders during the
fourth quarter of the year ended December 31, 2003.
Part II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SECURITY
HOLDER MATTERS AND PURCHASE OF EQUITY SECURITIES.
There is no established public trading market for LP's equity interests and
LP is not aware of any trading in such interests. During 2003 and 2002, LP paid
distributions on its equity interests aggregating $14.4 million and $14.8
million, respectively, of which, $13.6 million and $14.0 million were paid to
the Company or the Predecessor, respectively.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected operating data and balance sheet data set forth below have
been derived from our financial statements, including the combined operating
data for the year ended December 31, 2003 (combined for the respective periods
of the Predecessor and the Successor). The financial statements as of December
31, 2003 and 2002 and for the period from February 12, 2003 to December 31, 2003
(Successor), the period from January 1, 2003 to February 11, 2003 (Predecessor)
and the years ended December 31, 2002 and 2001, all contained elsewhere herein,
have been audited by Deloitte & Touche LLP, independent auditors. The data set
forth below should be read in conjunction with the financial statements and
related notes and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this annual report.
Year Ended December 31,
-----------------------------------------------------------------------
2003** 2002* 2001* 2000* 1999*
------------ ----------- ---------- ----------- -----------
(Predecessor) (Predecessor) (Predecessor) (Predecessor)
Statement of Operations Data:
Total revenues...................... $ 23,041 $ 23,578 $ 21,899 $ 18,913 $ 18,441
------------ ----------- ---------- ----------- -----------
Property operating expenses......... 7,162 6,569 5,887 5,091 4,617
Interest expense.................... 2,537 3,212 2,781 2,441 2,418
Rental property depreciation and
amortization...................... 3,187 3,653 3,560 3,226 3,004
General and administrative
expenses.......................... 20 1,059 1,028 828 778
------------ ----------- ---------- ----------- -----------
Total costs and expenses............ 12,906 14,493 13,256 11,586 10,817
------------ ----------- ---------- ----------- -----------
Other income (expense).............. 87 212 1,817 330 1,453
------------ ----------- ---------- ----------- -----------
Income before discontinued $ 10,222 $ 9,297 $ 10,460 $ 7,657 $ 9,077
operations........................
============ =========== ========== =========== ===========
Net income......................... $ 11,131 $ 15,012 $ 11,206 $ 8,385 $ 9,791
============ =========== ========== =========== ===========
*Amounts have been reclassified to conform to current year presentation.
**Predecessor and successor amounts for 2003 have been combined for purposes of
this table.
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Year Ended December 31,
-----------------------------------------------------------------------
2003 2002 2001 2000 1999
------------ ----------- ---------- ----------- -----------
(Predecessor) (Predecessor) (Predecessor) (Predecessor)
(in thousands other than per share, percentage and ratio data)
Balance Sheet Data:
Total rental properties, after
accumulated depreciation......... $187,132 $144,666 $145,625 $137,114 $ 126,605
Total assets....................... 190,072 173,105 166,873 145,814 137,834
Mortgage notes payable............... 39,061 41,476 37,464 30,595 31,181
Total liabilities.................... 40,841 43,684 39,618 32,294 33,726
Partners' equity..................... 149,231 129,421 127,255 113,520 104,108
Other Data:
Cash flows from:
Operating activities*............ 13,381 14,806 13,699 10,837 12,218
Investing activities*............ 1,468 1,702 (10,979) (13,898) (2,246)
Financing activities*............ 15,446 (16,400) (8,863) 9,345 (10,716)
*Predecessor and successor amounts for 2003 have been combined for purposes of
this table.
Due to the merger between the Company and IRT, the assets were re-valued at
current fair market values. The effect of this step-up caused a decrease in the
depreciable base of the assets compared to periods prior to the merger,
resulting in lower depreciation expense subsequent to February 12, 2003.
ITEM 7. MANAGEMENT'S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The following should be read in conjunction with our financial statements,
including the notes thereto, which are included elsewhere in this annual report.
Unless the context otherwise requires, all references to "we," "our," "us,"
"IRT Partners," and "LP" in this report refer collectively to IRT Partners L.P.
On February 12, 2003, Equity One, Inc. (the "Company" or "Successor"
general Partner of LP) completed a statutory merger with IRT Property Company
("IRT" or "Predecessor" the previous general partner of LP). As a result of the
merger, the Company acquired the general partnership interests in LP held by
IRT. The Company now owns approximately 94.4% of LP's partnership interests.
IRT Partners L.P. ("LP"), a Georgia limited partnership, was formed on July
15, 1998 in order to enhance the acquisition opportunities of its general
partner through a downREIT structure. This structure offers potential sellers
the ability to make a tax-deferred transfer of their real estate properties in
exchange for partnership units ("OP Units") of LP.
We believe we distinguish ourselves by owning and operating shopping
centers anchored by supermarkets or necessity-oriented retailers in high density
areas that are experiencing high population growth. Our goal is to own and
operate properties containing dominant supermarket operators and a diverse
tenant mix. We believe that these characteristics combine to reduce the
vulnerability of our properties to economic downturns, enhance consumer traffic
through our properties and generate more stable cash flows over time. We derive
substantially all of our revenue from tenants under existing leases at our
properties.
8
Our business is generally dependent on the performance of the economy in
the areas in which we own properties. Changes in the economic environment tend
to have a direct effect on our tenants' businesses and, therefore, their ability
to continue to pay us rent. In 2003, the overall U.S. economy began to
demonstrate sustained economic growth. This growth, as well as the prevailing
low interest rate environment, contributed to the growth in our cash flows and
allowed us to increase the occupancy rates at our centers for the year. We have
followed a disciplined approach and taken advantage of the improving economic
environment in our markets. The Company continues to concentrate on shopping
centers in the southern region of the United States by acquiring new centers in
high growth, high density areas, developing and redeveloping centers in these
areas and selling properties that no longer meet our investment criteria.
However, our long-term operating cash flow is dependent on the continued
occupancy of our properties, the rents that we are able to charge to our tenants
and the ability of these tenants to make their rental payments. Therefore, the
main long-term threat to our business is our dependence on the viability of our
anchor and other tenants. General economic downturns and competition from
national and regional supercenters may have an increasing adverse impact on the
business of our tenants by taking customers or reducing operating margins. We
are not currently aware of any pending tenant bankruptcies that are likely to
materially affect our rental revenues.
We are optimistic that we are well positioned to take advantage of the
sustained growth of the economy and continuing low interest rate environment.
Short-Term Liquidity Needs
As of December 31, 2003, we had $11,000 in cash and our cash flow generated
by operations was $13.4 million for the year ended December 31, 2003.
Our short-term liquidity requirements consist primarily of funds necessary
to pay for operating and other expenses directly associated with our portfolio
of properties, interest expense and scheduled principal payments on our
outstanding debt, capital expenditures incurred to facilitate the leasing of
space (e.g., tenant improvements and leasing commissions), and quarterly
distributions to holders of OP units.
Historically, we have satisfied these requirements principally through cash
generated from operations. We believe that cash generated from operations or
advances from the Company will be sufficient to meet our short-term liquidity
requirements; however, there are certain factors that may have a material
adverse effect on our cash flow.
We derive substantially all our revenue from tenants under existing leases
at our properties. Therefore, our operating cash flow is dependent on the rents
that we are able to charge to our tenants, and the ability of these tenants to
make their rental payments. We believe that the nature of the properties in
which we typically invest, primarily supermarket and necessity-oriented
retail-anchored and neighborhood shopping centers, provides a more stable
revenue flow in uncertain economic times because consumers still need to
purchase basic living essentials such as groceries and day-to-day goods.
However, general economic downturns, or economic downturns in one or more
markets in which we own properties, still may adversely impact the ability of
our tenants to make lease payments and our ability to re-lease space on
favorable terms as leases expire. In either of these instances, our cash flow
would be adversely affected. We are not currently aware of any pending tenant
bankruptcies that are likely to materially affect our rental revenues.
We may incur significant expenditures in connection with the re-leasing of
our retail space, principally in the form of tenant improvements and leasing
commissions. The amounts of these expenditures can vary significantly, depending
on negotiations with tenants and the willingness of tenants to pay higher base
rents over the life of the leases. We also incur expenditures for certain
recurring
9
capital expenses. We expect to pay for re-leasing and recurring capital
expenditures out of cash from operations.
The Company causes LP to distribute to each of its limited partners an
amount equal to the cash distribution declared by the Company on its common
stock. Distributions are made to the limited partners pro rata based on the
number of OP Units held by each limited partner. LP's cash distributions to its
limited partners for the year ended December 31, 2003 were $808,000.
Long-Term Liquidity Needs
Our long-term liquidity requirements consist primarily of funds
necessary to pay for the principal amount of our long-term debt as it matures,
significant non-recurring capital expenditures that need to be made periodically
at our properties, development and redevelopment projects that we undertake at
our properties and the costs associated with acquisitions of properties that we
pursue. Historically, the Company has satisfied these requirements principally
through the most advantageous source of capital at the time, which has included
the incurrence of new debt through borrowings (through public offerings of
unsecured debt and private incurrence of secured and unsecured debt), sales of
common and preferred stock, capital raised through the disposition of assets,
repayment by third parties of notes receivable and joint venture capital
transactions. We believe that these sources of capital will continue to be
available in the future to fund our long-term capital needs; however, there are
certain factors that may have a material adverse effect on our ability to access
these capital sources.
The following table sets forth certain information regarding the future
commitment on contractual obligations of the LP as of December 31, 2003 (in
thousands):
Payments due by period
Less than More than
Contractual Obligation Total 1 year 1-3 years 3-5 years 5 years
----------- ----------- ----------- ----------- ------------
Mortgage notes payable:
Schedule amortization......... $ 8,436 $ 650 $ 1,480 $ 1,746 $ 4,560
Balloon payments.............. 25,964 - - - 25,964
----------- ----------- ----------- ----------- ------------
Total mortgage obligations... 34,400 650 1,480 1,746 30,524
Development obligations......... 200 200 - - -
----------- ----------- ----------- ----------- ------------
Total contractual obligations... $ 34,600 $ 850 $ 1,480 $ 1,746 $ 30,524
=========== =========== =========== =========== ============
LP has no outstanding operating or capital lease obligations.
Off Balance Sheet Arrangements
As of December 31, 2003, our off balance sheet arrangements were as
follows:
o We have committed to fund $200,000 based on current plans and
estimates, in order to complete pending redevelopment projects. These
obligations, comprised principally of construction contracts, are
generally due as the work is performed and are expected to be financed
by our available operating cash flows.
o LP guarantees the $150 million unsecured senior notes payable and the
$340 million revolving credit facility of the Company.
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of
Operations provides additional information related to our financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The
10
preparation of these consolidated financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. On an ongoing basis, management evaluates and if
necessary, adjusts its estimates and judgments, including those related to real
estate and development assets, revenue recognition in conjunction with providing
development, leasing and management services and equity in earnings of
unconsolidated joint ventures. Management believes that the following critical
accounting policies affect its more significant judgments and estimates used in
the preparation of our financial statements.
Real Estate Properties and Development Assets. We capitalize acquisition
and construction costs, property taxes, interest and other miscellaneous costs
that are directly identifiable with a project, from pre-acquisition until the
time that construction is complete and the development is ready for its intended
use, in accordance with Statement of Financial Accounting Standards ("SFAS") No.
67 and SFAS No. 34. We allocate the capitalized project costs to the various
components of the project based on the components' relative fair values. Our
cost allocation method requires the use of management estimates regarding the
fair market value of each project component. Management bases its estimates on
current market appraisals, comparable sales, existing sale and purchase
contracts, replacement cost, historical experience, and various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the fair market
values of real estate assets. Actual results may differ from these estimates and
anticipated returns on a project, as well as the gain or loss on disposition of
the individual project components, could vary significantly from estimated
amounts.
Management reviews long-lived assets used in operations for impairment when
there is an event or change in circumstances that indicates that the carrying
amount of the asset may not be recoverable and the future undiscounted cash
flows expected to be generated by the asset are less than its carrying amount.
If such asset is considered to be impaired, we record impairment losses and
reduce the carrying amount of the impaired asset to an amount that reflects the
fair value of the asset at the time impairment is evident. Our impairment review
process relies on management's judgment regarding the indicators of impairment,
the remaining life of the asset used to generate the asset's undiscounted cash
flows, and the fair value of the asset at a particular point in time. Management
uses historical experience, current market appraisals and various other
assumptions to form the basis for making judgments about the impairment of real
estate assets. Under different assumptions or conditions, the asset impairment
analysis may yield a different outcome, which would alter the ultimate return on
our assets, as well as the gain or loss on the eventual disposition of the
asset.
Business Combinations. We are required to allocate the purchase price of
acquired companies and properties to the tangible and intangible assets
acquired, and liabilities assumed, based on their estimated fair values. Fair
value is defined as the amount at which that asset could be bought or sold in a
current transaction between willing parties (other than in a forced or
liquidation sale). In order to allocate the purchase price of acquired companies
and properties to the tangible and intangible assets acquired, we identify and
estimate the fair value of the land, buildings, and improvements, review the
leases to determine the existence of, and estimate the fair value of, any
contractual or other legal rights and investigates the existence of, and
estimate the fair value of, any other identifiable intangible assets. Such
valuations require management to make significant estimates and assumptions,
especially with respect to intangible assets.
The cost approach is used as the primary method to estimate the fair value
of the buildings, improvements and other assets. The market value approach is
used as the primary method to estimate the fair value of the land. The
determination of the fair value of contractual intangibles is based on the costs
to originate a lease including commissions and legal costs to the extent that
such costs are not already
11
incurred with a new lease that has been negotiated in connection with the
purchase of a property. In-place lease values are based on management's
evaluation of the specific characteristics of each lease and the overall
relationship with each tenant. Among the factors considered in the allocation of
these values include the nature of the existing relationship with the tenant,
the tenant's credit quality, the expectation of lease renewals, the estimated
carrying costs of the property during a hypothetical expected lease-up period,
current market conditions and costs to execute similar leases. Estimated
carrying costs include real estate taxes, insurance, other property operating
costs and estimates of lost rentals at market rates during the hypothetical
expected lease-up periods, under specific market conditions. Above-market,
below-market and in-place lease values are determined based on the present value
(using a discount rate reflecting the risks associated with the leases acquired)
of the difference between (i) the contractual amounts to be paid pursuant to the
leases negotiated and in-place at the time of acquisition and (ii) management's
estimate of fair market lease rates for the property or equivalent property,
measured over a period equal to the remaining non-cancelable term of the lease.
The value of contractual intangibles is amortized over the remaining term of
each lease. Other than as discussed above, the Company has determined that the
real estate properties do not have any other significant identifiable intangible
assets.
Critical estimates in valuing certain of the intangible assets and the
assumptions of what marketplace participants would use in making estimates of
fair value include, but are not limited to: future expected cash flows,
estimated carrying costs, estimated origination costs, lease up periods, and the
tenant risk attributes, as well as assumptions about the period of time the
acquired lease will continue to be used in our portfolio, and discount rates
used in these calculations. Management's estimates of fair value are based upon
assumptions believed to be reasonable, but which are inherently uncertain and
unpredictable. Assumptions may not always reflect unanticipated events and
changes in circumstances that may occur. In making such estimates, management
uses a number of sources, including appraisals that may be obtained in
connection with the acquisition or financing of the respective property or other
market data. Management also considers information obtained in our
pre-acquisition due diligence and market and leasing activities in estimating
the fair value of tangible and intangible assets acquired.
Revenue Recognition. We, as lessor, retain substantially all the risks and
benefits of property ownership and account for our leases as operating leases.
Rental income is recognized over the lease term on a straight-line basis as it
becomes receivable according to the provisions of the lease. Revenue from
percentage rent is recognized when tenants' reported sales have reached certain
levels specified in the respective leases. Recoveries from tenants for real
estate taxes and other operating expenses are recognized as revenue in the
period when the applicable costs are incurred.
We maintain an allowance for doubtful accounts for estimated losses
resulting from the inability of tenants to make required rent payments. The
computation of this allowance is based on the tenants' payment history and
current credit quality. If our estimate of collectibility differs from the cash
received the timing and amount of our reported revenue could be impacted.
Results of Operations
The following discussion should be read in conjunction with LP's audited
financial statements, including the notes thereto, which are included elsewhere
herein.
The results of the operations for the period from January 1, 2003 through
February 11, 2003 and for the years ended December 31, 2002 and 2001 have been
recorded based on the historical values of the assets and liabilities of LP
prior to the Company's merger with IRT. For the period from February 12, 2003
through December 31, 2003, the results of operations have been recorded based on
the fair values assigned to the assets and liabilities after the merger.
12
We derive substantially all of our revenues from rents received from
tenants under existing leases on each of our properties. These revenues include
fixed base rents, recoveries of expenses that we have incurred and which we pass
through to the individual tenants and percentage rents that are based on
specified percentages of tenants' revenues, in each case as provided in the
particular leases.
Our primary cash expenses consist of our property operating expenses, which
include real estate taxes, repairs and maintenance, management expenses,
insurance, utilities and other expenses, general and administrative expenses,
which include payroll, office expenses, professional fees and other
administrative expenses, and interest expense, primarily on mortgage and
revolving credit facilities indebtedness. In addition, we incur substantial
non-cash charges for depreciation and amortization on our properties. We also
capitalize certain expenses, such as taxes and interest, incurred in respect of
property under development or redevelopment until the property is ready for its
intended use.
Year Ended December 31, 2003 Compared to Year Ended December 31, 2002.
Total revenues from rental properties decreased by $537,000, or 2.3%, to
$23.0 million in 2003 from $23.6 million in 2002. The decrease was primarily due
to the vacancy of two major tenants.
Property operating expenses increased by $593,000, or 9.0%, to $7.2 million
for 2003 from $6.6 million in 2002. This variance relates to an increase of
management fees expense of $178,000 and common area maintenance of $733,000,
which are offset by a decrease in real estate taxes of $150,000 and
non-recoverable maintenance costs of $48,000.
Rental property depreciation and amortization decreased by $466,000, or
12.8%, to $3.2 million for 2003 from $3.7 million in 2002. Due to the merger
between the Company and IRT, the assets were re-valued at current fair market
values. The effect of this step-up caused a decrease in the depreciable base of
the assets compared to periods prior to the merger, resulting in lower
depreciation expense subsequent to February 12, 2003.
Interest expense decreased by $675,000, or 21.0%, to $2.5 million for 2003
from $3.2 million in 2002. The decrease is related to the payoff of existing
mortgage notes related to the disposition of properties.
During 2002, three properties were sold and the operations are reflected in
income from rental properties sold or held for sale. LP recognized a gain on the
sale of these operation of $4.2 million. There were no dispositions during 2003;
however, LP has one property being held for sale as of December 31, 2003. The
results of operations from this property are reflected in rental properties sold
or held for sale.
As a result of the foregoing, net income decreased by $3.9 million, or
25.9%, to $11.1 million for 2003 from $15.0 million in 2002.
Year Ended December 31, 2002 Compared to Year Ended December 31, 2001.
Total revenues from rental properties increased by $1.7 million, or 7.7%,
to $23.6 million in 2002 from $21.9 million in 2001 due to an increase in
expense recoveries and rental income.
Property operating expenses increased by $682,000, or 11.6%, to $6.6
million for 2002 from $5.9 million in 2001. This increase was partially due to
an increase in real estate taxes and insurance costs.
Rental property depreciation and amortization increased by $93,000, or
2.6%, to $3.7 million for 2002 from $3.6 million in 2001.
13
Interest expense increased by $440,000, or 15.9%, to $3.2 million for 2002
from $2.8 million in 2001 related to a mortgage note obtained in 2001 and
assumption of a mortgage.
During 2002, three properties were sold and the operations are reflected in
income from rental properties sold or held for sale. LP recognized a gain on the
sale of these operation of $4.2 million.
As a result of the foregoing, net income increased by $3.8 million, or
34.0%, to $15.0 million for 2002 from $11.2 million in 2001.
Liquidity and Capital Resources
LP's principal demands for liquidity are maintenance expenditures, repairs,
property taxes and tenant improvements, leasing costs, debt service and
distributions to its OP Unit holders. LP presently expects cash from its
operating activities to be the primary source of funds to pay distributions,
mortgage note payments and certain capital improvements on LP's properties.
CASH FLOWS
- ----------
For purposes of this cash flow analysis, the cash flows for the period from
January 1, 2003 through February 11, 2003, the date of the merger, have been
combined with the cash flows for the period from February 12, 2003 through
December 31, 2003 to provide a reasonable comparison to the cash flows for the
year ended December 31, 2002.
Net cash provided by operating activities was $13.4 million for the year
ended December 31, 2003. Changes in cash flow amounts related to net income of
$11.1 million, adjustments for non-cash items which increased cash flow by $2.6
million, and a net decrease in operating assets and liabilities of $356,000,
compared to net cash provided by operating activities of $14.8 million for the
year ended December 31, 2002, which included net income of $15.0 million,
adjustments for non-cash and gain on sale items which decreased cash flow by
$114,000, and a net decrease in operating assets and liabilities of $92,000.
Net cash used in investing activities was $1.5 million for the year ended
December 31, 2003. Changes in cash flow amounts related to additions to rental
property of $553,000 and redevelopment costs of $2.0 million offset by proceeds
from escrowed funds on sale of properties of $4.0 million. These amounts should
be compared to net cash provided by investing activities of $1.7 million for the
year ended December 31, 2002 which included the acquisition of properties of
$5.8 million and proceeds from escrowed funds of $4.0 million, offset by
proceeds from the sale of three properties of $11.6 million.
Net cash used in financing activities decreased to $15.4 million in 2003
from cash used in financing activities of $16.4 million in 2002. Cash used in
financing activities relates to advances to/from the Company.
DEBT
- ----
LP guarantees the Company's indebtedness under the Company's unsecured
senior debt and one of its unsecured revolving credit facilities.
LP, through the Company, uses unsecured borrowings for use in meeting
capital requirements. As of December 31, 2003, LP had $34.4 million in mortgage
notes payable at a weighted average interest rate of 8.43%, which are due in
monthly installments with maturity dates ranging from 2009 to 2015.
14
Our mortgage notes payable balances as of December 31, 2003 and 2002
consisted of the following:
December 31, December 31,
2003 2002
------------- -------------
(Successor) (Predecessor)
(in thousands)
Mortgage Notes Payable
Fixed rate mortgage loans............................. $ 34,400 $ 41,476
Unamortized premium on mortgage notes payable......... 4,661 -
------------- -------------
Total mortgage notes payable....................... $ 39,061 $ 41,476
============= =============
Each of the existing mortgage loans is secured by a mortgage on one or more
of certain of LP's properties. Certain of the mortgage loans involving an
aggregate principal balance of approximately $22.2 million contain prohibitions
on transfers of ownership which may have been violated by the Company's previous
issuances of common stock or in connection with the merger of IRT and may be
violated by transactions involving the Company's capital stock in the future. If
a violation were established, it could serve as a basis for a lender to
accelerate amounts due under the affected mortgage. To date, no lender has
notified the Company or LP that it intends to accelerate its mortgage. Based on
discussions with various lenders, current credit market conditions and other
factors, LP believes that the mortgages will not be accelerated. Accordingly, LP
believes that the violations of these prohibitions will not have a material
adverse impact on LP's results of operations or financial condition.
Our debt level could subject us to various risks, including the risk that
our cash flow will be insufficient to meet required payments of principal and
interest, and the risk that the resulting reduced financial flexibility could
inhibit our ability to develop or improve our rental properties, withstand
downturns in our rental income or take advantage of business opportunities. In
addition, because we currently anticipate that only a small portion of the
principal of our indebtedness will be repaid prior to maturity, it is expected
that it will be necessary to refinance the majority of our debt. Accordingly,
there is a risk that such indebtedness will not be able to be refinanced or that
the terms of any refinancing will not be as favorable as the terms of our
current indebtedness.
Mortgage Indebtedness
The following table sets forth certain information regarding LP's mortgage
indebtedness related to our properties as of December 31, 2003:
Balance at
December 31, Balance Due
Property 2003 Interest Rate Maturity Date at Maturity
- --------------------------------------- --------------- -------------- ---------------- -------------
Fixed Rate Mortgage Debt
Tamarac Town Square $ 6,206 9.190% 10/01/2009 $ 5,583
Parkwest Crossing 4,728 8.100% 09/01/2010 4,352
Charlotte Square 3,614 9.190% 02/01/2011 2,992
Pine Ridge Square 7,354 7.020% 05/01/2011 6,579
Riverside Square 7,694 9.190% 03/01/2012 6,458
Treasure Coast 4,804 8.000% 04/01/2015 -
----------- -------------
Total Fixed Rate Mortgage Debt (6 loans) $ 34,400 8.43% 6.74 years $ 25,964
=========== ============== ============== =============
(wtd.-avg.rate) (wtd.-avg.life)
15
Our mortgage indebtedness outstanding at December 31, 2003 will require
approximate balloon and scheduled principal payments as follows:
Schedule
Year Due Amortization Balloon Payments Total
- -------------- -------------- ------------------ --------------
2004 $ 650 $ - $ 650
2005 709 - 709
2006 771 - 771
2007 838 - 838
2008 908 - 908
2009 967 5,583 6,550
2010 905 4,352 5,257
2011 750 9,571 10,321
2012 567 6,458 7,025
Thereafter 1,371 - 1,371
- -------------- -------------- ------------------ --------------
Total $ 8,436 $ 25,964 $ 34,400
============== =================== ==============
FUTURE CAPITAL REQUIREMENTS
- ---------------------------
Distributions
LP was formed in order to enhance the acquisition opportunities of its
general partner through a downREIT structure. As a partnership under the
Internal Revenue Code, no federal or state income tax is reflected in the
accompanying financial statements as the partners are required to include their
respective share of profits and losses in their income tax returns.
Additionally, LP is required to make distribution payments to its limited
partners based on the number of outstanding units ("OP Units") held at the time
of distribution. LP's cash distributions for the year ended December 31, 2003
were $808,000.
We believe, based on currently proposed plans and assumptions relating to
our operations, that our existing financial arrangements, together with cash
generated from our operations, will be sufficient to satisfy our cash
requirements for a period of at least twelve months. In the event that our plans
change, our assumptions change or prove to be inaccurate or cash flows from
operations or amounts available under existing financing arrangements prove to
be insufficient to fund our expansion and development efforts or to the extent
we discover suitable acquisition targets the purchase price of which exceeds our
existing liquidity, we would be required to seek additional sources of
financing. There can be no assurance that any additional financing will be
available on acceptable terms or at all, and any future equity financing could
be dilutive to existing stockholders. If adequate funds are not available, our
business operations could be materially adversely affected.
New Accounting Standards
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections
which rescinds FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. It also
rescinds FASB Statement No. 44, Accounting for Intangible Assets or Motor
Carriers, and amends FASB Statement No. 13, Accounting for Leases. Finally SFAS
No. 145 amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. The provisions related to the rescission of FASB Statement
No. 4 and its amendment Statement No. 64 is effective for fiscal years beginning
after May 15, 2002. We adopted SFAS No. 145 as of July 2002 and have reflected
gains (losses) from extinguishment of debt as part of ordinary income.
16
In January 2003, FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"), an interpretation of ABR 51. FIN 46
provides guidance on identifying entities for which control is achieved through
means other than through voting rights, variable interest entities ("VIE"), and
how to determine when and which business enterprises should consolidate the VIE.
In addition, FIN 46 requires both the primary beneficiary and all other
enterprises with a significant variable interest in a VIE to make additional
disclosures. The transitional disclosure requirements will take effect almost
immediately and are required for all financial statements issued after January
31, 2003. The consolidation provisions of FIN 46 are effective immediately for
variable interests in VIEs created after January 31, 2003. For variable
interests in VIEs created before February 1, 2003, the provisions of FIN 46 are
effective for the first interim or annual period ending after December 15, 2003.
The Partnership has evaluated the effect of FIN 46 and has determined where it
is the primary beneficiary and has consolidated those VIE's. We are not a party
to any VIE's.
In April 2003, FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which clarifies the accounting
and reporting for derivative instruments, including derivative instruments that
are embedded in contracts. This statement is effective for contracts entered
into or modified after June 30, 2003. We adopted this pronouncement beginning
July 1, 2003. The adoption of SFAS No. 149 did not have a material impact on our
financial condition or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This statement
establishes standards for the classification and measurement of financial
instruments that possess characteristics similar to both liability and equity
instruments. SFAS No. 150 also addresses the classification of certain financial
instruments that include an obligation to issue equity shares. On October 29,
2003, the FASB voted to defer, for an indefinite period, the application of the
guidance in FASB Statement No. 150, Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity. The FASB also decided to
defer the application of certain aspect of Statement 150 until it could consider
some of the resulting implementation issues. We have adopted certain provisions
of SFAS 150 which did not have a material impact on our financial position or
results of operations. We are still evaluating the potential impact of the
provisions of SFAS 150 that have been deferred to future periods.
In December 2003, the FASB issued Statement No. 132 (SFAS No. 132) (revised
2003), Employers' Disclosures about Pensions and Other Postretirement Benefits.
This Statement revises employers' disclosures about pension plans and other
postretirement benefit plans. It does not change the measurement or recognition
provisions of FASB Statements No. 87, Employers' Accounting for Pensions, No.88,
Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits, and No. 106, Employers ' Accounting
for Postretirement Benefits Other Than Pensions. This Statement retains the
disclosure requirements contained in SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, which it replaces. It requires
additional disclosures about the assets, obligations, cash flows, and net
periodic benefit cost of defined benefit pension plans and other postretirement
benefit plans. The adoption of SFAS No. 132 (revised) did not have a material
impact on our financial condition or results of operations.
Environmental Matters
We are subject to numerous environmental laws and regulations. The
operation of dry cleaning facilities at our shopping centers is the principal
environmental concern. We believe that the tenants who operate these facilities
do so in accordance with current laws and regulations and we have established
procedures to monitor their operations. Additionally, we use all legal means to
cause tenants to remove dry cleaning plants from our shopping centers. Where
available, we have applied and been accepted into state sponsored environmental
programs. We have also placed environmental insurance on specific
17
properties with known contamination in order to mitigate our environmental risk.
We believe that the ultimate disposition of currently known environmental
matters will not have a material effect on our financial position, liquidity or
operations.
Inflation and Recession Considerations
Most of our leases contain provisions designed to partially mitigate the
adverse impact of inflation. Most of our leases require the tenant to pay its
share of operating expenses, including common area maintenance, real estate
taxes and insurance, thereby reducing our exposure to increases in costs and
operating expenses resulting from inflation. A small portion of our leases also
include clauses enabling us to receive percentage rents based on a tenant's
gross sales above predetermined levels, which sales generally increase as prices
rise, or escalation clauses.
Our financial results are affected by general economic conditions in the
markets in which our properties are located. An economic recession, or other
adverse changes in general or local economic conditions, could result in the
inability of some of our existing tenants to meet their lease obligations and
could otherwise adversely affect our ability to attract or retain tenants.
Supermarkets, drugstores and other anchor tenants that offer day-to-day
necessities rather than luxury items anchor our existing properties. These types
of tenants, in our experience, generally maintain more consistent sales
performance during periods of adverse economic conditions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary market risk to which LP has exposure is interest rate risk.
Changes in interest rates can affect LP's net income and cash flows. As changes
in market conditions occur, interest rates can either increase or decrease,
interest expense on the variable component of LP's debt will move in the same
direction. With respect to our mortgage notes payable, changes in interest rates
generally do not affect the LP's interest expense as these notes payable are
predominantly at fixed-rates for extended terms with a weighted average life of
6.7 years. Because LP has the intent to hold its existing fixed rate notes
payable either to maturity or until the sale of the associated property, there
is believed to be no interest rate market risk on LP's results of operations or
its working capital position. The LP's possible risk is from increases in
long-term interest rates that may occur over a period of several years, as this
may decrease the overall value of its real estate.
LP estimates the fair market value of its long term, fixed rate mortgage
loans using discounted cash flow analysis based on current borrowing rates for
similar types of debt. At December 31, 2003, the fair value of the fixed rate
mortgage loans was estimated to be $39.9 million compared to the carrying value
amount of $34.4 million, excluding the unamortized premium on notes payable. If
the weighted average interest rate on LP's fixed rate debt were 100 basis points
lower or higher than the current weighted average rate of 8.43%, the fair market
value would be $36.2 million and $32.7 million, respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by Regulation S-X
are included in this Form 10-K commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
18
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to provide
reasonable assurance that information required to be disclosed in our Securities
Exchange Act of 1934, as amended ("Exchange Act"), reports is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer of Equity One, Inc., in its capacity as
general partner, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.
As required by Rule 13a-15(b) under the Exchange Act, we carried out an
evaluation, under the supervision and with the participation of management,
including the Chief Executive Officer and Chief Financial Officer of Equity One,
Inc., in its capacity as general partner, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on the foregoing, the
Chief Executive Officer and Chief Financial Officer of Equity One, Inc., in its
capacity as general partner, concluded that, as of the end of the period covered
by this report, our disclosure controls and procedures were effective at the
reasonable assurance level to ensure that information required to be disclosed
by us in reports that we file under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms.
There have been no changes in our internal controls over financial
reporting during the year ended December 31, 2003, that have materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Not applicable for IRT Partners L.P. The Company acts as general partner of
LP. Certain information about the Company is available from the Company's
definitive proxy statement to be filed within 120 days after the end of the
Company's fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Not applicable for IRT Partners L.P. The Company acts as general partner of
LP. Certain information about the Company is available from the Company's
definitive proxy statement to be filed within 120 days after the end of the
Company's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Not applicable for IRT Partners L.P. The Company acts as general partner of
LP. Certain information about the Company is available from the Company's
definitive proxy statement to be filed within 120 days after the end of the
Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable for IRT Partners L.P. The Company acts as general partner of
LP. Certain information about the Company is available from the Company's
definitive proxy statement to be filed within 120 days after the end of the
Company's fiscal year.
19
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable for IRT Partners L.P. The Company acts as general partner of
LP. Certain information about the Company is available from the Company's
definitive proxy statement to be filed within 120 days after the end of the
Company's fiscal year.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following consolidated financial information is included as a
separate section of this Form 10-K:
1. Financial Statements: PAGE
--------------------- ----
Independent Auditors' Report...................................................... F-1
Balance Sheets as of December 31, 2003 and 2002................................... F-2
Statements of Operations for the period from January 1, 2003 through
February 11, 2003 (merger date), the period from February 12, 2003 through
December 31, 2003, and for the years ended 2002 and 2001........................ F-3
Statements of Changes in Partners' Capital for the years ended
December 31, 2003, 2002 and 2001................................................ F-4
Statements of Cash Flows for the years ended December 31, 2003,
2002 and 2001................................................................... F-5
Notes to Consolidated Financial Statements........................................ F-6 - F-13
2. Schedule III - Real Estate Investments and Accumulated
Depreciation and Independent Auditors' Report.................................... S-1
Schedules I, II, IV and V are not required to be filed.
3. Exhibits: See (c) below
(b) Reports on Form 8-K:
None.
(c) Exhibits: The following exhibits are filed as part of, or incorporated
by reference into, this annual report.
20
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Certificate of Limited Partnership of IRT Partners L.P.
(incorporated by reference to Exhibit 3.1 to the Form 10-Q
of IRT Partners L.P. for the quarter ended March 31, 2001).
3.2 Agreement of Limited Partnership of IRT Partners L.P., and
Amendment No. 1 thereto (incorportated by reference to
Exhibit 99.2 to the Current Report on Form 8-K of IRT
Property Company filed on September 15, 1998).
4.1 Indenture dated November 9, 1995 between the Company, as
successor-by-merger to IRT Property Company, and SunTrust
Bank, as Trustee (incorporated herein by reference to
Exhibit 4(c) to the Annual Report on Form 10-K, of IRT
Property Company filed on February 16, 1996).
4.2 Supplemental Indenture No. 1 dated March 26, 1996 between
the Company, as successor-by-merger to IRT Property Company,
and SunTrust Bank, as Trustee (incorporated herein by
reference to Exhibit 4 to the Current Report on Form 8-K of
IRT Property Company filed on March 26, 1996).
4.3 Supplemental Indenture No. 2 dated August 15, 1997 between
the Company, as successor-by-merger to IRT Property Company,
and SunTrust Bank, as Trustee (incorporated herein by
reference to Exhibit 4 to the Current Report on Form 8-K of
IRT Property Company filed on August 13, 1997).
4.4 Supplemental Indenture No. 3 dated September 9, 1998 between
the Company, as successor-by-merger to IRT Property Company,
and SunTrust Bank, as Trustee (incorporated herein by
reference to Exhibit 4.1 to the Current Report on Form 8-K
filed by IRT Property Company on September 15, 1998)
4.5 Supplemental Indenture No. 4 dated November 1, 1999 between
the Company, as successor-by-merger to IRT Property Company,
and SunTrust Bank, as Trustee (incorporated herein by
reference to Exhibit 4.7 of the Current Report on Form 8-K
filed by IRT Property Company on November 12, 1999).
4.6 Supplemental Indenture No. 5 dated February 12, 2003 between
the Company and SunTrust Bank, as Trustee (incorporated
herein by reference to Exhibit 4.1 of the Current Report on
Form 8-K filed by the Company on February 20, 2003).
4.7 Indenture dated September 9, 1998 between the Company, as
successor-by-merger to IRT Property Company, and SunTrust
Bank, as Trustee (incorporated herein by reference to
Exhibit 4.2 of the Current Report on Form 8-K filed by IRT
Property Company on September 15, 1998).
4.8 Supplemental Indenture No. 1 dated September 9, 1998 between
the Company, as successor-by-merger to IRT Property Company,
and SunTrust Bank, as Trustee (incorporated herein by
reference to Exhibit 4.3 of the Current Report on Form 8-K
filed by IRT Property Company on September 15, 1998)
4.9 Supplemental Indenture No. 2 dated November 1, 1999 between
the Company, as successor-by-merger to IRT Property Company,
and SunTrust Bank, as Trustee (incorporated herein by
reference to Exhibit 4.5 of the Current Report on Form 8-K
filed by IRT Property Company on November 12, 1999).
4.10 Supplemental Indenture No. 3 dated February 12, 2003 between
the Company and SunTrust Bank, as Trustee (incorporated
herein by reference to Exhibit 4.2 of the Current Report on
Form 8-K filed by the Company on February 20, 2003).
12.1 Ratio of Earnings to Fixed Charges
31.1 Certification of Chief Executive Officer pursuant to Section
302 of Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section
302 of Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. 1350, as created by Section
906 of the Sarbanes-Oxley Act of 2002.
________________________________________________________________________
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 22, 2004 IRT PARTNERS, LP
BY: Equity One, Inc., general partner
By: /s/ CHAIM KATZMAN
-----------------------------
Chaim Katzman
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ HOWARD M. SIPZNER
------------------------------
Howard M. Sipzner
Executive Vice President and
Chief Financial Officer
(Principal Accounting and Financial Officer)
22
IRT PARTNERS L.P.
(a limited partnership)
TABLE OF CONTENTS
-----------------
Page
------
Independent Auditors' Report................................................................................. F-1
Balance Sheets as of December 31, 2003 and 2002.............................................................. F-2
Statements of Operations for the period from January 1, 2003 through February 11, 2003 (merger date), the
period from February 12, 2003 through December 31, 2003, and for the years ended December 31, 2002 and 2001.. F-3
Statements of Changes in Partners' Capital for the period from January 1, 2003 to February 11, 2003 (Merger
Date), for the period from February 12, 2003 to December 31, 2003, and for the years ended December 31, 2002
and 2001..................................................................................................... F-4
Statements of Cash Flows for the period from January 1, 2003 to February 11, 2003 (Merger Date), for the
period from February 12, 2003 to December 31, 2003, and for the years ended December 31, 2002 and 2001 ...... F-5
Notes to the Financial Statements............................................................................ F-6 - F-13
INDEPENDENT AUDITORS' REPORT
To the Partners
of IRT Partners L.P.:
We have audited the accompanying balance sheets of IRT Partners L.P. (a limited
partnership) ("LP") as of December 31, 2003 and 2002, and the related statements
of operations, changes in partners' capital and cash flows for the period from
January 1, 2003 through February 11, 2003 (merger date), the period from
February 12, 2003 through December 31, 2003 and for each of the two years in the
period ended December 31, 2002. These financial statements are the
responsibility of LP's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of LP at December 31, 2003 and 2002 and the
results of its operations and its cash flows for the period from January 1, 2003
through February 11, 2003 (merger date), the period from February 12, 2003
through December 31, 2003 and for each of the two years in the period ended
December 31, 2002 in conformity with accounting principles generally accepted in
the United States of America.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
March 10, 2004
F-1
IRT PARTNERS L.P. (a limited partnership)
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
(In thousands, except partnership units)
2003 2002
----------------- ----------------
(Successor) (Predecessor)
ASSETS
PROPERTIES:
Income producing.......................................................... $ 179,072 $ 173,611
Less: accumulated depreciation............................................ (2,641) (28,945)
----------------- ----------------
176,431 144,666
Construction in progress and land held for development.................... 2,012 -
Property held for sale.................................................... 8,689 -
----------------- ----------------
Properties, net......................................................... 187,132 144,666
CASH AND CASH EQUIVALENTS.................................................... 11 608
CASH HELD IN ESCROW.......................................................... - 4,033
ADVANCES TO AFFILIATE....................................................... - 20,866
OTHER ASSETS................................................................. 2,929 2,932
----------------- ----------------
TOTAL........................................................................ $ 190,072 $ 173,105
================= ================
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Mortgage notes payable..................................................... $ 34,400 $ 41,476
Unamortized premium on notes payable...................................... 4,661 -
----------------- ----------------
Total mortgage notes payable............................................ 39,061 41,476
Other liabilities....................................................... 1,780 2,208
----------------- ----------------
Total liabilities...................................................... 40,841 43,684
COMMITMENTS AND CONTINGENT LIABILITIES
LIMITED PARTNERS' CAPITAL (815,852 partnership units in 2003 and 2002,
respectively)............................................................. 11,118 9,684
GENERAL PARTNERS' CAPITAL.................................................... 138,113 119,737
----------------- ----------------
TOTAL........................................................................ $ 190,072 $ 173,105
================= ================
See accompanying notes to the financial statements.
F-2
IRT PARTNERS L.P. (a limited partnership)
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 2003 TO FEBRUARY 11, 2003 (merger date),
FOR THE PERIOD FROM FEBRUARY 12, 2003 TO DECEMBER 31, 2003 AND FOR THE YEARS
ENDED DECEMBER 31, 2002 AND 2001 (In thousands, except partnership units)
For the Period
-------------------------------
January 1, to February 12
February 11, to December
2003 31, 2003 2002 2001
-------------- ------------ -------------- -------------
(Predecessor) (Successor) (Predecessor) (Predecessor)
RENTAL INCOME........................................... $ 2,617 $20,424 $23,578 $21,899
-------------- ------------ -------------- -------------
COSTS AND EXPENSES:
Property operating expenses.......................... 867 6,295 6,569 5,887
Interest expense..................................... 375 2,162 3,212 2,781
Rental property depreciation and amortization........ 515 2,672 3,653 3,560
General and administrative expenses.................. 4 16 1,059 1,028
-------------- ------------ -------------- -------------
Total costs and expenses........................... 1,761 11,145 14,493 13,256
-------------- ------------ -------------- -------------
INCOME BEFORE OTHER INCOME (EXPENSE) AND DISCONTINUED
OPERATIONS........................................... 856 9,279 9,085 8,643
OTHER INCOME (EXPENSE)
Interest income from affliates........................ 15 72 212 416
Gain on sale of income producing properties........... - - - 1,401
-------------- ------------ -------------- -------------
INCOME FROM CONTINUING OPERATIONS........................ 871 9,351 9,297 10,460
-------------- ------------ -------------- -------------
DISCONTINUED OPERATIONS:
Income from rental properties sold or held for sale.. 89 839 1,539 746
Loss (gain) on disposal of income producing
properties........................................ (19) - 4,176 -
-------------- ------------ -------------- -------------
Total income from discontinued operations......... 70 839 5,715 746
-------------- ------------ -------------- -------------
NET INCOME.............................................. $ 941 $10,190 $15,012 $11,206
============== ============ ============== =============
See accompanying notes to the financial statements.
F-3
IRT PARTNERS L.P. (a limited partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD FROM JANUARY 1, 2003 TO FEBRUARY 11, 2003 (Merger Date),
FOR THE PERIOD FROM FEBRUARY 12, 2003 TO DECEMBER 31, 2003 AND THE YEARS ENDED
DECEMBER 31, 2002 AND 2001 (In thousands, except partnership units)
Limited Partners' General Partner's
Capital Capital
----------------- ------------------
BALANCE,
JANUARY 1, 2001 (Predecessor)......... $6,621 $106,899
Issuance of units.................... - 14,667
Distributions........................ (767) (11,371)
Net income........................... 554 10,652
Adjustment to reflect limited partners'
capital interest at redemption value 2,240 (2,240)
----------------- ------------------
BALANCE,
DECEMBER 31, 2001 (Predecessor) 8,648 118,607
Issuance of units.................... - 1,946
Distributions........................ (829) (13,963)
Net income........................... 831 14,181
Adjustment to reflect limited partners'
capital interest at redemption value 1,034 (1,034)
-----------------
BALANCE,
DECEMBER 31, 2002 (Predecessor) 9,684 119,737
Net income........................... 53 888
----------------- ------------------
BALANCE,
FEBRUARY 11, 2003 (merger date) 9,737 120,625
Cash distributions................... (808) (13,646)
Net income........................... 570 9,620
Fair value adjustment due to merger.. 1,619 21,514
----------------- ------------------
BALANCE,
DECEMBER 31, 2003 (Successor) $ 11,118 $138,113
================= ==================
See accompanying notes to the financial statements.
F-4
IRT PARTNERS L.P. (a limited partnership)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 2003 TO FEBRUARY 11, 2003 (Merger Date),
FOR THE PERIOD FROM FEBRUARY 12, 2003 TO DECEMBER 31, 2003 AND THE YEARS ENDED
DECEMBER 31, 2002 AND 2001 (In thousands, except partnership units)
For the Period
-------------------------------
January 1, to February 12
February 11, to December
2003 31, 2003 2002 2001
-------------- ------------ -------------- -------------
(Predecessor) (Successor) (Predecessor) (Predecessor)
OPERATING ACTIVITIES:
Net income................................................. $ 941 $ 10,190 $ 15,012 $ 11,206
Adjustments to reconcile net income to net cash provided by
operating activities:
Straight line rent adjustment.......................... (13) (139) (159) (189)
Amortization of deferred financing fees................ 2 1 19 10
Amortization of debt premium........................... - (472) - -
Rental property depreciation and amortization.......... 515 2,840 4,202 3,895
(Gain) loss on disposal of real estate................. 19 - (4,176) (1,401)
Changes in assets and liabilities:
Other assets............................................ 36 35 (135) (283)
Other liabilities....................................... (641) 67 43 461
-------------- ------------ ------------ -----------
Net cash provided by operating activities.................. 859 12,522 14,806 13,699
-------------- ------------ ------------ -----------
INVESTING ACTIVITIES:
Additions to and purchase of rental property............ - (2,565) (5,833) (17,508)
Proceeds from disposal of rental property............... - - 11,568 6,529
Decrease (increase) in cash held in escrow.............. - 4,033 (4,033) -
-------------- ------------ ------------ -----------
Net cash provided by (used) in investing activities........ - 1,468 1,702 (10,979)
-------------- ------------ ------------ -----------
FINANCING ACTIVITIES:
Proceeds from mortgage notes payable.................... - - - 7,540
Repayment from mortgage notes payable.................... (68) (7,008) (790) (672)
Payment of deferred financing costs..................... - - (58) (130)
Issuance of units for cash.............................. - - 1,946 14,667
Distributions paid...................................... - (14,454) (14,792) (12,138)
Advances from (to) affiliate, net....................... (725) 6,809 (2,706) (18,130)
-------------- ------------ ------------
Net cash used in financing activities...................... (793) (14,653) (16,400) (8,863)
-------------- ------------ ------------ -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS....... 66 (663) 108 (6,143)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............. 608 674 500 6,643
-------------- ------------ ------------ -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD................... $ 674 $ 11 $ 608 $ 500
============== ============ ============ -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of amount capitalized........ $ 375 $ 1,918 $ 3,184 $ 2,745
============== ============ ============ ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
The Company merged with IRT and the assets and liabilities
of LP were restated to fair value as follows:
Fair value of assets acquired......................... $200,154
Assumption of liabilities and mortgage notes payable 46,657
------------
Partners' capital..................................... $153,497
============
See accompanying notes to the financial statements.
F-5
IRT PARTNERS L.P. (a limited partnership)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
(In thousands, except per share amounts)
- ----------------------------------------
1. Organization
------------
IRT Partners L.P. ("LP" or "Partnership"), a Georgia limited partnership,
was formed on July 15, 1998 in order to enhance the acquisition opportunities of
its general partner through a downREIT structure. This structure offers
potential sellers the ability to make a tax-deferred transfer of their real
estate properties in exchange for partnership units ("OP Units") of LP.
On February 12, 2003, Equity One, Inc. (the "Company" or the "Successor"
general partner of LP) completed a statutory merger with IRT Property Company
("IRT" or the "Predecessor" general partner of LP). As a result of the merger,
the Company acquired the general partnership interests in LP held by IRT. The
Company now owns approximately 94.4% of LP's partnership interests. As a result
of the substantial change in ownership from this transaction, "push-down"
accounting has been applied to LP's financial statements, and assets and
liabilities of LP were restated to fair value in the same manner as IRT's assets
and liabilities were recorded by the Company subsequent to the merger.
LP is obligated to redeem each OP Unit held by a person other than the
Company, at the sole request of the holder, for cash equal to the fair market
value of a share of the Company's common stock at the time of such redemption.
However, the Company may elect, at its option, to acquire any such OP Unit
presented for redemption for one common share of the Company's stock or cash.
At December 31, 2003, LP owned 23 neighborhood and community shopping
centers located in Florida, Tennessee, Georgia and North Carolina. The shopping
centers are anchored by necessity-oriented retailers such as supermarkets, drug
stores and other discount stores.
2. Summary of Significant Accounting Policies
------------------------------------------
Basis of Presentation
The results of operations for the years ended December 31, 2002 and
2001 and for the period from January 1, 2003 through February 11, 2003 have been
recorded based on the historical values of the assets and liabilities of LP
prior to the merger. As of December 31, 2003 and for the period from February
12, 2003 through December 31, 2003, the financial position and results of
operations have been recorded based on the fair values assigned to the assets
and liabilities after IRT's merger with the Company.
Properties
Income producing property is stated at cost and includes all costs related
to acquisition, development and construction, including tenant improvements,
interest incurred during development, costs of pre-development and certain
direct and indirect costs of development. Costs incurred during the
predevelopment stage are capitalized once management has identified a site,
determined that the project is feasible and that it is probable that LP will be
able to proceed with the project. Expenditures for ordinary maintenance and
repairs are expensed to operations as they are incurred. Significant renovations
and improvements, which improve or extend the useful life of assets, are
capitalized.
Income producing properties are individually evaluated for impairment when
conditions exist that may indicate that it is probable that the sum of expected
future cash flows (on an undiscounted basis)from a property is less than its
historical net cost basis. Upon determination that a permanent impairment has
occurred, LP records an impairment charge equal to the excess of historical cost
basis over fair value.
F-6
In addition, LP writes off costs related to predevelopment projects when it
determines that it will no longer pursue the project.
Depreciation expense is computed using the straight-line method over the
estimated useful lives of the assets, as follows:
Land improvements 40 years
Buildings 30-40 years
Building improvements 5-40 years
Tenant improvements Over the term of the related lease
Equipment 5-7 years
Business Combinations. The Company is required to allocate the purchase
price of acquired companies and properties to the tangible and intangible assets
acquired, and liabilities assumed, based on their estimated fair values. Fair
value is defined as the amount at which that asset could be bought or sold in a
current transaction between willing parties (other than in a forced or
liquidation sale). In order to allocate the purchase price of acquired companies
and properties to the tangible and intangible assets acquired, the Company
identifies and estimates the fair value of the land, buildings, and
improvements, review the leases to determine the existence of, and estimates
fair value of, any contractual or other legal rights and investigates the
existence of, and estimates fair value of, any other identifiable intangible
assets. Such valuations require management to make significant estimates and
assumptions, especially with respect to intangible assets.
The cost approach is used as the primary method to estimate the fair value
of the buildings, improvements and other assets. The market value approach is
used as the primary method to estimate the fair value of the land. The
determination of the fair value of contractual intangibles is based on the costs
to originate a lease including commissions and legal costs to the extent that
such costs are not already incurred with a new lease that has been negotiated in
connection with the purchase of a property. In-place lease values are based on
management's evaluation of the specific characteristics of each lease and the
Company's overall relationship with each tenant. Among the factors considered in
the allocation of these values include the nature of the existing relationship
with the tenant, the tenant's credit quality, the expectation of lease renewals,
the estimated carrying costs of the property during a hypothetical expected
lease-up period, current market conditions and costs to execute similar leases.
Estimated carrying costs include real estate taxes, insurance, other property
operating costs and estimates of lost rentals at market rates during the
hypothetical expected lease-up periods, under specific market conditions.
Above-market, below-market and in-place lease values are determined based on the
present value (using a discount rate reflecting the risks associated with the
leases acquired) of the difference between (i) the contractual amounts to be
paid pursuant to the leases negotiated and in-place at the time of acquisition
and (ii) management's estimate of fair market lease rates for the property or
equivalent property, measured over a period equal to the remaining
non-cancelable term of the lease. The value of contractual intangibles is
amortized over the remaining term of each lease. Other than as discussed above,
the Company has determined that its real estate properties do not have any
significant identifiable intangible assets.
Critical estimates in valuing certain of the intangible assets and the
assumptions of what marketplace participants would use in making estimates of
fair value include, but are not limited to: future expected cash flows,
estimated carrying costs, estimated origination costs, lease up periods, and the
tenant risk attributes, as well as assumptions about the period of time the
acquired lease will continue to be used in the Company's portfolio, and discount
rates used in these calculations. Management's estimates of fair value are based
upon assumptions believed to be reasonable, but which are inherently uncertain
and unpredictable. Assumptions may not always reflect unanticipated events and
changes in circumstances that may occur. In making such estimates, management
uses a number of sources, including appraisals that may be obtained in
connection with the acquisition of financing of the respective
F-7
property or other market data. Management also considers information obtained in
its pre-acquisition due diligence and market and leasing activities in
estimating the fair value of tangible and intangible assets acquired.
Construction in progress and land held for development
Land held for development is stated at cost. Costs incurred during the
predevelopment stage are capitalized once management has identified a site,
determined that the project is feasible and it is probable that the Company is
able to proceed with the project. Properties undergoing significant renovations
and improvements are considered under development. The Company estimates the
cost a property undergoing renovations as a basis for determining eligible
costs. Interest, real estate taxes and other costs directly related to the
properties and projects under development are capitalized until the property is
ready for its intended use. Similar costs related to properties not under
development are expensed as incurred. In addition, the Company writes off costs
related to predevelopment projects when it determines that it will no longer
pursue the project.
Long-lived assets
Long-lived assets, such as property, land held for development, certain
identifiable intangibles, and goodwill related to those assets to be held and
used are reviewed for impairment whenever events or changes in circumstances
indicate that it is probable that the sum of expected undiscounted cash flows of
the related operations are less than historical net cost basis. These factors,
along with plans with respect to the operations, are considered in assessing the
recoverability of long-lived assets. If the Company determines that the carrying
amount is impaired, the long-lived assets are written down to their fair value
with a corresponding charge to earnings. During the periods presented, no such
impairment was incurred.
Cash and cash equivalents
The Company considers highly liquid investments with an initial maturity of
three months or less to be cash equivalents.
Cash held in escrow
Escrowed cash consists of cash being held in anticipation of the execution
of tax-free exchanges under Section 1031 of the Internal Revenue Code.
Deferred expenses
Deferred expenses consist of loan origination fees and leasing costs. Loan
and other fees directly related to rental property financing with third parties
are amortized over the term of the loan which approximates the effective
internet method. Direct salaries, third party fees and other costs incurred by
the Company to originate a lease, are capitalized and are being amortized using
the straight-line method over the term of the related leases.
Deposits
Deposits are composed of funds held by various institutions for future
payments of property taxes, insurance and improvements, utility and other
service deposits.
Revenue Recognition
Rental income comprises minimum rents, expense reimbursements, termination
fees and percentage rent payments. Rental income is recognized over the lease
term on a straight-line basis as it becomes receivable according to the
provisions of the lease. Expense reimbursements are recognized in the period
that the applicable costs are incurred. The Company accounts for these leases as
operating leases as the Company has retained substantially all risks and
benefits of property ownership. Percentage
F-8
rent is recognized when the tenant's reported sales have reached certain levels
specified in the respective lease.
LP maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of tenant to make required rent payments. The
computation of this allowance is based on the tenants' payment history and
credit quality.
Income taxes
No federal or state income taxes are reflected in the accompanying
financial statements because LP is a partnership and its Partners are required
to include their respective share of profits and losses in their income tax
returns.
Segment information
The Partnership's properties are community and neighborhood shopping
centers located predominately in high growth markets in the southern United
States. Each of the Partnership's centers are separate operating segments which
have been aggregated and reported as one reportable segment because they have
characteristics so similar that they are expected to have essentially the same
future prospects. The economic characteristics include similar returns,
occupancy and tenants and each is located near a metropolitan area with similar
economic demographics and site characteristics.
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
New accounting pronouncements
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections
which rescinds FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. It also
rescinds FASB Statement No. 44, Accounting for Intangible Assets or Motor
Carriers, and amends FASB Statement No. 13, Accounting for Leases. Finally SFAS
No. 145 amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. The provisions related to the rescission of FASB Statement
No. 4 and its amendment Statement No. 64 is effective for fiscal years beginning
after May 15, 2002. The Partnership adopted SFAS No. 145 as of July 2002 and has
reflected gains (losses) from extinguishment of debt as part of ordinary income.
In January 2003, FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"), an interpretation of ABR 51. FIN 46
provides guidance on identifying entities for which control is achieved through
means other than through voting rights, variable interest entities ("VIE"), and
how to determine when and which business enterprises should consolidate the VIE.
In addition, FIN 46 requires both the primary beneficiary and all other
enterprises with a significant variable interest in a VIE to make additional
disclosures. The transitional disclosure requirements will take effect almost
immediately and are required for all financial statements issued after January
31, 2003. The consolidation provisions of FIN 46 are effective immediately for
variable interests in VIEs created after January 31, 2003. For variable
interests in VIEs created before February 1, 2003, the provisions of FIN 46 are
effective for the first interim or annual period ending after December 15, 2003.
The Partnership is not a party to any VIE's.
F-9
In April 2003, FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which clarifies the accounting
and reporting for derivative instruments, including derivative instruments that
are embedded in contracts. This statement is effective for contracts entered
into or modified after June 30, 2003. The Partnership adopted this pronouncement
beginning July 1, 2003. The adoption of SFAS No. 149 did not have a material
impact on the Partnership's financial condition or results of operations.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This statement
establishes standards for the classification and measurement of financial
instruments that possess characteristics similar to both liability and equity
instruments. SFAS No. 150 also addresses the classification of certain financial
instruments that include an obligation to issue equity shares. On October 29,
2003, the FASB voted to defer, for an indefinite period, the application of the
guidance in FASB Statement No. 150, Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity. The FASB decided to defer
the application of certain aspects of Statement 150 until it could consider some
of the resulting implementation issues. The Partnership has adopted certain
provisions of SFAS No. 150 which did not have a material impact on the
Partnerships financial condition or results of operations. The Partnership is
still evaluating the potential affect of the provisions of SFAS No. 150 that
have been deferred to future periods.
In December 2003, the FASB issued Statement No. 132 (revised 2003),
Employers' Disclosures about Pensions and Other Postretirement Benefits. This
Statement revises employers' disclosures about pension plans and other
postretirement benefit plans. It does not change the measurement or recognition
provisions of FASB Statements No. 87, Employers' Accounting for Pensions, No.88,
Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits, and No. 106, Employers ' Accounting
for Postretirement Benefits Other Than Pensions. This Statement retains the
disclosure requirements contained in FASB Statement No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits, which it replaces.
It requires additional disclosures about the assets, obligations, cash flows,
and net periodic benefit cost of defined benefit pension plans and other
postretirement benefit plans. The adoption of SFAS No. 132 (revised) did not
have a material impact on the Partnership's financial statements.
Fair value of financial instruments
The estimated fair values of financial instruments have been determined by
the Partnership using available market information and appropriate valuation
methods. Considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that the Company could realize in
a current market exchange. The use of different market assumptions and/or
estimation methods may have a material effect on the estimated fair value
amounts. The Partnership has used the following market assumptions and/or
estimation methods:
Cash and Cash Equivalents and Accounts and Other Receivables. The carrying
amounts reported in the balance sheets for these financial instruments
approximate fair value because of their short maturities.
Mortgage Notes Payable. The estimated fair value at December 31, 2003 and
2002 was $39,900 and $45,818, respectively, calculated based on the net present
value of payments over the term of the loans using estimated market rates for
similar mortgage loans and remaining terms.
F-10
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year financial presentation.
3. Properties
----------
Composition in the balance sheets: December 31,
------------------------------
2003 2002
------------- -------------
(Successor) (Predecessor)
Land and land improvements............................. $ 87,094 $ 40,468
Building and building improvements..................... 91,777 128,628
Tenant improvements.................................... 201 4,515
------------- -------------
Total income producing property................... 179,072 173,611
Less: accumulated depreciation......................... (2,641) (28,945)
------------- -------------
Total rental property............................. 176,431 144,666
Construction in progress and land held for development. 2,012 -
Property held for sale................................. 8,689 -
------------- -------------
Properties, net..................................... $ 187,132 $ 144,666
============= =============
Acquisitions
LP did not acquire any properties during 2003.
4. Other Assets
------------
Composition in the balance sheets: December 31,
----------------------------
2003 2002
----------- -----------
(Successor) (Predecessor)
Accounts and other receivables, net of allowance for doubtful
accounts of $187 and $120, respectively........................... $ 1,820 $ 1,450
Deposits and escrow impounds........................................ 839 610
Deferred expenses................................................... 253 851
Prepaid and other assets............................................ 17 21
----------- -----------
Total Other Assets............................................. $ 2,929 $ 2,932
=========== ===========
5. Notes Payable
-------------
Composition in the balance sheets: December 31,
----------------------------
2003 2002
----------- -----------
(Successor) (Predecessor)
Fixed rate mortgage loans
Various mortgage notes payable secured by rental properties,
bearing interest at 7.02% to 9.19% per annum, maturing from
2009 through 2015................................................. $ 34,400 $ 41,476
Unamortized premium on mortgage notes payable....................... 4,661 -
----------- -----------
Total notes payable.............................................. $ 39,061 $ 41,476
=========== ===========
Each of the existing mortgage loans is secured by a mortgage on one or more
of certain of Partnership properties. Certain of the mortgage loans involving an
aggregate principal balance of approximately $22.2 million contain prohibitions
on transfers of ownership which may have been
F-11
violated by the Company's previous issuances of common stock or in connection
with past acquisitions and may be violated by transactions involving the
Company's capital stock in the future. If a violation were established, it could
serve as a basis for a lender to accelerate amounts due under the affected
mortgage. To date, no lender has notified the Company or LP that it intends to
accelerate its mortgage. Based on discussions with various lenders, current
credit market conditions and other factors, LP believes that the mortgages will
not be accelerated. Accordingly, LP believes that the violations of these
prohibitions will not have a material adverse impact on LP's results of
operations or financial condition.
As of December 31, 2003, the scheduled amortization and principal payments
due on mortgage notes payable are as follows:
Total
Scheduled Balloon Principal Balance
Year Amortization Payments Due at Maturity
------------------- -------------- ------------ -------------------
2004............... $ 650 $ - $ 650
2005............... 709 - 709
2006............... 771 - 771
2007............... 838 - 838
2008............... 908 - 908
Thereafter......... 4,560 25,964 30,524
-------------- ------------ -------------------
Total.......... $8,436 $ 25,964 $ 34,400
============== ============= ===================
6. Commitments and Contingencies
-----------------------------
LP has guaranteed the $150,000 unsecured senior notes of the Company
bearing interest at fixed interest rates ranging from 7.25% to 7.84% and
maturing between 2006 and 2012. The interest rate of one series of these senior
notes is subject to a 50 basis point increase if the Company does not maintain
an investment grade debt rating. LP has also guaranteed a $340,000 unsecured
revolving credit facility of the Company, under which $162,000 was outstanding
at December 31, 2003. These notes and revolving credit facility have also been
guaranteed by most of the Company's wholly-owned subsidiaries.
7. Dispositions
------------
LP includes the operations of properties sold and held for sale, as well as
the gain on sale of sold properties identified for sale on or after January 1,
2002, as discontinued operations for all periods presented.
As of December 31, 2003, one retail property was classified as property
held for sale. This property has an aggregate gross leasable area of 214 square
feet and an aggregate net book value of $8,689. The operations of this property
are reflected in discontinued operations.
The following table reflects properties being reported in discontinued
operations for the year ended December 31, 2002:
Square Feet/ Gross Sales Gain On
Property Location Date Sold Acres Price Sale
- ---------------------- ----------------- ---------------- -------------- ----------- ----------
2002 Dispositions
(Predecessor)
- ----------------------
Forest Hills Center... Wilson, NC September 2002 74,180 $ 6,850 $ 2,187
Asheville Plaza....... Asheville, NC November 2002 49,800 950 735
Lawrence Commons...... Lawrensburg, TN December 2002 52,295 4,219 1,254
----------- ----------
Total....................................................................... $ 12,019 $ 4,176
=========== ==========
F-12
8. Future Minimum Rental Income, Commitments and Contingent Liabilities
--------------------------------------------------------------------
Future minimum rental income under noncancelable operating leases
approximates the following as of December 31, 2003:
Year Ending December 31, Amount
------------------------------- ----------------
2004................ $ 15,936
2005................ 13,432
2006................ 10,088
2007................ 7,074
2008................ 5,203
Thereafter.......... 23,925
---------------
Total............... $ 75,658
===============
The Partnership is subject to litigation in the normal course of business,
none of which as of December 31, 2003 in the opinion of management will have a
material adverse effect on the financial condition, results of operations, or
cash flows of the Partnership.
* * * * *
F-13
INDEPENDENT AUDITORS' REPORT
To the Partners
of IRT Partners L.P.
We have audited the financial statements of IRT Partners L.P. (a limited
partnership) ("LP") for the period from January 1, 2003 through February 11,
2003 (merger date) and for the period from February 12, 2003 through December
31, 2003 and for each of the two years in the period ended December 31, 2002 and
have issued our report thereon dated March 10, 2004; such report is included
elsewhere in this Form 10-K. Our audits also included the financial statement
schedule of LP, listed in Item 15(a)2. This financial statement schedule is the
responsibility of the LP's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
March 10, 2004
S
SCHEDULE III
IRT Partners, L.P.
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2003
(in thousands)
INITIAL COST TO COMPANY
-----------------------
CAPITALIZED
SUBSEQUENT TO
ENCUM- BUILDING & ACQUISITION OR
PROPERTY LOCATION BRANCES LAND IMPROVEMENTS IMPROVEMENTS
-------- -------- ------- ---- ------------ ---------------
Income Producing Properties
Central Florida
Unigold Winter Park $ - $ 2,181 $ 8,195 $ 22
Florida West Coast
Bay Pointe Plaza St. Petersburg - 2,733 7,810 34
Carrollwood Tampa - 1,873 7,322 24
Charlotte Square Port Charlotte 3,614 1,924 6,644 45
Florida Treasure Coast
Treasure Coast Vero Beach 4,804 2,676 8,444 3
South Florida / Atlantic Coast
Lago Mar Miami - 5,020 6,609 12
Pine Ridge Square Coral Springs 7,354 9,006 9,850 30
Riverside Square Coral Springs 7,694 7,202 8,260 12
Tamarac Town Square Tamarac 6,206 2,504 7,874 4
GEORGIA
Atlanta
Williamsburg @ Dunwoody Dunwoody - 4,600 3,615 16
NORTH CAROLINA
Centre Pointe Plaza Smithfield - 3,273 1,633 1,506
Chestnut Square Brevard - 793 1,326 -
The Galleria Wrightsville Beach - 1,847 3,875 21
Parkwest Crossing Durham 4,728 1,712 6,727 -
Plaza North Hendersonville - 945 1,887 3
Providence Square Charlotte - 1,719 2,575 8
Riverview Shopping Center Durham - 2,644 4,745 21
Salisbury Marketplace Salisbury - 1,652 6,395 6
Shelby Plaza Shelby - 2,061 338 -
Stanley Market Place Stanley - 808 669 -
Willowdale Shopping Center Durham - 2,416 6,499 33
TENNESSEE
Smyrna Village Smyrna - 1,667 4,694 30
-----------------------------------------------
Total Income Producing Properties 34,400 61,256 115,986 1,830
===============================================
Land held for/under development
GROSS AMOUNTS AT WHICH
CARRIED AT CLOSE OF PERIOD
--------------------------
ACCUMULATED DEPRECIABLE
LAND IMPROVEMENTS TOTAL DEPRECIATION DATE ACQUIRED LIFE
---- ------------ ------- ------------ ---------------- -----------
$ 2,181 $ 8,217 $ 10,398 $ (181) February 12, 2003 40
2,733 7,844 10,577 (173) February 12, 2003 40
1,873 7,346 9,219 (163) February 12, 2003 40
1,924 6,689 8,613 (147) February 12, 2003 40
2,676 8,447 11,123 (185) February 12, 2003 40
5,020 6,621 11,641 (146) February 12, 2003 40
9,006 9,880 18,886 (220) February 12, 2003 40
7,202 8,272 15,474 (182) February 12, 2003 40
2,504 7,878 10,382 (172) February 12, 2003 40
4,600 3,631 8,231 (82) February 12, 2003 40
3,273 3,139 6,412 (71) February 12, 2003 40
793 1,326 2,119 (29) February 12, 2003 40
1,847 3,896 5,743 (92) February 12, 2003 40
1,712 6,727 8,439 (147) February 12, 2003 40
945 1,890 2,835 (42) February 12, 2003 40
1,719 2,583 4,302 (58) February 12, 2003 40
2,644 4,766 7,410 (107) February 12, 2003 40
1,652 6,401 8,053 (140) February 12, 2003 40
2,061 338 2,399 (7) February 12, 2003 40
808 669 1,477 (15) February 12, 2003 40
2,416 6,532 8,948 (177) February 12, 2003 40
1,667 4,724 6,391 (105) February 12, 2003 40
- -----------------------------------------------------------------------------------------------------
61,256 117,816 179,072 (2,641)
- -----------------------------------------------------------------------------------------------------
S-1
INITIAL COST TO COMPANY
-----------------------
CAPITALIZED
SUBSEQUENT TO
ENCUM- BUILDING & ACQUISITION OR
PROPERTY LOCATION BRANCES LAND IMPROVEMENTS IMPROVEMENTS
-------- -------- ------- ---- ------------ ---------------
FLORIDA
Central Florida
Unigold Winter Park - - - 416
Florida West Coast
Bay Pointe Plaza St. Petersburg - - - 2
Carrollwood Tampa - - - 1
NORTH CAROLINA
Centre Pointe Plaza Smithfield - - - 1,593
Total Land held for/under development - - - 2,012
Property Held for Sale
Forrest Gallery Tullahoma - 4,289 4,425 75
-----------------------------------------------
Total Property Held for Sale - 4,289 4,425 75
-----------------------------------------------
Grand Total $34,400 $65,545 $120,411 $3,917
===============================================
GROSS AMOUNTS AT WHICH
CARRIED AT CLOSE OF PERIOD
--------------------------
ACCUMULATED DEPRECIABLE
LAND IMPROVEMENTS TOTAL DEPRECIATION DATE ACQUIRED LIFE
---- ------------ ------- ------------ ---------------- -----------
- 416 416 February 12, 2003
-
- 2 2 February 12, 2003
- 1 1 February 12, 2003
- 1,593 1,593 February 12, 2003
-
- 2,012 2,012
4,289 4,500 8,789 (100) February 12, 2003 40
- --------------------------------------------------------
4,289 4,500 8,789 (100)
========================================================
- --------------------------------------------------------
$ 65,545 $122,328 $189,873 $(2,741)
========================================================
S-2
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. DESCRIPTION
- ---------- ------------
12.1 Ratio of Earnings to Fixed Charges
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. 1350, as created by Section 906
of the Sarbanes-Oxley Act of 2002.