e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 |
For the quarterly period ended June 30, 2009
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 |
For the transition period from to
Commission file number 1-10093
RAMCO-GERSHENSON PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
|
|
|
MARYLAND
(State or other jurisdiction
of incorporation or organization)
|
|
13-6908486
(I.R.S. Employer
Identification Number) |
|
|
|
31500 Northwestern Highway
Farmington Hills, Michigan
|
|
48334 |
(Address of principal executive offices)
|
|
(Zip code) |
248-350-9900
(Registrants telephone number, including area code)
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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act)
Yes o No þ
Number of common shares of beneficial interest ($0.01 par value) of the registrant outstanding
as of July 27, 2009: 18,710,476
PART
I FINANCIAL INFORMATION
Item 1. Financial Statements
RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
(In thousands, except per |
|
|
|
share amounts) |
|
ASSETS |
|
|
|
|
|
|
|
|
Investment in real estate, net |
|
$ |
826,296 |
|
|
$ |
830,392 |
|
Cash and cash equivalents |
|
|
7,818 |
|
|
|
5,295 |
|
Restricted cash |
|
|
5,202 |
|
|
|
4,891 |
|
Accounts receivable, net |
|
|
33,665 |
|
|
|
40,736 |
|
Equity investments in and advances to unconsolidated entities |
|
|
104,623 |
|
|
|
95,867 |
|
Other assets, net |
|
|
35,718 |
|
|
|
37,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
1,013,322 |
|
|
$ |
1,014,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Mortgages and notes payable |
|
$ |
662,176 |
|
|
$ |
662,601 |
|
Accounts payable and accrued expenses |
|
|
30,273 |
|
|
|
26,751 |
|
Distributions payable |
|
|
4,958 |
|
|
|
4,945 |
|
Capital lease obligation |
|
|
7,060 |
|
|
|
7,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities |
|
|
704,467 |
|
|
|
701,488 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Ramco-Gershenson Properties Trust (RPT) shareholders equity: |
|
|
|
|
|
|
|
|
Common Shares of Beneficial Interest, par value $0.01, 45,000 shares
authorized; 18,710 and 18,583 issued and outstanding as of
June 30, 2009 and December 31, 2008, respectively |
|
|
187 |
|
|
|
185 |
|
Additional paid-in capital |
|
|
390,105 |
|
|
|
389,528 |
|
Accumulated other comprehensive loss |
|
|
(3,151 |
) |
|
|
(3,851 |
) |
Cumulative distributions in excess of net income |
|
|
(117,508 |
) |
|
|
(112,671 |
) |
|
|
|
|
|
|
|
Total RPT Shareholders Equity |
|
|
269,633 |
|
|
|
273,191 |
|
Noncontrolling interest in subsidiaries |
|
|
39,222 |
|
|
|
39,847 |
|
|
|
|
|
|
|
|
Total Shareholders Equity |
|
|
308,855 |
|
|
|
313,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
1,013,322 |
|
|
$ |
1,014,526 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
3
RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Six Months |
|
|
|
Ended June 30, |
|
|
Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
|
(In thousands, except per share amounts) |
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents |
|
$ |
21,215 |
|
|
$ |
23,101 |
|
|
$ |
42,594 |
|
|
$ |
46,122 |
|
Percentage rents |
|
|
27 |
|
|
|
133 |
|
|
|
280 |
|
|
|
497 |
|
Recoveries from tenants |
|
|
9,890 |
|
|
|
10,313 |
|
|
|
20,537 |
|
|
|
21,396 |
|
Fees and management income |
|
|
1,497 |
|
|
|
1,930 |
|
|
|
2,626 |
|
|
|
3,352 |
|
Other income |
|
|
1,000 |
|
|
|
495 |
|
|
|
1,353 |
|
|
|
980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
33,629 |
|
|
|
35,972 |
|
|
|
67,390 |
|
|
|
72,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate taxes |
|
|
4,697 |
|
|
|
4,805 |
|
|
|
9,407 |
|
|
|
9,652 |
|
Recoverable operating expenses |
|
|
5,558 |
|
|
|
5,500 |
|
|
|
11,561 |
|
|
|
12,083 |
|
Depreciation and amortization |
|
|
7,876 |
|
|
|
7,880 |
|
|
|
15,669 |
|
|
|
15,835 |
|
Other operating |
|
|
656 |
|
|
|
1,013 |
|
|
|
1,920 |
|
|
|
2,061 |
|
General and administrative |
|
|
5,364 |
|
|
|
4,820 |
|
|
|
9,489 |
|
|
|
8,625 |
|
Interest expense |
|
|
7,904 |
|
|
|
8,893 |
|
|
|
16,008 |
|
|
|
18,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
32,055 |
|
|
|
32,911 |
|
|
|
64,054 |
|
|
|
66,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before gain on sale of real estate
assets and earnings from unconsolidated entities |
|
|
1,574 |
|
|
|
3,061 |
|
|
|
3,336 |
|
|
|
5,419 |
|
Gain on sale of real estate assets |
|
|
53 |
|
|
|
103 |
|
|
|
401 |
|
|
|
10,287 |
|
Income from unconsolidated entities |
|
|
337 |
|
|
|
769 |
|
|
|
857 |
|
|
|
1,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
1,964 |
|
|
|
3,933 |
|
|
|
4,594 |
|
|
|
17,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of real estate assets |
|
|
|
|
|
|
(463 |
) |
|
|
|
|
|
|
(463 |
) |
Income from operations |
|
|
|
|
|
|
108 |
|
|
|
|
|
|
|
205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations |
|
|
|
|
|
|
(355 |
) |
|
|
|
|
|
|
(258 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
1,964 |
|
|
|
3,578 |
|
|
|
4,594 |
|
|
|
17,114 |
|
Less: Net income attributable to the noncontrolling interest in
subsidiaries |
|
|
(401 |
) |
|
|
(594 |
) |
|
|
(781 |
) |
|
|
(2,685 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to RPT common shareholders |
|
$ |
1,563 |
|
|
$ |
2,984 |
|
|
$ |
3,813 |
|
|
$ |
14,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per RPT common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to RPT common shareholders |
|
$ |
0.08 |
|
|
$ |
0.18 |
|
|
$ |
0.20 |
|
|
$ |
0.79 |
|
Loss from discontinued operations attributable to RPT common shareholders |
|
|
|
|
|
|
(0.02 |
) |
|
|
|
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to RPT common shareholders |
|
$ |
0.08 |
|
|
$ |
0.16 |
|
|
$ |
0.20 |
|
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per RPT common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to RPT common shareholders |
|
$ |
0.08 |
|
|
$ |
0.18 |
|
|
$ |
0.20 |
|
|
$ |
0.79 |
|
Loss from discontinued operations attributable to RPT common shareholders |
|
|
|
|
|
|
(0.02 |
) |
|
|
|
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to RPT common shareholders |
|
$ |
0.08 |
|
|
$ |
0.16 |
|
|
$ |
0.20 |
|
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
|
18,699 |
|
|
|
18,478 |
|
|
|
18,654 |
|
|
|
18,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding |
|
|
18,699 |
|
|
|
18,490 |
|
|
|
18,654 |
|
|
|
18,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AMOUNTS ATTRIBUTABLE TO RPT COMMON SHAREHOLDERS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
1,563 |
|
|
$ |
3,291 |
|
|
$ |
3,813 |
|
|
$ |
14,652 |
|
Loss from discontinued operations |
|
|
|
|
|
|
(307 |
) |
|
|
|
|
|
|
(223 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,563 |
|
|
$ |
2,984 |
|
|
$ |
3,813 |
|
|
$ |
14,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,563 |
|
|
$ |
2,984 |
|
|
$ |
3,813 |
|
|
$ |
14,429 |
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on interest rate swaps |
|
|
542 |
|
|
|
2,828 |
|
|
|
700 |
|
|
|
1,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
2,105 |
|
|
|
5,812 |
|
|
|
4,513 |
|
|
|
15,453 |
|
Comprehensive income attributable to the noncontrolling interest in subsidiaries |
|
|
74 |
|
|
|
385 |
|
|
|
95 |
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to RPT |
|
$ |
2,179 |
|
|
$ |
6,197 |
|
|
$ |
4,608 |
|
|
$ |
15,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
4
RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
For the Six Months |
|
|
|
Ended June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
|
(In thousands) |
|
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net income attributable to RPT common shareholders |
|
$ |
3,813 |
|
|
$ |
14,429 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
15,669 |
|
|
|
15,835 |
|
Amortization of deferred financing costs |
|
|
345 |
|
|
|
436 |
|
Gain on sale of real estate assets |
|
|
(401 |
) |
|
|
(10,287 |
) |
Earnings from unconsolidated entities |
|
|
(857 |
) |
|
|
(1,666 |
) |
Discontinued operations |
|
|
|
|
|
|
(205 |
) |
Noncontrolling interest in subsidiaries |
|
|
781 |
|
|
|
2,685 |
|
Distributions received from unconsolidated entities |
|
|
2,358 |
|
|
|
4,095 |
|
Changes in operating assets and liabilities that (used) provided cash: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(609 |
) |
|
|
(3,069 |
) |
Other assets |
|
|
498 |
|
|
|
(2,526 |
) |
Accounts payable and accrued expenses |
|
|
5,074 |
|
|
|
(6,145 |
) |
|
|
|
|
|
|
|
Net Cash Provided by Continuing Operating Activities |
|
|
26,671 |
|
|
|
13,582 |
|
Loss on sale of Discontinued Operations |
|
|
|
|
|
|
463 |
|
Operating Cash from Discontinued Operations |
|
|
|
|
|
|
205 |
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities |
|
|
26,671 |
|
|
|
14,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Real estate developed or acquired, net of liabilities assumed |
|
|
(11,155 |
) |
|
|
(35,969 |
) |
Investment in and advances to unconsolidated entities, net |
|
|
(3,110 |
) |
|
|
(1,846 |
) |
Proceeds from sales of real estate assets |
|
|
1,207 |
|
|
|
4,970 |
|
Increase in restricted cash |
|
|
(311 |
) |
|
|
(1,713 |
) |
Repayment of note receivable from joint venture |
|
|
|
|
|
|
23,249 |
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities |
|
|
(13,369 |
) |
|
|
(11,309 |
) |
Investing Cash from Discontinued Operations |
|
|
|
|
|
|
9,157 |
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities |
|
|
(13,369 |
) |
|
|
(2,152 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Cash distributions to shareholders |
|
|
(8,640 |
) |
|
|
(17,074 |
) |
Cash distributions to operating partnership unit holders |
|
|
(1,350 |
) |
|
|
(3,360 |
) |
Paydown of mortgages and notes payable |
|
|
(10,624 |
) |
|
|
(81,052 |
) |
Payment of deferred financing costs |
|
|
(180 |
) |
|
|
(56 |
) |
Distributions to noncontrolling partners |
|
|
(54 |
) |
|
|
(28 |
) |
Borrowings on mortgages and notes payable |
|
|
10,200 |
|
|
|
81,250 |
|
Reduction of capital lease obligation |
|
|
(131 |
) |
|
|
(124 |
) |
Proceeds from exercise of stock options |
|
|
|
|
|
|
39 |
|
|
|
|
|
|
|
|
Net Cash Used in Financing Activities |
|
|
(10,779 |
) |
|
|
(20,405 |
) |
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and Cash Equivalents |
|
|
2,523 |
|
|
|
(8,307 |
) |
Cash and Cash Equivalents, Beginning of Period |
|
|
5,295 |
|
|
|
14,977 |
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period |
|
$ |
7,818 |
|
|
$ |
6,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Disclosure, including Non-Cash Activities: |
|
|
|
|
|
|
|
|
Cash paid for interest during the period |
|
$ |
14,436 |
|
|
$ |
18,219 |
|
Cash paid for federal income taxes |
|
|
341 |
|
|
|
5,797 |
|
Capitalized interest |
|
|
815 |
|
|
|
1,319 |
|
Increase in fair value of interest rate swaps |
|
|
700 |
|
|
|
1,024 |
|
Reclassification of note receivable from joint venture |
|
|
7,680 |
|
|
|
|
|
Decrease in deferred gain on sale of property |
|
|
|
|
|
|
11,678 |
|
See notes to consolidated financial statements.
5
RAMCO-GERSHENSON PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
1. Organization and Basis of Presentation
Ramco-Gershenson Properties Trust, together with its subsidiaries (the Company), is a real
estate investment trust (REIT) engaged in the business of owning, developing, acquiring, managing
and leasing community shopping centers, regional malls and single tenant retail properties. At June
30, 2009, the Company owned and managed a portfolio of 89 shopping centers, with approximately 19.8
million square feet of gross leaseable area (GLA), located in the Midwestern, Southeastern and
Mid-Atlantic regions of the United States. The Companys centers are usually anchored by discount
department stores or supermarkets and the tenant base consists primarily of national and regional
retail chains and local retailers. The Companys credit risk, therefore, is concentrated in the
retail industry.
The economic performance and value of the Companys real estate assets are subject to all the
risks associated with owning and operating real estate, including risks related to adverse changes
in national, regional and local economic and market conditions. The economic condition of each of
the Companys markets may be dependent on one or more industries. An economic downturn in one of
these industries may result in a business downturn for the Companys tenants, and as a result,
these tenants may fail to make rental payments, decline to extend leases upon expiration, delay
lease commencements or declare bankruptcy.
The accompanying consolidated financial statements have been prepared by the Company pursuant
to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in audited financial statements prepared in
accordance with accounting principles generally accepted in the United States have been condensed
or omitted. These consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and related notes included in the Companys Annual Report on Form
10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission. These
consolidated financial statements, in the opinion of management, include all adjustments necessary
for a fair presentation of the financial position, results of operations and cash flows for the
periods and dates presented. Interim operating results are not necessarily indicative of operating
results for the full year.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its majority
owned subsidiary, the Operating Partnership, Ramco-Gershenson Properties, L.P. (86.5% and 86.4%
owned by the Company at June 30, 2009 and December 31, 2008, respectively), and all wholly owned
subsidiaries, including bankruptcy remote single purpose entities and all majority owned joint
ventures over which the Company has control. The Operating Partnership owns 100% of the non-voting
and voting common stock of Ramco-Gershenson, Inc. (Ramco), and therefore it is included in the
consolidated financial statements. Ramco has elected to be a taxable REIT subsidiary for federal
income tax purposes. Ramco provides property management services to the Company and to other
entities. Investments in real estate joint ventures which the Company has the ability to exercise
significant influence over, but for which the Company does not have financial or operating control,
are accounted for using the equity method of accounting. Accordingly, the Companys share of the
earnings from these joint ventures is included in consolidated net income. All intercompany
accounts and transactions have been eliminated in consolidation.
New Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (FASB) issued Statement No. 160
Noncontrolling Interests in Consolidated Financial Statements (SFAS 160). SFAS 160 establishes
accounting and reporting standards for the noncontrolling interest in a subsidiary, previously
referred to as a minority interest. This statement requires noncontrolling interests to be treated
as a separate component of equity, not as a liability or other item outside of permanent equity.
Consolidated net income and comprehensive income is required to include the noncontrolling
interests share. The calculation of earnings per share will continue to be based on income
amounts attributable to the parent. The Company adopted the provisions of SFAS 160 in the first
quarter of 2009. Certain presentation requirements of the standard were applied retrospectively.
6
In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments
and Hedging Activitiesan amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 requires
entities that utilize derivative instruments to provide qualitative disclosures about their
objectives and strategies for using such instruments, as well as any details of credit-risk-related
contingent features contained within derivatives. SFAS 161 also requires entities to disclose
additional information about the amounts and location of derivatives included within the financial
statements, how the provisions of SFAS 133 have been applied, and the impact that hedges have on an
entitys financial position, financial performance, and cash flows. SFAS 161 is effective for
fiscal years and interim periods beginning after November 15, 2008. The Company implemented the
provisions of SFAS 161 in the first quarter of 2009. The application of SFAS 161 did not have a
material effect on the Companys results of operations or financial position because it only
included new disclosure requirements. Refer to Note 8 for further information.
In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating Securities (FSP EITF
03-6-1). FSP EITF 03-6-1 clarifies that unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents are considered participating securities
and should be included in the calculation of basic earnings per share using the two-class method
prescribed by SFAS No. 128, Earnings Per Share. FSP EITF 03-6-1 is effective for financial
statements issued for fiscal years and interim periods beginning after December 15, 2008. All
prior period earnings per share amounts presented are required to be adjusted retrospectively.
Accordingly, the Company adopted the provisions of FSP EITF 03-6-1 in the first quarter of 2009.
The adoption of the provisions of FSP EITF 03-6-1 did not have a material effect on the Companys
consolidated financial condition, results of operations, or cash flows. Refer to Note 9 for the
calculation of earnings per share.
In April 2009, the FASB issued FASB Staff Position No. 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly. This Staff Position clarifies the application of
FASB Statement No. 157, Fair Value Measurements, when the volume and level of activity for the
asset or liability have significantly decreased. This FSP also includes guidance on identifying
circumstances that indicate a transaction is not orderly. Additionally, FASB Staff Position No.
157-4 emphasizes that even if there has been a significant decrease in the volume and level of
activity for the asset or liability and regardless of the valuation technique(s) used, the
objective of a fair value measurement remains the same. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a
forced liquidation or distressed sale) between market participants at the measurement date under
current market conditions. The guidance in this Staff Position is effective for interim and annual
reporting periods ending after June 15, 2009, and must be applied prospectively. The Company is
currently evaluating the application of Staff Position No. 157-4, but does not expect the standard
to have a material impact on the Companys consolidated financial position, results of operations,
or cash flows.
In May 2009, the FASB issued Statement No. 165, Subsequent Events (SFAS 165). SFAS 165
requires that an entity shall recognize in the financial statements the effects of all subsequent
events that provide additional evidence about conditions that existed at the date of the balance
sheet, including the estimates inherent in the process of preparing financial statements. The
standard also requires entities to disclose the date through which subsequent events have been
evaluated, as well as whether that date is the date the financial statements were issued or the
date the financial statements were available to be issued. SFAS 165 is effective for interim or
annual financial periods ending after June 15, 2009, and is to be applied prospectively.
Accordingly, the Company adopted the provisions of SFAS in the second quarter of 2009. The adoption
of the provisions of SFAS 165 did not have a material effect on the Companys consolidated
financial condition, results of operations, or cash flows. Refer to Note 14 for the Companys
disclosure on subsequent events.
In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No.
162 (SFAS 168). SFAS 168, or the FASB Accounting Standards Codification (Codification), will
become the source of authoritative U.S. generally accepted accounting principles (GAAP)
recognized by the FASB to be applied by nongovernmental entities. On the effective date of SFAS
168, the Codification will supersede all then-existing non-SEC accounting and reporting standards.
All other non-grandfathered non-SEC accounting literature not included in the Codification will
become non-authoritative. SFAS 168 is effective for financial statements issued for interim and
annual periods ending after September 15, 2009. The Company does not expect the standard to have a
material impact on the Companys consolidated financial position, results of operations, or cash
flows.
7
2. Accounts Receivable, Net
Accounts receivable includes $17,242 and $17,605 of unbilled straight-line rent receivables at
June 30, 2009 and December 31, 2008, respectively.
The Company provides for bad debt expense based upon the allowance method of accounting. The
Company monitors the collectability of its accounts receivable (billed and unbilled, including
straight-line) from specific tenants, and analyzes historical bad debts, customer credit
worthiness, current economic trends and changes in tenant payment terms when evaluating the
adequacy of the allowance for doubtful accounts. When tenants are in bankruptcy, the Company makes
estimates of the expected recovery of pre-petition and post-petition claims. The ultimate
resolution of these claims can be delayed for one year or longer. Accounts receivable in the
accompanying balance sheets is shown net of an allowance for doubtful accounts of $3,845 and $4,287
at June 30, 2009 and December 31, 2008, respectively.
Accounts receivable at June 30, 2009 and December 31, 2008 includes $1,800 and $2,258,
respectively, due from Atlantic Realty Trust (Atlantic) for reimbursement of tax deficiencies,
interest and other miscellaneous expenses related to the Internal Revenue Service (IRS)
examination of the Companys taxable years ended December 31, 1991 through 1995. Under terms of
the tax agreement the Company entered into with Atlantic (Tax Agreement), Atlantic assumed all of
the Companys liability for tax and interest arising out of that IRS examination. Effective June
30, 2006, Atlantic was merged into (acquired by) Kimco SI 1339, Inc. (formerly known as SI 1339,
Inc.), a wholly owned subsidiary of Kimco Realty Corporation (Kimco), with Kimco SI 1339, Inc.
continuing as the surviving corporation. By way of the merger, Kimco SI 1339, Inc. acquired
Atlantics assets, subject to its liabilities, including its obligations to the Company under the
Tax Agreement.
3. Investment in Real Estate, Net
Investment in real estate consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land |
|
$ |
144,191 |
|
|
$ |
144,422 |
|
Buildings and improvements |
|
|
833,294 |
|
|
|
813,705 |
|
Construction in progress |
|
|
35,233 |
|
|
|
46,982 |
|
|
|
|
|
|
|
|
|
|
|
1,012,718 |
|
|
|
1,005,109 |
|
Less: accumulated depreciation |
|
|
(186,422 |
) |
|
|
(174,717 |
) |
|
|
|
|
|
|
|
Investment in real estate, net |
|
$ |
826,296 |
|
|
$ |
830,392 |
|
|
|
|
|
|
|
|
8
4. Equity Investments in and Advances to Unconsolidated Entities
As of June 30, 2009, the Company had investments in the following unconsolidated entities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
Total Assets |
|
|
|
Ownership as of |
|
|
as of |
|
|
as of |
|
Entity Name |
|
June 30, 2009 |
|
|
June 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-12 Associates |
|
|
50 |
% |
|
$ |
669 |
|
|
$ |
661 |
|
Ramco/West Acres LLC |
|
|
40 |
% |
|
|
9,822 |
|
|
|
9,877 |
|
Ramco/Shenandoah LLC |
|
|
40 |
% |
|
|
15,539 |
|
|
|
15,592 |
|
Ramco/Lion Venture LP |
|
|
30 |
% |
|
|
536,607 |
|
|
|
536,446 |
|
Ramco 450 Venture LLC |
|
|
20 |
% |
|
|
365,692 |
|
|
|
362,885 |
|
Ramco 191 LLC |
|
|
20 |
% |
|
|
23,780 |
|
|
|
23,240 |
|
Ramco RM Hartland SC LLC |
|
|
20 |
% |
|
|
20,985 |
|
|
|
19,760 |
|
Ramco HHF KL LLC |
|
|
7 |
% |
|
|
51,827 |
|
|
|
52,461 |
|
Ramco HHF NP LLC |
|
|
7 |
% |
|
|
27,759 |
|
|
|
28,126 |
|
Ramco Jacksonville North
Industrial LLC |
|
|
5 |
% |
|
|
1,267 |
|
|
|
1,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,053,947 |
|
|
$ |
1,050,305 |
|
|
|
|
|
|
|
|
|
|
|
|
Debt
The Companys unconsolidated entities had the following debt outstanding at June 30, 2009
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance |
|
|
Interest |
|
|
|
|
Entity Name |
|
Outstanding |
|
|
Rate |
|
|
Maturity Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-12 Associates |
|
$ |
858 |
|
|
|
7.3 |
% |
|
May 2016 (1) |
Ramco/West Acres LLC |
|
|
8,639 |
|
|
|
8.1 |
% |
|
April 2010 (2) |
Ramco/Shenandoah LLC |
|
|
11,965 |
|
|
|
7.3 |
% |
|
February 2012 |
Ramco/Lion Venture LP |
|
|
271,286 |
|
|
|
4.6% - 8.3 |
% |
|
Various (3) |
Ramco 450 Venture LLC |
|
|
217,272 |
|
|
|
5.3% - 6.5 |
% |
|
Various (4) |
Ramco 191 LLC |
|
|
8,750 |
|
|
|
1.8 |
% |
|
June 2010 |
Ramco RM Hartland SC LLC |
|
|
8,505 |
|
|
|
3.3 |
% |
|
July 2009 |
Ramco RM Hartland SC LLC |
|
|
6,942 |
|
|
|
13.0 |
% |
|
October 2009 |
Ramco Jacksonville North Industrial LLC |
|
|
738 |
|
|
|
2.6 |
% |
|
September 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
534,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Interest rate resets annually per formula. |
|
(2) |
|
Under terms of the note, the anticipated payment date is April 2010. |
|
(3) |
|
Interest rates range from 4.6% to 8.3% with maturities ranging from November 2009 to
June 2020. |
|
(4) |
|
Interest rates range from 5.3% to 6.5% with maturities ranging from February 2011 to
January 2018. |
9
Fees and Management Income from Transactions with Joint Ventures
Under the terms of agreements with certain joint ventures, the Company is the manager of the
joint ventures and their properties, earning fees for acquisitions, development, management,
leasing, and financing. The fees earned by the Company, which are reported in the consolidated
statements of income as fees and management income, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
$ |
712 |
|
|
$ |
682 |
|
|
$ |
1,441 |
|
|
$ |
1,379 |
|
Leasing fees |
|
|
306 |
|
|
|
246 |
|
|
|
416 |
|
|
|
384 |
|
Acquisition and development fees |
|
|
150 |
|
|
|
227 |
|
|
|
271 |
|
|
|
297 |
|
Financing fees |
|
|
58 |
|
|
|
170 |
|
|
|
68 |
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,226 |
|
|
$ |
1,325 |
|
|
$ |
2,196 |
|
|
$ |
2,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined Condensed Financial Information
Combined condensed financial information for the Companys unconsolidated entities is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Investment in real estate, net |
|
$ |
1,010,234 |
|
|
$ |
1,012,752 |
|
Other assets |
|
|
43,713 |
|
|
|
37,553 |
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
1,053,947 |
|
|
$ |
1,050,305 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND OWNERS EQUITY |
|
|
|
|
|
|
|
|
Mortgage notes payable |
|
$ |
534,955 |
|
|
$ |
540,766 |
|
Other liabilities |
|
|
30,300 |
|
|
|
25,641 |
|
Owners equity |
|
|
488,692 |
|
|
|
483,898 |
|
|
|
|
|
|
|
|
Total Liabilities and Owners Equity |
|
$ |
1,053,947 |
|
|
$ |
1,050,305 |
|
|
|
|
|
|
|
|
|
Companys equity investments in and advances to
unconsolidated entities |
|
$ |
104,623 |
|
|
$ |
95,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
TOTAL REVENUES |
|
$ |
24,802 |
|
|
$ |
23,491 |
|
|
$ |
50,287 |
|
|
$ |
48,003 |
|
TOTAL EXPENSES |
|
|
23,374 |
|
|
|
20,416 |
|
|
|
46,733 |
|
|
|
41,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
1,428 |
|
|
$ |
3,075 |
|
|
$ |
3,554 |
|
|
$ |
6,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companys share of
earnings from
unconsolidated
entities |
|
$ |
337 |
|
|
$ |
769 |
|
|
$ |
857 |
|
|
$ |
1,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
5. Other Assets, Net
Other assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing costs |
|
$ |
39,898 |
|
|
$ |
38,980 |
|
Intangible assets |
|
|
5,836 |
|
|
|
5,836 |
|
Deferred financing costs |
|
|
6,036 |
|
|
|
6,626 |
|
Other |
|
|
5,975 |
|
|
|
5,904 |
|
|
|
|
|
|
|
|
|
|
|
57,745 |
|
|
|
57,346 |
|
Less: accumulated amortization |
|
|
(36,500 |
) |
|
|
(34,320 |
) |
|
|
|
|
|
|
|
|
|
|
21,245 |
|
|
|
23,026 |
|
Prepaid expenses and other |
|
|
13,244 |
|
|
|
12,967 |
|
Proposed development and acquisition costs |
|
|
1,229 |
|
|
|
1,352 |
|
|
|
|
|
|
|
|
Other assets, net |
|
$ |
35,718 |
|
|
$ |
37,345 |
|
|
|
|
|
|
|
|
Intangible assets at June 30, 2009 include $4,526 of lease origination costs and $1,228 of
favorable leases related to the allocation of the purchase price for acquisitions made since 2002.
These assets are being amortized over the lives of the applicable leases as reductions or additions
to minimum rent revenue, as appropriate, over the initial terms of the respective leases.
At June 30, 2009 and 2008, $1,750 and $2,605, respectively, of intangible assets, net of
accumulated amortization of $4,004 and $3,870, respectively, were included in other assets in the
consolidated balance sheets. Included in net intangible assets at June 30, 2009 and 2008, were
approximately $1,361 and $2,076, respectively, of lease origination costs and $389 and $529,
respectively, of above-market leases. Included in accounts payable and accrued expenses at June
30, 2009 and 2008 were intangible liabilities related to below-market leases of $623 and $939,
respectively, and an adjustment to increase debt to fair market value in the amount of $433 and
$749, respectively. The lease-related intangible assets and liabilities are being amortized over
the terms of the acquired leases, which resulted in additional expense of approximately $61 and
$64, respectively, and an increase in revenue of $83 and $113, respectively, for the six months
ended June 30, 2009 and 2008. The adjustment of debt decreased interest expense by $155 and $93
for the six months ended June 30, 2009 and 2008, respectively.
The average amortization period for intangible assets attributable to lease origination costs
and for favorable leases is 5.5 years and 4.5 years, respectively.
The Company recorded amortization of deferred financing costs of $345 and $436, respectively,
during the six months ended June 30, 2009 and 2008. This amortization has been recorded as interest
expense in the Companys consolidated statements of income.
11
The following table represents estimated future amortization expense related to other assets
as of June 30, 2009 (unaudited):
|
|
|
|
|
Year Ending December 31, |
|
|
|
|
|
|
|
|
|
2009 (July 1 December 31) |
|
$ |
3,206 |
|
2010 |
|
|
4,620 |
|
2011 |
|
|
3,694 |
|
2012 |
|
|
2,847 |
|
2013 |
|
|
2,169 |
|
Thereafter |
|
|
4,709 |
|
|
|
|
|
Total |
|
$ |
21,245 |
|
|
|
|
|
6. Mortgages and Notes Payable
Mortgages and notes payable consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
|
|
|
Fixed rate mortgages with interest rates ranging from 4.8% to 8.1%,
due at various dates from December 2009 through May 2018 |
|
$ |
352,084 |
|
|
$ |
354,253 |
|
|
|
|
|
|
|
|
|
|
Floating rate mortgages with interest rates ranging from 3.1% to 5.3%,
due at various dates from November 2009 through June 2011 |
|
|
14,667 |
|
|
|
15,023 |
|
|
|
|
|
|
|
|
|
|
Secured Revolving Credit Facility, with an interest rate at LIBOR
plus 325 basis points due December 2009. The effective rate at June 30,
2009 and December 31, 2008 was 3.6% and 4.3%, respectively |
|
|
40,000 |
|
|
|
40,000 |
|
|
|
|
|
|
|
|
|
|
Junior subordinated notes, unsecured, due January 2038, with an
interest rate fixed until January 2013 when the notes are redeemable or the
interest rate becomes LIBOR plus 330 basis points. The effective rate at both
June 30, 2009 and December 31, 2008 was 7.9% |
|
|
28,125 |
|
|
|
28,125 |
|
|
|
|
|
|
|
|
|
|
Unsecured Term Loan Credit Facility, with an interest rate at LIBOR
plus 130 to 165 basis points, due December 2010, maximum borrowings
$100,000. The effective rate at June 30, 2009 and December 31, 2008
was 4.6% and 5.7%, respectively |
|
|
100,000 |
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
Unsecured Revolving Credit Facility, with an interest rate at LIBOR
plus 115 to 150 basis points, due December 2009, maximum borrowings
$150,000. The effective rate at June 30, 2009 and December 31, 2008
was 1.7% and 3.0%, respectively |
|
|
127,300 |
|
|
|
125,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
662,176 |
|
|
$ |
662,601 |
|
|
|
|
|
|
|
|
The mortgage notes, both fixed rate and floating rate, are secured by mortgages on properties
that have an approximate net book value of $443,252 as of June 30, 2009.
The Company has a $250,000 unsecured credit facility (the Credit Facility) consisting of a $100,000 unsecured term loan credit facility and a $150,000 unsecured revolving credit facility. The Credit Facility provides that the unsecured revolving credit facility may be increased by up to $100,000 at the Companys request, for a total unsecured revolving credit facility commitment of $250,000.
The unsecured term loan credit facility matures in December 2010 and bears interest at a rate equal to LIBOR plus 130 to 165 basis points, depending on certain debt ratios. The unsecured revolving credit facility matures in December 2009 and bears interest at a rate equal to LIBOR plus 115 to 150 basis points, depending on certain debt ratios. Additionally, the Company has a $40,000 revolving credit facility secured by The Towne Center at Aquia, that matures in December 2009 and bears
interest at a rate equal to LIBOR plus 325 basis points, depending
on certain debt ratios. The Company retains the option to extend the
maturity date of both the unsecured revolving credit facility and the
$40,000 revolving credit facility secured by The Towne Center at
Aquia to December 2010.
It is anticipated that funds borrowed under the aforementioned Credit Facilities will be used for general corporate purposes, including working capital, capital expenditures, the repayment of indebtedness or other corporate activities.
12
In June 2009, the Company extended the maturity date of the $7,387 variable rate mortgage
securing the Gaines Marketplace shopping center to June 2011.
At June 30, 2009, outstanding letters of credit issued under the Credit Facility, not
reflected in the accompanying consolidated balance sheets, totaled approximately $1,776. These
letters of credit reduce the availability under the Credit Facility.
The Credit Facility and the secured term loan contain financial covenants relating to total
leverage, fixed charge coverage ratio, loan to asset value, tangible net worth and various other
calculations. As of June 30, 2009, the Company was in compliance with the covenant terms.
The mortgage loans encumbering the Companys properties, including properties held by its
unconsolidated joint ventures, are generally non-recourse, subject to certain exceptions for which
the Company would be liable for any resulting losses incurred by the lender. These exceptions vary
from loan to loan but generally include fraud or a material misrepresentation, misstatement or
omission by the borrower, intentional or grossly negligent conduct by the borrower that harms the
property or results in a loss to the lender, filing of a bankruptcy petition by the borrower,
either directly or indirectly, and certain environmental liabilities. In addition, upon the
occurrence of certain events, such as fraud or filing of a bankruptcy petition by the borrower, the
Company would be liable for the entire outstanding balance of the loan, all interest accrued
thereon and certain other costs, including penalties and expenses.
We have entered into mortgage loans which are secured by multiple properties and contain
cross-collateralization and cross-default provisions. Cross-collateralization provisions allow a
lender to foreclose on multiple properties in the event that we default under the loan.
Cross-default provisions allow a lender to foreclose on the related property in the event a default
is declared under another loan.
Under terms of various debt agreements, the Company may be required to maintain interest rate
swap agreements to reduce the impact of changes in interest rates on its floating rate debt. The
Company has interest rate swap agreements with an aggregate notional amount of $100,000 at June 30,
2009. Based on rates in effect at June 30, 2009, the agreements provide for fixed rates ranging
from 4.4% to 4.7% and expire December 2010.
The following table presents scheduled principal payments on mortgages and notes payable as of
June 30, 2009 (unaudited):
|
|
|
|
|
Year Ending December 31, |
|
|
|
|
|
|
|
|
|
2009 (July 1 December 31) |
|
$ |
199,984 |
|
2010 |
|
|
126,736 |
|
2011 |
|
|
35,071 |
|
2012 |
|
|
34,011 |
|
2013 |
|
|
33,485 |
|
Thereafter |
|
|
232,889 |
|
|
|
|
|
Total |
|
$ |
662,176 |
|
|
|
|
|
With
respect to the various fixed rate and floating rate mortgages, it is
the Companys intent to refinance these mortgages upon or prior
to their maturities. Even though the Company has the option to
extend the maturities of the unsecured revolving credit facility and
the $40,000 revolving credit facility secured by The Towne Center at
Aquia until December 2010, we have been proactive with our bank group
to replace the debt well in advance of maturity. The Company has
agreed in principle on the material terms for a new $150,000
revolving credit facility and a $100,000 term loan, both of which are
expected to be secured by approximately 33 assets that are currently
unencumbered, as well as a new $40,000 revolving credit facility
secured by The Town Center at Aquia. The material terms of the new
credit facilities have been agreed to by the lead arranging bank and
administrative agent. To date, the Company has received commitments
from the participants in the new credit facilities on a significant
portion of the total requirement. Subject to documentation, due
diligence, and customary conditions, the Company expects to close on
the new credit facilities late third quarter or early fourth quarter
of 2009. Although the Company expects to refinance the debt
mentioned above, there can be no assurance that the Company will be
able to refinance its debt on commercially reasonable or any other
terms.
13
by the lead
arranging bank and administrative agent. To date, the Company has received commitments from the
participants in the new credit facilities on a significant portion of the total requirement.
Subject to documentation, due diligence, and customary conditions, the Company expects to close on
the new credit facilities late third quarter or early fourth quarter of 2009. Although the Company
expects to refinance the debt mentioned above, there can be no assurance that the Company will be
able to refinance its debt on commercially reasonable or any other terms.
7. Fair Value
The Company utilizes fair value measurements to record fair value adjustments to certain
assets and liabilities and to determine fair value disclosures. Derivative instruments (interest
rate swaps) are recorded at fair value on a recurring basis. Additionally, the Company, from time
to time, may be required to record certain assets, such as impaired real estate assets, at fair
value on a nonrecurring basis.
Fair Value Hierarchy
As required under SFAS 157, the Company groups assets and liabilities at fair value in three
levels, based on the markets in which the assets and liabilities are traded and the reliability of
the assumptions used to determine fair value.
These levels are:
|
Level 1 |
|
Valuation is based upon quoted prices for identical instruments
traded in active markets. |
|
|
Level 2 |
|
Valuation is based upon quoted prices for similar instruments in
active markets, quoted prices for identical or similar instruments
in markets that are not active, and model-based valuation
techniques for which all significant assumptions are observable in
the market. |
|
|
Level 3 |
|
Valuation is generated from model-based techniques that use at
least one significant assumption not observable in the market.
These unobservable assumptions reflect estimates of assumptions
that market participants would use in pricing the asset or
liability. |
The following is a description of valuation methodologies used for the Companys assets and
liabilities recorded at fair value.
Derivative Assets and Liabilities
All derivative instruments held by the Company are interest rate swaps for which quoted market
prices are not readily available. For those derivatives, the Company measures fair value on a
recurring basis using valuation models that use primarily market observable inputs, such as yield
curves. The Company classifies derivative instruments as recurring Level 2.
Real Estate Assets
Real estate assets are subject to impairment testing on a nonrecurring basis. The Company
records investments in real estate at cost, less accumulated depreciation. When the fair value of
a real estate asset is lower than the cost, the asset is considered impaired and is written down to
fair value. The Company utilizes cash flow analyses by applying appropriate discount rates, and
other valuation techniques, including managements analysis of comparable properties in the
existing portfolio and observable market prices to determine the fair value of its shopping
centers. As such, the Company classifies impaired real estate assets as nonrecurring Level 3.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The table below presents the recorded amount of liabilities measured at fair value on a
recurring basis as of June 30, 2009 (in thousands). The Company did not have any material assets
that were required to be measured at fair value on a recurring basis at June 30, 2009.
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
|
|
($3,151 |
) |
|
$ |
|
|
|
|
($3,151 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
The table below presents the recorded amount of assets measured at fair value on a
nonrecurring basis as of June 30, 2009 (in thousands). The Company did not have any material
liabilities that were required to be measured at fair value on a nonrecurring basis at June 30,
2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in real estate, net (1) |
|
$ |
3,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Impaired real estate assets |
8. Derivative Financial Instruments
As of June 30, 2009, the Company had $100,000 of interest rate swap agreements. Under the
terms of certain debt agreements, the Company is required to maintain interest rate swap agreements
in an amount necessary to ensure that the Companys variable rate debt does not exceed 25% of its
assets, as computed under the agreements, to reduce the impact of changes in interest rates on its
variable rate debt. Based on rates in effect at June 30, 2009, the agreements provide for fixed
rates ranging from 4.4% to 4.7% on a portion of the Companys unsecured credit facility and expire
December 2010.
On the date the Company enters into an interest rate swap for risk management purposes, the
derivative is designated as a hedge against the variability of cash flows that are to be paid in
connection with a recognized liability. Subsequent changes in the fair value of a derivative
designated as a cash flow hedge that is determined to be highly effective are recorded in other
comprehensive income (OCI) until earnings are affected by the variability of cash flows of the
hedged transaction. The differential between fixed and variable rates to be paid or received is
accrued, as interest rates change, and recognized currently as interest expense in the consolidated
statement of income.
The following table summarizes the notional values and fair values of the Companys derivative
financial instruments as of June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hedge |
|
Notional |
|
|
Fixed |
|
|
Fair |
|
|
Expiration |
Underlying Debt |
|
Type |
|
Value |
|
|
Rate |
|
|
Value |
|
|
Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Facility |
|
Cash Flow |
|
$ |
20,000 |
|
|
|
4.4 |
% |
|
$ |
(581 |
) |
|
|
12/2010 |
|
Credit Facility |
|
Cash Flow |
|
|
10,000 |
|
|
|
4.6 |
% |
|
|
(315 |
) |
|
|
12/2010 |
|
Credit Facility |
|
Cash Flow |
|
|
10,000 |
|
|
|
4.6 |
% |
|
|
(315 |
) |
|
|
12/2010 |
|
Credit Facility |
|
Cash Flow |
|
|
10,000 |
|
|
|
4.6 |
% |
|
|
(307 |
) |
|
|
12/2010 |
|
Credit Facility |
|
Cash Flow |
|
|
10,000 |
|
|
|
4.6 |
% |
|
|
(307 |
) |
|
|
12/2010 |
|
Credit Facility |
|
Cash Flow |
|
|
20,000 |
|
|
|
4.7 |
% |
|
|
(663 |
) |
|
|
12/2010 |
|
Credit Facility |
|
Cash Flow |
|
|
20,000 |
|
|
|
4.7 |
% |
|
|
(663 |
) |
|
|
12/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
100,000 |
|
|
|
|
|
|
$ |
(3,151 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
The following table presents the fair values of derivative financial instruments in the
Companys consolidated balance sheets as of June 30, 2009 and December 31, 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives |
|
|
|
June 30, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
Derivatives Designated as Hedging |
|
Balance Sheet |
|
|
Fair |
|
|
Balance Sheet |
|
|
Fair |
|
Instruments under SFAS 133 |
|
Location |
|
|
Value |
|
|
Location |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
Accounts payable and accrued expenses |
|
$ |
(3,151 |
) |
|
Accounts payable and accrued expenses |
|
$ |
(3,851 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
(3,151 |
) |
|
|
|
|
|
$ |
(3,851 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effect of derivative financial instruments on the Companys consolidated statements of
income for the six months ended June 30, 2009 and 2008, is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Amount of Gain (Loss) |
|
|
|
Amount of Gain (Loss) |
|
|
Gain (Loss) |
|
|
Reclassified from |
|
Derivatives in |
|
Recognized in OCI on Derivative |
|
|
Reclassified from |
|
|
Accumulated OCI into |
|
SFAS 133 |
|
(Effective Portion) |
|
|
Accumulated OCI |
|
|
Income (Effective Portion) |
|
Cash Flow Hedging |
|
Six Months Ended June 30, |
|
|
into Income |
|
|
Six Months Ended June 30, |
|
Relationship |
|
2009 |
|
|
2008 |
|
|
(Effective Portion) |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
700 |
|
|
$ |
1,024 |
|
|
Interest Expense |
|
$ |
(1,390 |
) |
|
$ |
(551 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
700 |
|
|
$ |
1,024 |
|
|
|
|
|
|
$ |
(1,390 |
) |
|
$ |
(551 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
9. Earnings Per Common Share
The following table sets forth the computation of basic and diluted earnings per common share
(EPS) (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before noncontrolling interest |
|
$ |
1,964 |
|
|
$ |
3,933 |
|
|
$ |
4,594 |
|
|
$ |
17,372 |
|
Noncontrolling interest in subsidiaries from continuing operations |
|
|
(401 |
) |
|
|
(642 |
) |
|
|
(781 |
) |
|
|
(2,720 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to RPT common shareholders |
|
|
1,563 |
|
|
|
3,291 |
|
|
|
3,813 |
|
|
|
14,652 |
|
Discontinued operations, net of noncontrolling interest in subsidiaries: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of real estate assets |
|
|
|
|
|
|
(400 |
) |
|
|
|
|
|
|
(400 |
) |
Income from operations |
|
|
|
|
|
|
93 |
|
|
|
|
|
|
|
177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to RPT common shareholders |
|
$ |
1,563 |
|
|
$ |
2,984 |
|
|
$ |
3,813 |
|
|
$ |
14,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares for basic EPS |
|
|
18,699 |
|
|
|
18,478 |
|
|
|
18,654 |
|
|
|
18,477 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding |
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares for diluted EPS |
|
|
18,699 |
|
|
|
18,490 |
|
|
|
18,654 |
|
|
|
18,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to RPT common shareholders |
|
$ |
0.08 |
|
|
$ |
0.18 |
|
|
$ |
0.20 |
|
|
$ |
0.79 |
|
Loss from discontinued operations attributable to RPT common shareholders |
|
|
|
|
|
|
(0.02 |
) |
|
|
|
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to RPT common shareholders |
|
$ |
0.08 |
|
|
$ |
0.16 |
|
|
$ |
0.20 |
|
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to RPT common shareholders |
|
$ |
0.08 |
|
|
$ |
0.18 |
|
|
$ |
0.20 |
|
|
$ |
0.79 |
|
Loss from discontinued operations attributable to RPT common shareholders |
|
|
|
|
|
|
(0.02 |
) |
|
|
|
|
|
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to RPT common shareholders |
|
$ |
0.08 |
|
|
$ |
0.16 |
|
|
$ |
0.20 |
|
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Shareholder Rights Plan
Our Board of Trustees has the authority to issue Preferred Shares and to determine the price,
rights (including conversion rights), preferences and privileges of those shares without any
further vote or action by the shareholders. Consistent with this authority, in March 2009, our
Board of Trustees adopted for a one-year term a Shareholder Rights Plan (the Rights Plan) in
which one purchase right was distributed as a dividend on each share of common share held of record
as of the close of business on April 10, 2009 (the Rights). If exercisable, each Right will
entitle its holder to purchase from the Company one one-thousandth of a share of a newly created
Series A Junior Participating Preferred Shares of beneficial interest, par value $0.01 per share,
of the Company for $30.00 (the Purchase Price). The Rights will become exercisable if any person
or any of its affiliates or associates, directly or indirectly, becomes the beneficial owner of 15%
or more of the Companys common shares or has commenced a tender or exchange offer which, if
consummated, would result in any person or any of its affiliates or associates becoming the
beneficial owner of 15% or more of the Companys common shares. If any person or any of its
affiliates or associates becomes the beneficial owner of 15% or more of the Companys common
shares, each right will entitle its holder, other than the acquiring person, to purchase a number
of shares of the Companys or the acquirors common share having a value of twice the Purchase
Price. The Rights are deemed attached to the certificates representing outstanding common shares of
beneficial interest.
17
11. Leases
Approximate future minimum revenues from rentals under noncancelable operating leases in
effect at June 30, 2009, assuming no new or renegotiated leases or option extensions on lease
agreements, are as follows (unaudited):
|
|
|
|
|
Year Ending December 31, |
|
|
|
|
|
|
|
|
|
2009 (July 1 December 31) |
|
$ |
41,350 |
|
2010 |
|
|
80,624 |
|
2011 |
|
|
73,670 |
|
2012 |
|
|
64,189 |
|
2013 |
|
|
55,194 |
|
Thereafter |
|
|
253,618 |
|
|
|
|
|
Total |
|
$ |
568,645 |
|
|
|
|
|
The Company has an operating lease for its corporate office space for a term expiring in 2014.
The Company also has operating leases for office space in Florida and land at one of its shopping
centers. In addition, the Company has a capitalized ground lease. Total amounts expensed relating
to these leases were $787 and $755 for the six months ended June 30, 2009 and 2008, respectively.
Approximate future minimum rental payments under the Companys noncancelable office leases and
land, assuming no options extensions, and a capital ground lease at one of its shopping centers,
are as follows (unaudited):
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
Capital |
|
Year Ending December 31, |
|
Leases |
|
|
Lease |
|
|
|
|
|
|
|
|
|
|
2009 (July 1 December 31) |
|
$ |
452 |
|
|
$ |
339 |
|
2010 |
|
|
909 |
|
|
|
677 |
|
2011 |
|
|
916 |
|
|
|
677 |
|
2012 |
|
|
938 |
|
|
|
677 |
|
2013 |
|
|
960 |
|
|
|
677 |
|
Thereafter |
|
|
1,517 |
|
|
|
5,956 |
|
|
|
|
|
|
|
|
Total minimum lease payments |
|
|
5,692 |
|
|
|
9,003 |
|
Less: amounts representing interest |
|
|
|
|
|
|
(1,943 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
5,692 |
|
|
$ |
7,060 |
|
|
|
|
|
|
|
|
12. Commitments and Contingencies
Construction Costs
In connection with the development and expansion of various shopping centers, as of June 30,
2009 we have entered into agreements for construction costs of approximately $26,804, including
approximately $10,816 for costs related to the development of Hartland Towne Square in Hartland,
Michigan and $14,084 for The Towne Center at Aquia in Stafford, Virginia.
Litigation
We are currently involved in certain litigation arising in the ordinary course of business.
The Company believes that this litigation will not have a material adverse effect on our
consolidated financial statements.
18
13. Other Taxes
On May 12, 2009, the Michigan Court of Appeals affirmed a decision of the Michigan Tax
Tribunal that a wholly-owned limited liability company (LLC) met the statutory definition of a
person under the former Michigan Single Business Tax Act (SBTA) and was required to file a
separate return despite being classified as a disregarded entity for federal tax purposes. The
Court of Appeals ruled that a 1999 Michigan Department of Treasury Revenue Administration Bulletin
(RAB) that required conformity with federal tax laws conflicted with the SBTA, which treats
various other entities not taxable at the federal level, such as partnerships, as taxable entities
for SBTA purposes.
The Michigan Single Business Tax (SBT) was repealed and replaced by the Michigan Business
Tax effective for the Companys taxable year beginning January 1, 2008. Prior to such repeal, the
Company relied on the RAB, including the activities of any LLC classified as a disregarded entity
for federal tax purposes in its members SBT return.
On June 23, 2009, the Michigan Department of Treasury formally appealed the Court of Appeals
decision to the Michigan Supreme Court. As of the date of this filing, the Michigan Supreme Court
has not ruled nor has the Michigan Department of Treasury issued any guidance on this matter.
If the Michigan Court of Appeals decision is ultimately upheld, the Company could be obligated
to file additional stand-alone tax returns for each of its Michigan LLCs and pay any related tax,
interest and/or penalties, for all tax years open under the applicable statute of limitations. Any
amounts owed, if this were to occur, would be reflected as operating expenses in the Companys
consolidated statements of income in the period of the payment. The Company continues to closely
monitor this case and is in the process of evaluating any potential impact. Given the uncertainty
surrounding the ultimate resolution of this matter, the Company has not recorded a reserve as of
June 30, 2009.
14. Subsequent Events
In accordance with SFAS No. 165, Subsequent Events, the Company has evaluated subsequent
events through the date that the consolidated financial statements were issued. No events have
taken place that meet the definition of a subsequent event that requires disclosure in this filing.
19
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and results of operations
should be read in conjunction with the consolidated financial statements, including the respective
notes thereto, which are included in this Form 10-Q.
Overview
We are a fully integrated, self-administered, publicly-traded REIT which owns, develops,
acquires, manages and leases community shopping centers (including power centers and single-tenant
retail properties) and one enclosed regional mall in the Midwestern, Southeastern and Mid-Atlantic
regions of the United States. At June 30, 2009, we owned interests in 89 shopping centers,
comprised of 88 community centers and one enclosed regional mall, totaling approximately 19.8
million square feet of GLA. We and our joint venture partners own approximately 15.7 million
square feet of such GLA, with the remaining portion owned by various anchor stores.
Our corporate strategy is to maximize total return for our shareholders by improving operating
income and enhancing asset value. We pursue our goal through:
|
|
|
Aggressively leasing vacant spaces and entering into new leases for occupied spaces when
leases are about to expire; |
|
|
|
|
A proactive approach to redeveloping, renovating and expanding our shopping centers; and |
|
|
|
|
The development of new shopping centers in metropolitan markets where we believe demand
for a center exists. |
We have followed a disciplined approach to managing our operations by focusing primarily on
enhancing the value of our existing portfolio through strategic sales and successful leasing
efforts. We continue to selectively pursue new development, redevelopment and acquisition
opportunities.
Leasing
During the second quarter of 2009, 18 tenants took occupancy of their stores at an average
base rent of $10.45 per square foot. Included in the 18 tenants were five anchor tenants paying
on average $9.04 per square foot, an 11.3% increase above portfolio average rents for anchor space.
Also included were 13 non-anchor tenants paying on average $16.00 per square foot, a 2.7% decrease
over portfolio average rents for non-anchor space. The Company signed 27 new leases during the
second quarter of 2009 for new tenancies that will take occupancy in subsequent periods, at an
increase of 31.6% above portfolio average rents. Additionally, we renewed 47 non-anchor leases, at
an average base rent of $16.54 per square foot, achieving an increase of 5.7% over prior rental
rates. Overall portfolio average base rents for non-anchor tenants decreased to $16.44 per square
foot in the second quarter of 2009 from $16.49 for the same period in 2008.
The Companys core operating portfolio was 94.4% occupied at June 30, 2009, compared to 94.7%
at June 30, 2008. Overall portfolio occupancy, which includes joint venture properties and
properties under redevelopment, was 91.3% at June 30, 2009, compared to 92.0% at June 30, 2008.
Redevelopment
We and our joint ventures have eight redevelopments currently in process. We estimate the
total project costs of the eight redevelopment projects in process to be $48.6 million. Four of
the redevelopments involve core operating properties included in our balance sheet and are expected
to cost approximately $19.5 million of which $7.9 million has been spent as of June 30, 2009. For
the four redevelopment projects at properties held by joint ventures, we estimate off-balance sheet
project costs of approximately $29.1 million (our share is estimated to be $8.3 million) of which
$12.2 million has been spent as of June 30, 2009 (our share is $3.6 million).
In 2009, the Company plans to focus on completing those redevelopment projects presently in
process that have commitments for the expansion or addition of an anchor tenant. While we
anticipate redevelopments will be accretive upon completion, a majority of the projects has
required taking some retail space off-line to accommodate
20
the new/expanded tenancies. These measures have resulted in the loss of minimum rents and
recoveries from tenants for those spaces removed from our pool of leasable space. Based on the
sheer number of value-added redevelopments that are in process in 2009, the revenue loss has
created a short-term negative impact on net operating income and FFO. The majority of the projects
are expected to stabilize by the first half of 2010.
Development
As previously
announced, the Company continues to take a conservative approach to the development of new shopping centers,
curtailing further investment until leasing, construction financing and partnership requirements have been met. At June 30, 2009, the Company had two projects under construction and three
projects in the pre-development phase with an estimated total project cost of current phases of $253.7
million. As of June 30, 2009, we and one of our joint ventures have spent $113.0 million on such
developments.
At June 30, 2009,
the current developments that the Companys intends to wholly-own or to be developed through joint venture
partners that the
Company anticipates having no more than a 20% ownership interest in are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Costs |
|
|
Estimated |
|
|
|
|
|
|
|
Projected |
|
|
Incurred to |
|
|
Future |
|
Development Project/Location |
|
|
Project Type |
|
Cost |
|
|
Date |
|
|
Costs |
|
Northpointe Town Center - Jackson, MI |
|
On-Balance Sheet |
|
$ |
34,725 |
|
|
$ |
1,211 |
|
|
$ |
33,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hartland Towne Square - Hartland Twp., MI |
|
Off-Balance Sheet-20% Ownership |
|
|
24,411 |
|
|
|
21,084 |
|
|
|
3,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Town Center at Aquia - Stafford, VA |
|
Proposed Off-Balance Sheet-20% Ownership |
|
|
98,439 |
|
|
|
59,554 |
|
|
|
38,885 |
|
Gateway Commons - Lakeland, FL |
|
Proposed Off-Balance Sheet-20% Ownership |
|
|
64,709 |
|
|
|
18,495 |
|
|
|
46,214 |
|
Parkway Shops - Jacksonville, FL |
|
Proposed Off-Balance Sheet-20% Ownership |
|
|
31,405 |
|
|
|
12,610 |
|
|
|
18,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
253,689 |
|
|
$ |
112,954 |
|
|
$ |
140,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RPT Anticipated Share of Total
Estimated Costs Including Debt |
|
$ |
78,518 |
|
|
$ |
23,560 |
|
|
$ |
54,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We own 20% of the joint venture that is developing Hartland Towne Square, and our share of the estimated $24.4 million of project costs is $4.9 million. The Company is currently providing the mezzanine financing for the project which was $6.9 million at June 30, 2009. We expect The Town Center at Aquia, Gateway Commons, and Parkway Shops to be
completed through joint ventures, and ultimately be accounted as off-balance sheet assets,
even though we do not have joint venture partners to date and no assurance can be given that we will
have joint venture partners on such projects.
Acquisitions/Dispositions
Critical Accounting Policies and Estimates
Managements Discussion and Analysis of Financial Condition and Results of Operations is based
upon our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP). The preparation of these
financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets
and liabilities. Management bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the results of which forms
the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Senior management has discussed the development, selection
and disclosure of these estimates with the audit committee of our board of trustees. Actual
results could differ from these estimates under different assumptions or conditions.
Critical accounting policies are those that are both significant to the overall presentation
of our financial condition and results of operations and require management to make difficult,
complex or subjective judgments. For example, significant estimates and assumptions have been
made with respect to useful lives of assets, capitalization of development and leasing costs,
recoverable amounts of receivables and initial valuations and related amortization periods of
deferred costs and intangibles, particularly with respect to property acquisitions. Our critical
accounting policies as discussed in our Annual Report on Form 10-K for the year ended December 31,
2008 have not materially changed during the first six months of 2009.
21
Comparison of Three Months Ended June 30, 2009 to Three Months Ended June 30, 2008
For purposes of comparison between the three months ended June 30, 2009 and 2008, Same
Center refers to the shopping center properties owned by consolidated entities as of April 1, 2008
and June 30, 2009.
In August 2008, we sold the Plaza at Delray shopping center to a joint venture with an
investor advised by Heitman LLC. This sale to our joint venture in which we have an ownership
interest is referred to as the Disposition in the following discussion.
Revenues
Total revenues decreased $2.3 million, or 6.5%, to $33.6 million for the three months ended
June 30, 2009, as compared to $35.9 million in 2008. The decrease in total revenues was primarily
the result of a $1.9 million decrease in minimum rents and a $0.4 million decrease in fees and
management income.
Minimum rents decreased $1.9 million, or 8.2%, to $21.2 million for the three months ended
June 30, 2009 as follows:
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
|
|
|
|
(in millions) |
|
|
Percentage |
|
Same Center |
|
$ |
(0.7 |
) |
|
|
(3.0% |
) |
Disposition |
|
|
(1.2 |
) |
|
|
(5.2% |
) |
|
|
|
|
|
|
|
|
|
$ |
(1.9 |
) |
|
|
(8.2% |
) |
|
|
|
|
|
|
|
The decrease in Same Center minimum rents was primarily attributable to the current challenging economic environment resulting in an increased number of tenant bankruptcies, including Circuit City and Linens n Things, as well as the vacancy of a major tenant at one of the Companys shopping centers in January 2009.
Recoveries from tenants decreased $0.4 million, or 4.1%, to $9.9 million for the three months
ended June 30, 2009. Substantially all of the decrease was due to the Disposition.
The overall property operating expense recovery ratio was 96.4% for the three months ended June 30, 2009, as compared to 100.1% for the same period in the prior year. The decrease was primarily due to the current challenging economic environment resulting in an increased number of tenant bankruptcies, including Circuit City and Linens n Things in the second half of 2008.
Recoverable operating expenses, which includes real estate tax expense, are a component of our
recovery ratio. These expenses decreased $0.1 million, or 0.5%, to $10.2 million for the three
months ended June 30, 2009 as follows:
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
|
|
|
|
(in millions) |
|
|
Percentage |
|
Same Center |
|
$ |
0.4 |
|
|
|
4.6% |
|
Disposition |
|
|
(0.5 |
) |
|
|
(5.1% |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.1 |
) |
|
|
(0.5% |
) |
|
|
|
|
|
|
|
The increase in Same Center recoverable operating expenses was due primarily to expanding our
electricity resale program in 2009.
Fees and management income decreased approximately $433,000 to $1.5 million for the three
months ended June 30, 2009 as compared to $1.9 million for the three months ended June 30, 2008.
The decrease was mainly attributable to a net decrease in development related fees of approximately
$505,000, partially offset by an increase
22
in leasing fees of approximately $159,000. The decrease
in development fees was mainly due to fees earned in the second quarter of 2008 relating to the
development of the Hartland Towne Square center by our Ramco RM Hartland SC LLC joint venture. The
increase in leasing fees is primarily attributable to leasing fees earned at a redevelopment
property in the second quarter of 2009.
Other income increased approximately $505,000 to $1.0 million for the three months ended June
30, 2009, compared to $495,000 for the same period in the prior year. The increase was primarily
due to a $178,000 increase in lease termination fees and a $115,000 increase in interest income.
The increase in lease termination income was mostly attributable to income earned in the second
quarter of 2009 on a higher volume of lease terminations. Interest income increased on advances to
the Ramco RM Hartland SC LLC joint venture relating to the development of Hartland Towne Square.
Other miscellaneous income for the three months ended June 30, 2009, increased approximately
$172,000 when compared to the same period in the prior year.
Expenses
Total expenses decreased $0.8 million, or 2.6%, to $32.1 million for the three months ended
June 30, 2009 as compared to $32.9 million for the three months ended June 30, 2008. The decrease
was primarily due to a decrease in interest expense of $1.0 million and a decrease in other
operating expenses of $0.4 million, offset by an increase in general and administrative expenses of
$0.6 million.
Depreciation and amortization expense was $7.9 million for the three months ended June 30,
2009 and 2008.
Other operating expenses decreased $0.3 million, or 35.2%, to $0.7 million for the three months ended June 30, 2009, as compared to $1.0 million for the same period in 2008. The decrease in other operating expenses from the second quarter of 2008 was primarily due to decreases in bad debt expense of approximately $122,000.
General and administrative expenses was $5.4 million for the three months ended June 30, 2009,
as compared to $4.8 million for the same period in 2008, an increase of $0.6 million, or 11.3%. The
increase in general and administrative expenses was primarily due to costs incurred related to the
Companys recent proxy contest and strategic review process in the second quarter of 2009.
Interest expense decreased $1.0 million, or 11.1%, to $7.9 million for the three months ended
June 30, 2009 as compared to $8.9 million in 2008. The summary below identifies the components of
the net decrease:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Average total loan balance |
|
$ |
665,905 |
|
|
$ |
698,197 |
|
Average rate |
|
|
4.9 |
% |
|
|
5.6 |
% |
|
|
|
|
|
|
|
|
|
Total interest on debt |
|
$ |
8,142 |
|
|
$ |
9,698 |
|
Amortization of loan fees |
|
|
176 |
|
|
|
212 |
|
Interest on capital lease
obligation |
|
|
103 |
|
|
|
107 |
|
Capitalized interest and other |
|
|
(517 |
) |
|
|
(1,124 |
) |
|
|
|
|
|
|
|
|
|
$ |
7,904 |
|
|
$ |
8,893 |
|
|
|
|
|
|
|
|
Other
Earnings from unconsolidated entities represents our proportionate share of the earnings of various joint ventures in which we have an ownership interest. Earnings from unconsolidated entities decreased approximately $432,000 from approximately $769,000 for the three months ended June 30, 2008 to approximately $337,000 for the three months ended June 30, 2009. During the three months ended
June 30, 2009, earnings from unconsolidated entities decreased approximately $231,000 from the Ramco/Lion Venture LP joint venture and $134,000 from the Ramco 450 Venture LLC joint venture primarily the result of the bankruptcies of Circuit City and Linens n Things that closed stores in the second half of 2008 at five of the joint venture properties in which the Company holds an ownership interest.
23
Noncontrolling interest in subsidiaries represents the equity in income attributable to the
portion of the Operating Partnership not owned by us. Noncontrolling interest for the second
quarter of 2009 decreased $0.2 million to $0.4 million, as compared to $0.6 million for the second
quarter of 2008. The decrease is primarily attributable to the noncontrolling interests
proportionate share of the lower total revenues in 2009 when compared to the same period in 2008.
Comparison of Six Months Ended June 30, 2009 to Six Months Ended June 30, 2008
For purposes of comparison between the six months ended June 30, 2009 and 2008, Same Center
refers to the shopping center properties owned by consolidated entities as of January 1, 2008 and
June 30, 2009.
In August 2008, we sold the Plaza at Delray shopping center to a joint venture with an
investor advised by Heitman LLC. This sale to our joint venture in which we have an ownership
interest is referred to as the Disposition in the following discussion.
Revenues
Total revenues decreased $5.0 million, or 6.9%, to $67.4 million for the six months ended June
30, 2009, as compared to $72.4 million in 2008. The decrease in total revenues was primarily the
result of a $3.5 million decrease in minimum rents, a $0.9 million decrease in recoveries from
tenants, and a $0.7 million decrease in fees and management income.
Minimum rents decreased $3.5 million, or 7.6%, to $42.6 million for the six months ended June
30, 2009 as follows:
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
|
|
|
|
(in millions) |
|
|
Percentage |
|
Same Center |
|
$ |
(1.0 |
) |
|
|
(2.3% |
) |
Disposition |
|
|
(2.5 |
) |
|
|
(5.3% |
) |
|
|
|
|
|
|
|
|
|
$ |
(3.5 |
) |
|
|
(7.6% |
) |
|
|
|
|
|
|
|
The decrease in Same Center minimum rents was primarily attributable to the current challenging
economic environment resulting in an increased number of tenant bankruptcies, including Circuit City and
Linens n Things, as well as the vacancy of a major tenant at one of the Companys shopping centers in
January 2009.
Recoveries from tenants decreased $0.9 million, or 4.0%, to $20.5 million for the six months
ended June 30, 2009. Substantially all of the decrease was due to the Disposition.
The overall property operating expense recovery ratio was 97.9% for the six months ended June
30, 2009, as compared to 98.4% for the same period in the prior year. We expect our recovery ratio
to be between 97% and 98% for the full year of 2009.
Recoverable operating expenses, which includes real estate tax expense, are a component of our
recovery ratio. These expenses decreased $0.8 million, or 3.6%, to $21.0 million for the six months
ended June 30, 2009 as follows:
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
|
|
|
|
(in millions) |
|
|
Percentage |
|
Same Center |
|
$ |
0.3 |
|
|
|
1.3% |
|
Disposition |
|
|
(1.1 |
) |
|
|
(4.9% |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.8 |
) |
|
|
(3.6% |
) |
|
|
|
|
|
|
|
24
The increase in Same Center recoverable operating expenses is mainly attributable to the
completed construction of a building at one of the Companys shopping centers in the first quarter
of 2009.
Fees and management income decreased approximately $726,000 to $2.6 million for the six months
ended June 30, 2009, as compared to the same period in 2008. The decrease was mainly attributable
to a net decrease in development related fees of approximately $610,000. The decrease in
development fees was mainly due to fees earned in the second quarter of 2008 relating to the
development of the Hartland Towne Square center by our Ramco RM Hartland SC LLC joint venture.
Other income increased approximately $373,000 to $1.4 million for the six months ended June
30, 2009, compared to $1.0 million for the same period in the prior year. The increase was
primarily due to a $145,000 increase in interest income for the six months ended June 30, 2009.
Interest income increased on advances to the Ramco RM Hartland SC LLC joint venture relating to the
development of Hartland Towne Square. Other miscellaneous income for the six months ended June 30,
2009, increased approximately $183,000 when compared to the same period in the prior year.
Expenses
Total expenses decreased $2.8 million, or 4.3%, to $64.1 million for the six months ended June
30, 2009 as compared to $66.9 million for the six months ended June 30, 2008. The decrease was
primarily due to decreases in interest expense of $2.7 million, recoverable operating expenses of
$0.8 million, and depreciation and amortization of $0.2 million, partially offset by a $0.9 million
increase in general and administrative expenses.
Depreciation and amortization expense decreased $0.2 million, or 1.0%, for the six months
ended June 30, 2009 as follows:
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) |
|
|
|
Amount |
|
|
|
|
|
|
(in millions) |
|
|
Percentage |
|
Same Center |
|
$ |
0.6 |
|
|
|
3.9% |
|
Disposition |
|
|
(0.8 |
) |
|
|
(4.9% |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.2 |
) |
|
|
(1.0% |
) |
|
|
|
|
|
|
|
The $0.6 million increase in Same Center depreciation and amortization expense was mostly
attributable to the completed construction of a building at one of the Companys shopping centers
in the first quarter of 2009.
General and administrative expenses was $9.5 million for the six months ended June 30, 2009,
as compared to $8.6 million for the same period in 2008, an increase of $0.9 million, or 10.0%. The
increase in general and administrative expenses was primarily due to costs incurred related to the
Companys recent proxy contest and strategic review process in the second quarter of 2009.
Interest expense decreased $2.7 million, or 14.3%, to $16.0 million for the six months ended
June 30, 2009 as compared to $18.7 million in 2008. The summary below identifies the components of
the net decrease:
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
Average total loan balance |
|
$ |
665,587 |
|
|
$ |
694,635 |
|
Average rate |
|
|
4.9 |
% |
|
|
5.7 |
% |
|
|
|
|
|
|
|
|
|
Total interest on debt |
|
$ |
16,378 |
|
|
$ |
19,754 |
|
Amortization of loan fees |
|
|
345 |
|
|
|
436 |
|
Interest on capital lease
obligation |
|
|
207 |
|
|
|
214 |
|
Capitalized interest and other |
|
|
(922 |
) |
|
|
(1,732 |
) |
|
|
|
|
|
|
|
|
|
$ |
16,008 |
|
|
$ |
18,672 |
|
|
|
|
|
|
|
|
25
Other
Gain on sale of real estate assets decreased $9.9 million to $0.4 million for the six months
ended June 30, 2009, as compared to $10.3 million for the six months ended June 30, 2008. The
decrease is due primarily to the recognition of the gain on the sale of the Mission Bay Plaza
shopping center to our Ramco/Lion Venture LP joint venture in the first quarter of 2008.
Earnings
from unconsolidated entities represents our proportionate share of the earnings of various joint
ventures in which we have an ownership interest. Earnings from unconsolidated entities decreased approximately
$809,000 from approximately $1.7 million for the six months ended June 30, 2008 to approximately
$857,000 for the six months ended June 30, 2009.
During the six months ended June 30, 2009, earnings from unconsolidated entities decreased approximately
$456,000 from the Ramco/Lion Venture LP joint venture and $303,000 from the Ramco 450 Venture LLC
joint venture primarily the result of the bankruptcies of Circuit
City and Linens n Things that closed stores in the second
half of 2008 at five of the joint venture properties in which the Company holds an ownership interest.
Noncontrolling interest in subsidiaries represents the equity in income attributable to the
portion of the Operating Partnership not owned by us. Noncontrolling interest for the six months
ended June 30, 2009 decreased $1.9 million to $0.8 million, as compared to $2.7 million for the six
months ended June 30, 2008. The decrease is primarily attributable to the noncontrolling
interests proportionate share of the lower gain on the sale of real estate assets in 2009 when
compared to the same period in 2008.
Liquidity and Capital Resources
The principal uses of our liquidity and capital resources are for operations, development,
redevelopment, including expansion and renovation programs, acquisitions, and debt repayment, as
well as dividend payments in accordance with REIT requirements and repurchases of our common
shares. We anticipate that the combination of cash on hand and cash retained from operations, the
availability under our Credit Facility, additional financings, potential equity offerings, and the
sale of existing properties will satisfy our expected working capital requirements through at least
the next 12 months and allow us to achieve continued growth. Although we believe that the
combination of factors discussed above will provide sufficient liquidity, no such assurance can be
given.
As part of our business plan to improve our capital structure and reduce debt, we will
continue to pursue the strategy of selling fully-valued properties and to dispose of shopping
centers that no longer meet the criteria established for our portfolio. Our ability to obtain
acceptable selling prices and satisfactory terms will impact the timing of future sales. Net
proceeds from the sale of properties are expected to reduce outstanding debt and to fund any future
cash requirements.
The following is a summary of our cash flow activities (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
June 30, |
|
|
2009 |
|
2008 |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
Cash provided from operations |
|
$ |
26,671 |
|
|
$ |
14,250 |
|
Cash used in investing activities |
|
|
(13,369 |
) |
|
|
(2,152 |
) |
Cash used in financing activities |
|
|
(10,779 |
) |
|
|
(20,405 |
) |
26
For the six months ended
June 30, 2009, we generated $26.7 million in cash flows from operating activities,
as compared to $14.3 million for the same period in 2008.
Cash flows from operating activities were higher during the six months ended June 30, 2009
mainly due to higher net cash inflows related to accounts receivable and lower cash outflows
for accounts payable and accrued expenses.
For the six months ended June 30, 2009,
investing activities used $13.4 million of cash flows,
as compared to $2.2 million used in investing activities for the six months ended June 30, 2008.
Cash flows used in investing activities were higher in 2009,
due to lower investments in real estate and lower cash received from sales of shopping centers to our joint ventures.
Additionally, no cash was received in the first six months of 2009 from the repayment of a note receivable
from a joint venture, as occurred in the first six months of 2008.
During the six months ended June 30, 2009, cash flows used in financing activities were $10.8 million,
as compared to $20.4 million during the six months ended June 30, 2008. In the first six months of 2009,
the Company had significantly lower distributions to shareholders and operating partnership unit holders,
as compared to the six months ended June 30, 2008.
Under the Internal Revenue Code of 1986, as amended (the Code), as a REIT we must distribute
annually to our shareholders at least 90% of our REIT taxable income, excluding net capital gain.
Distributions paid are at the discretion of our Board of Trustees and depend on our actual net income
available to common shareholders, cash flow, financial condition, capital requirements, restrictions in
financing arrangements, the annual distribution requirements under REIT provisions of the Code and such
other factors as our Board of Trustees deems relevant.
We declared a quarterly cash dividend distribution of $0.2313 per common share paid to shareholders of
record on June 20, 2009, as compared to the dividend paid in the same quarter of 2008 of $0.4625 per
share. The quarterly dividend was reduced to $0.2313 per common share in the fourth quarter of 2008.
The cash we estimate to retain annually from the reduced dividend is approximately $20.0 million and will
be used to fund our future capital requirements. Our dividend policy has not changed in that we expect to
continue making distributions to shareholders of at least 90% of our REIT taxable income, excluding net
capital gain, in order to maintain qualification as a REIT. On an annualized basis, our current dividend is
above our estimated minimum required distribution.
The Company has a $250,000 unsecured credit facility (the Credit Facility) consisting of a $100,000
unsecured term loan credit facility and a $150,000 unsecured revolving credit facility. The Credit Facility
provides that the unsecured revolving credit facility may be increased by up to $100,000 at the Companys
request, for a total unsecured revolving credit facility commitment of $250,000. The unsecured term loan
credit facility matures in December 2010 and bears interest at a rate equal to LIBOR plus 130 to 165 basis
points, depending on certain debt ratios. The unsecured revolving credit facility matures in December 2009
and bears interest at a rate equal to LIBOR plus 115 to 150 basis points, depending on certain debt ratios.
Additionally, the Company has a $40,000 revolving credit facility secured by The Towne Center at Aquia,
that matures in December 2009 and bears interest at a rate equal to LIBOR plus 325 basis points, depending
on certain debt ratios. The Company retains the option to extend the
maturity date of both the unsecured revolving credit facility and the
$40,000 revolving credit facility secured by The Towne Center at
Aquia to December 2010.
It is anticipated that funds borrowed under the aforementioned Credit Facilities will be used for general
corporate purposes, including working capital, capital expenditures, the repayment of indebtedness or
other corporate activities.
Even
though the Company has the option to extend the maturities of the
unsecured revolving credit facility and the $40,000 revolving credit
facility secured by The Towne Center at Aquia until December 2010, we
have been proactive with our bank group to replace the debt well in advance of maturity. The Company
has agreed in principle on the material terms for a new $150,000 revolving credit facility and a $100,000
term loan, both of which are expected to be secured by approximately 33 assets that are currently
unencumbered, as well as a new $40,000 revolving credit facility secured by The Town Center at Aquia.
The material terms of the new credit facilities have been agreed to by the lead arranging bank and
administrative agent. To date, the Company has received commitments from the participants in the new
credit facilities on a significant portion of the total requirement. Subject to documentation, due diligence,
and customary conditions, the Company expects to close on the new credit facilities late third quarter or
early fourth quarter of 2009. Although the Company expects to refinance the debt mentioned above, there
can be no assurance that the Company will be able to refinance its debt on commercially reasonable or any
other terms.
Under terms of various debt agreements, we may be required to maintain interest rate swap
agreements to reduce the impact of changes in interest rates on our floating rate debt. We have
interest rate swap agreements with an aggregate notional amount of $100.0 million at June 30, 2009.
Based on rates in effect at June 30, 2009, the agreements provide for fixed rates ranging from 4.4%
to 4.7% and expire December 2010.
After taking into account the impact of converting our variable rate debt into fixed rate debt
by use of the interest rate swap agreements, at June 30, 2009 our variable rate debt accounted for
approximately $182.0 million of outstanding debt with a weighted average interest rate of 2.3%.
Variable rate debt accounted for approximately 27.5% of our total debt and 20.7% of our total
capitalization.
We have $406.8 million of mortgage loans encumbering our consolidated properties, and $535.0
million of mortgage loans on properties held by our unconsolidated joint ventures (of which our pro
rata share is $138.4 million). Such mortgage loans are generally non-recourse, subject to certain
exceptions for which we would be liable for any resulting losses incurred by the lender. These
exceptions vary from loan to loan but generally include fraud or a material misrepresentation,
misstatement or omission by the borrower, intentional or grossly negligent conduct by the borrower
that harms the property or results in a loss to the lender, filing of a bankruptcy petition by the
borrower, either directly or indirectly, and certain environmental liabilities. In addition, upon
the occurrence of certain of such events, such as fraud or filing of a bankruptcy petition by the
borrower, we would be liable for the entire outstanding balance of the loan, all interest accrued
thereon and certain other costs, penalties and expenses.
The unconsolidated joint ventures in which our Operating Partnership owns an interest and
which are accounted for by the equity method of accounting are subject to mortgage indebtedness,
which in most instances is non-recourse. At June 30, 2009, mortgage debt for the unconsolidated
joint ventures was $535.0 million, of which our
pro rata share was $138.4 million, with a weighted average interest rate of 6.4%. Fixed rate debt
for the unconsolidated joint ventures was $506.0 million at June 30, 2009. Our pro rata share of
fixed rate debt for the unconsolidated joint ventures amounted to $132.7 million, or 95.9% of our
total pro rata share of such debt. The
27
mortgage debt of $11.0 million at Peachtree Hill, a shopping
center owned by our Ramco 450 Venture LLC, is recourse debt. The loan is secured by unconditional
guarantees of payment and performance by Ramco 450 Venture LLC, the Company, and its majority owned
subsidiary, Ramco-Gershenson Properties, L.P, the Operating Partnership.
Planned Capital Spending
During the six months ended June 30, 2009, we spent approximately $3.3 million on
revenue-generating capital expenditures including tenant allowances, leasing commissions paid to
third-party brokers, legal costs related to lease documents, and capitalized leasing and
construction costs. These types of costs generate a return through rents from tenants over the
term of their leases. Revenue-enhancing capital expenditures, including expansions, renovations or
repositionings, were approximately $8.6 million. Revenue neutral capital expenditures, such as roof
and parking lot repairs which are anticipated to be recovered from tenants, amounted to
approximately $0.6 million.
For the remainder of 2009, we anticipate spending approximately $16.7 million for
revenue-generating, revenue-enhancing and revenue neutral capital expenditures, including
approximately $6.9 million for redevelopment projects.
We are also working on four additional redevelopments that are in the final planning stages
that are not included in such amounts. Further, we anticipate spending approximately $0.6 million
in the remainder of 2009 for ongoing development projects.
In addition, as a result of the challenging acquisition market and the global liquidity
crisis, the Company chose to de-emphasize its acquisition program as a significant driver of
growth. As such, there was no significant acquisition activity in the second quarter of 2009.
Future acquisitions are planned to be opportunistic in nature and more selective as market
conditions allow.
Capitalization
At June 30, 2009, our market capitalization amounted to $878.7 million. Market capitalization
consisted of $662.2 million of debt (including property-specific mortgages, an Unsecured Credit
Facility consisting of a Term Loan Credit Facility and a Revolving Credit Facility, a Secured Term
Loan, and a Junior Subordinated Note), and $216.5 million of common shares (based on the closing
price of $10.01 per share at June 30, 2009) and Operating Partnership Units at market value. Our
debt to total market capitalization was 75.4% at June 30, 2009, as compared to 83.3% at December
31, 2008. After taking into account the impact of converting our variable rate debt into fixed
rate debt by use of interest rate swap agreements, our outstanding debt at June 30, 2009 had a
weighted average interest rate of 4.8%, and consisted of $480.2 million of fixed rate debt and
$182.0 million of variable rate debt. Outstanding letters of credit issued under the Credit
Facility totaled approximately $1.8 million at June 30, 2009.
At June 30, 2009, the noncontrolling interest in the Operating Partnership represented a 13.5%
ownership in the Operating Partnership. The OP Units may, under certain circumstances, be
exchanged for our common shares of beneficial interest on a one-for-one basis. We, as sole general
partner of the Operating Partnership, have the option, but not the obligation, to settle exchanged
OP Units held by others in cash based on the current trading price of our common shares of
beneficial interest. Assuming the exchange of all OP Units, there would have been 21,629,050 of
our common shares of beneficial interest outstanding at June 30, 2009, with a market value of
approximately $216.5 million.
Inflation
Inflation has been relatively low in recent years and has not had a significant detrimental
impact on the results of our operations. Should inflation rates increase in the future,
substantially all of our tenant leases contain provisions designed to partially mitigate the
negative impact of inflation in the near term. Such lease provisions include clauses that require
our tenants to reimburse us for real estate taxes and many of the operating expenses we incur.
Also, many of our leases provide for periodic increases in base rent which are either of a fixed
amount or based on changes in the consumer price index and/or percentage rents (where the tenant
pays us rent based on a percentage of
its sales). Significant inflation rate increases over a prolonged period of time may have a
material adverse impact on our business.
28
Funds from Operations
We consider funds from operations, also known as FFO, an appropriate supplemental measure of
the financial performance of an equity REIT. Under the National Association of Real Estate
Investment Trusts (NAREIT) definition, FFO represents net income, excluding extraordinary items (as
defined under GAAP) and gains (losses) on sales of depreciable property, plus real estate related
depreciation and amortization (excluding amortization of financing costs), and after adjustments
for unconsolidated partnerships and joint ventures. FFO is intended to exclude GAAP historical
cost depreciation and amortization of real estate investments, which assumes that the value of real
estate assets diminishes ratably over time. Historically, however, real estate values have risen
or fallen with market conditions and many companies utilize different depreciable lives and
methods. Because FFO adds back depreciation and amortization unique to real estate, and excludes
gains and losses from depreciable property dispositions and extraordinary items, it provides a
performance measure that, when compared year over year, reflects the impact on operations from
trends in occupancy rates, rental rates, operating costs, acquisition and development activities
and interest costs, which provides a perspective of our financial performance not immediately
apparent from net income determined in accordance with GAAP. In addition, FFO does not include the
cost of capital improvements, including capitalized interest.
For the reasons described above we believe that FFO provides us and our investors with an
important indicator of our operating performance. This measure of performance is used by us for
several business purposes and for REITs it provides a recognized measure of performance other than
GAAP net income, which may include non-cash items. Other real estate companies may calculate FFO
in a different manner.
We recognize FFOs limitations when compared to GAAP net income. FFO does not represent
amounts available for needed capital replacement or expansion, debt service obligations, or other
commitments and uncertainties. In addition, FFO does not represent cash generated from operating
activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash
needs, including the payment of dividends. FFO should not be considered as an alternative to net
income (computed in accordance with GAAP) or as an alternative to cash flow as a measure of
liquidity. FFO is simply used as an additional indicator of our operating performance.
29
The following table illustrates the calculation of FFO (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to RPT common shareholders |
|
$ |
1,563 |
|
|
$ |
2,984 |
|
|
$ |
3,813 |
|
|
$ |
14,429 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
9,321 |
|
|
|
9,268 |
|
|
|
18,604 |
|
|
|
18,683 |
|
Noncontrolling interest in partnership: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations |
|
|
401 |
|
|
|
627 |
|
|
|
781 |
|
|
|
2,704 |
|
Discontinued Operations |
|
|
|
|
|
|
(48 |
) |
|
|
|
|
|
|
(35 |
) |
Discontinued operations, loss on sale of property |
|
|
|
|
|
|
463 |
|
|
|
|
|
|
|
463 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of depreciable real estate (1) |
|
|
|
|
|
|
(115 |
) |
|
|
|
|
|
|
(9,876 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to RPT common
shareholders, assuming conversion of OP units |
|
$ |
11,285 |
|
|
$ |
13,179 |
|
|
$ |
23,198 |
|
|
$ |
26,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average equivalent shares outstanding, diluted |
|
|
21,617 |
|
|
|
21,408 |
|
|
|
21,573 |
|
|
|
21,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted share to FFO per diluted
share reconciliation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted share |
|
$ |
0.08 |
|
|
$ |
0.16 |
|
|
$ |
0.20 |
|
|
$ |
0.78 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
0.43 |
|
|
|
0.43 |
|
|
|
0.86 |
|
|
|
0.87 |
|
Noncontrolling interest in partnership: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations |
|
|
0.02 |
|
|
|
0.03 |
|
|
|
0.04 |
|
|
|
0.13 |
|
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, loss on sale of property |
|
|
|
|
|
|
0.02 |
|
|
|
|
|
|
|
0.02 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of depreciable real estate (1) |
|
|
|
|
|
|
(0.01 |
) |
|
|
|
|
|
|
(0.46 |
) |
Assuming conversion of OP units |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.02 |
) |
|
|
(0.11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to RPT common shareholders
per diluted share, assuming conversion of OP units |
|
$ |
0.52 |
|
|
$ |
0.62 |
|
|
$ |
1.08 |
|
|
$ |
1.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes gain on sale of undepreciated land |
|
$ |
|
|
|
$ |
(12 |
) |
|
$ |
|
|
|
$ |
411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward Looking Statements
This document contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking
statements represent our expectations, plans or beliefs concerning future events and may be
identified by terminology such as may, will, should, believe, expect, estimate,
anticipate, continue, predict or similar terms. Although the forward-looking statements made
in this document are based on our good faith beliefs, reasonable assumptions and our best judgment
based upon current information, certain factors could cause actual results to differ materially
from those in the forward-looking statements, including: our success or failure in implementing our
business strategy; economic conditions generally and in the commercial real estate and finance
markets specifically; our cost of capital, which depends in part on our asset quality, our
relationships with lenders and other capital providers; our business prospects and outlook; changes
in governmental regulations, tax rates and similar matters; our continuing to qualify as a REIT;
and other factors discussed elsewhere in this document and our other filings with the Securities
and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended
December 31, 2008. Given these uncertainties, you should not place undue reliance on any
forward-
30
looking statements. Except as required by law, we assume no obligation to update these
forward-looking statements, even if new information becomes available in the future.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have exposure to interest rate risk on our variable rate debt obligations. We are not
subject to any foreign currency exchange rate risk or commodity price risk, or other material rate
or price risks. Based on our debt and interest rates and the interest rate swap agreements in
effect at June 30, 2009, a 100 basis point change in interest rates would affect our annual
earnings and cash flows by between approximately $1.8 million and $2.5 million.
Under the terms of various debt agreements, we may be required to maintain interest rate swap
agreements to reduce the impact of changes in interest rate on our floating rate debt. We have
interest rate swap agreements with an aggregate notional amount of $100.0 million at June 30, 2009.
Based on rates in effect at June 30, 2009, the agreements provide for fixed rates ranging from
4.4% to 4.7% and expire December 2010.
The following table presents information as of June 30, 2009 concerning our long-term debt
obligations, including principal cash flows by scheduled maturity, weighted average interest rates
of maturing amounts and fair market value (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
|
2009 |
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
Thereafter |
|
Total |
|
Fair Value |
Fixed-rate debt |
|
$ |
25,313 |
|
|
$ |
126,580 |
|
|
$ |
27,932 |
|
|
$ |
34,011 |
|
|
$ |
33,485 |
|
|
$ |
232,888 |
|
|
$ |
480,209 |
|
|
$ |
457,837 |
|
Average interest
rate |
|
|
7.0 |
% |
|
|
5.2 |
% |
|
|
7.4 |
% |
|
|
6.8 |
% |
|
|
5.5 |
% |
|
|
5.7 |
% |
|
|
5.8 |
% |
|
|
6.9 |
% |
Variable-rate
debt |
|
$ |
174,671 |
|
|
$ |
157 |
|
|
$ |
7,139 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
181,967 |
|
|
$ |
181,967 |
|
Average interest
rate |
|
|
2.2 |
% |
|
|
5.3 |
% |
|
|
5.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.3 |
% |
|
|
2.3 |
% |
We estimated the fair value of fixed rate mortgages using a discounted cash flow analysis,
based on our incremental borrowing rates for similar types of borrowing arrangements with the same
remaining maturity. Considerable judgment is required to develop estimated fair values of
financial instruments. The table incorporates only those exposures that exist at June 30, 2009 and
does not consider those exposures or positions which could arise after that date or firm
commitments as of such date. Therefore, the information presented therein has limited predictive
value. Our actual interest rate fluctuations will depend on the exposures that arise during the
period and interest rates.
31
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to
be disclosed in our reports under the Securities Exchange Act of 1934, as amended (Exchange Act),
such as this report on Form 10-Q, is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the design control objectives, and therefore management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.
We carried out an assessment as of June 30, 2009 of the effectiveness of the design and
operation of our disclosure controls and procedures. This assessment was done under the supervision
and with the participation of management, including our Chief Executive Officer and Chief Financial
Officer. Based on such evaluation, our management, including our Chief Executive Officer and Chief
Financial Officer, concluded that such disclosure controls and procedures were effective as of June
30, 2009.
Changes in Internal Control Over Financial Reporting
During the quarter ended June 30, 2009, there were no changes in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
32
PART II OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal or governmental proceedings, other than the IRS
Examination, against or involving us or our properties. For a description of the IRS Examination,
see our Annual Report on Form 10-K for the year ended December 31, 2008 (Note 20 to the
consolidated financial statements).
Item 1A. Risk Factors
You should review our Annual Report on Form 10-K for the year ended December 31, 2008, which
contains a detailed description of risk factors that may materially affect our business, financial
condition or results of operations. There are no material changes to the disclosure on these
matters set forth in such Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on June 10, 2009.
At the annual meeting, Stephen R. Blank and Joel M. Pashcow were re-elected as trustees of the
Company to serve until the 2012 annual meeting of shareholders. Matthew L. Ostrower was elected as
Trustee of the Company to serve until the 2012 annual meeting of shareholders. David J. Nettina
was elected as Trustee of the Company to serve until the 2011 annual meeting of shareholders. The
following votes were cast for or were withheld from voting with respect to the election of each of
the following persons:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Authority |
Name |
|
Votes For |
|
Withheld |
Stephen R. Blank |
|
|
9,349,737 |
|
|
|
7,751,666 |
|
Joel M. Pashcow |
|
|
9,263,474 |
|
|
|
7,837,929 |
|
Matthew L. Ostrower |
|
|
16,661,171 |
|
|
|
440,231 |
|
David J. Nettina |
|
|
16,631,740 |
|
|
|
469,663 |
|
Arthur H. Goldberg, Dennis E. Gershenson, Robert A. Meister, Mark K. Rosenfeld and Michael A.
Ward continue to hold office after the annual meeting.
The following votes were cast for, against or abstain regarding the ratification of Grant
Thornton LLP as our independent registered public accounting firm for the fiscal year ending
December 31, 2009:
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
15,228,526
|
|
|
1,849,539 |
|
|
|
23,338 |
|
The following votes were cast for, against or abstain regarding the approval of the 2009
Omnibus Long-Term Incentive Plan:
|
|
|
|
|
|
|
|
|
For |
|
Against |
|
Abstain |
8,485,643
|
|
|
3,759,649 |
|
|
|
64,500 |
|
33
Item 6. Exhibits
|
|
|
Exhibit No. |
|
Description |
|
|
31.1*
|
|
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
|
31.2*
|
|
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
|
|
32.1*
|
|
Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
|
|
32.2*
|
|
Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
34
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.
|
|
|
|
|
|
RAMCO-GERSHENSON PROPERTIES TRUST
|
|
Date: July 31, 2009 |
By: |
/s/ Dennis Gershenson
|
|
|
|
Dennis Gershenson |
|
|
|
Chairman, President and Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
|
Date: July 31, 2009 |
By: |
/s/ Richard J. Smith
|
|
|
|
Richard J. Smith |
|
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
|
35