Item 1. Business
(a) General Development of Business
The Trust, a self-administered and self-managed equity real estate investment trust, was organized on July 31, 1972 as a business trust under the laws of the Commonwealth of Massachusetts. The Trust is the successor to the original registrant (Reg. No. 2-19671), New Plan Realty Corporation, which was incorporated under the laws of the State of Delaware on December 4, 1961.
(b) Financial Information About Industry Segments
The Trust is in the business of managing, operating, leasing, acquiring, developing and investing in shopping centers, factory outlet centers and apartment complexes. See the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report on Form 10-K for certain information required by Item 1.
(c) Narrative Description of Business
General
At September 9, 1997, the Trust owned fee, mortgage or leasehold interests in 131 shopping centers containing an aggregate of approximately 18,905,000 gross rentable square feet, six factory outlet centers containing an aggregate of approximately 1,752,000 gross rentable square feet and 49 apartment complexes containing 11,288 units, all located in 23 states. The average occupancy rates at July 31, 1997 for the shopping centers, factory outlet centers and apartment complexes were approximately 89%, 93% and 95%, respectively.
The Trust is self-administered and self-managed and does not engage or pay a REIT advisor because the Trust personnel manage and maintain all of the Trust's properties.
The Trust maintains its executive offices at 1120 Avenue of the Americas, New York, New York 10036, and its telephone number is (212) 869- 3000.
Acquisition, Financing and Operating Strategies
The Trust's primary investment strategy is to identify and purchase well-located income-producing shopping centers and apartment complexes at a discount to replacement cost. The Trust also purchases selected factory outlet centers. The Trust seeks to achieve income growth and enhance the cash flow potential of its properties through a program of expansion, renovation, leasing, re-leasing and improving the tenant mix. The Trust minimizes development risks by generally purchasing existing income- producing properties. The Trust regularly reviews its portfolio and from time to time considers the sale of certain of its properties.
The Trust generally has acquired properties for cash. It is management's belief that its ability to purchase available properties for cash enhances its negotiating position in obtaining attractive purchase prices. In a few instances properties have been acquired subject to existing mortgages. Long-term debt of the Trust at July 31, 1997, consisted of $65.6 million of mortgages having a weighted average interest rate of 7.79% and unsecured notes aggregating $412.6 million having a weighted average interest rate of 6.88%. In July 1997 the Trust issued 150,000 shares of Series A Cumulative Preferred Stock (the "Cumulative Preferred Shares"). In connection with the issuance of Cumulative Preferred Shares, 1,500,000 depositary shares, each representing a 1/10 fractional interest in a Cumulative Preferred Share, were sold to the public. This stock currently pays dividends quarterly at the rate of 7.8% per annum and has a liquidation preference of $500 per share ($50 per depositary share).
The Trust's short-term debt consists of normal trade payables and the current portion of mortgages payable. As of July 31, 1997 there was no balance outstanding under the Trust's $50 million unsecured line of credit with the Bank of New York, Corestates Bank N.A. and Fleet National Bank.
Virtually all operating and administrative functions, such as leasing, data processing, finance, accounting, construction and legal, are centrally managed at the Trust's headquarters. In addition, the Trust maintains regional offices located near its various properties. On-site functions such as security, maintenance, landscaping and other similar activities are either performed by the Trust or subcontracted. The cost of these functions are passed through to tenants to the extent permitted by the respective leases.
Developments During the 1997 Fiscal Year
In the fiscal year ended July 31, 1997, the Trust acquired 16 shopping centers containing an aggregate of approximately 2.5 million gross rentable square feet and 13 apartment complexes containing 3,810 units. The newly acquired properties are located in Alabama, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Michigan, Missouri, Nevada, Ohio, Pennsylvania, Tennessee and Virginia. The aggregate purchase price for all of the properties, including assumed mortgages, was approximately $281 million. In April 1997 construction was completed on the Trust's Six Flags Factory Outlet in Jackson, New Jersey.
Between July 31, 1997 and September 9, 1997 the Trust purchased one apartment complex containing 184 units and three shopping centers containing an aggregate of approximately 479,000 gross rentable square feet. The newly acquired properties are located in New York, North Carolina and Florida. The aggregate purchase price for these properties was approximately $28.7 million.
Gross revenues, net income and funds from operations of the Trust for the fiscal year ended July 31, 1997 were the largest in the Trust's history. Funds from operations applicable to shares of beneficial interest, defined as net income plus depreciation and amortization of real estate, less gains from asset sales, less preferred stock dividend requirements, was approximately $101.6 million ($1.74 per share).
Competition
The success of the Trust depends, among other factors, upon the trends of the economy, including interest rates, construction costs, income tax laws, increases or decreases in operating expenses, governmental regulations and legislation, including environmental requirements, real estate fluctuations, retailing trends, population trends, zoning laws, the financial condition and stability of tenants, the availability of financing and capital on satisfactory terms and the ability of the Trust to compete with others for tenants and keep its properties leased at profitable levels. The Trust competes for properties with an indeterminate number of investors, including domestic and foreign corporations and financial institutions, other real estate investment trusts, life insurance companies, pension funds and trust funds.
Adverse changes in general or local economic conditions could result in the inability of some existing tenants of the Trust to meet their lease obligations and could otherwise adversely affect the Trust's ability to attract or retain tenants. Management believes, however, that the Trust's financial strength and operating practices, particularly its ability to implement renovation, expansion and leasing programs will enable it to maintain and increase rental income from its properties.
Employees
As of September 9, 1997, the Trust employed 602 individuals, including executive, administrative and field personnel. The Trust considers its relations with its personnel to be good.
Qualification as a Real Estate Investment Trust
The Trust presently meets the qualification requirements of a real estate investment trust under Sections 856-58 of the Internal Revenue Code of 1986, as amended (the "Code"). If, as the Trust contemplates, such qualification continues, the Trust will not be taxed on its real estate investment trust taxable income, at least 95% of which will be distributed to shareholders. See Item 5 below.
Item 2.
Item 2. Properties
The location, general character and primary occupancy information with respect to the Trust's properties as of July 31, 1997 (including acquisitions through September 9, 1997) are set forth on the Summary of Properties Schedule on the pages immediately following.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
(a) Liquidity and Capital Resources
At July 31, 1997, the Trust had approximately $42.8 million in available cash and cash equivalents, $2 million in marketable securities and $23.1 million in mortgages receivable.
During the year the Trust issued $223 million of unsecured notes. Three of these note issues, aggregating $99 million, have variable interest rates ranging from 5.86% to 5.91% per annum and four of these note issues, aggregating $124 million, have interest rates ranging from 5.95% to 7.68% per annum. In July 1997 the Trust issued 150,000 Series A Cumulative Preferred Shares with a liquidation preference of $75 million for $73 million net of issuance costs. The shares pay dividends at the rate of 7.8% of the liquidation preference through September 15, 2012 and at the rate of 9.8% thereafter. They are redeemable at the option of the Trust on or after June 15, 2007 at the liquidation preference of $500 per share. The Trust maintains a $50 million unsecured credit facility, which it expects to renew under substantially similar terms prior to such credit facility's expiration in December 1997.
Debt at July 31, 1997 consisted of $65.6 million of mortgages payable with a weighted average interest rate of 7.79% and unsecured notes aggregating $412.6 million with a weighted average interest rate of 6.88%. The $16.6 million increase in mortgages payable was the net result of the assumption of $17.5 million in connection with the purchase of properties and the repayment of $900,000 of existing mortgages. The increase in other liabilities is due to increases in interest payable, accrued construction costs and real estate taxes payable. These increases are due primarily to the larger portfolio of properties and the increase in notes payable. Short term debt consists of normal trade payables and the current portion of mortgages payable.
During the fiscal year $16.5 million of funds were provided from the Dividend Reinvestment and Share Purchase Plan. The Trust made distributions of $83.8 million to shareholders, paid $274.6 million to acquire properties and complete the construction of the Six Flags Factory Outlet Center, and invested $8 million in expansion and improvement of properties.
Other sources of funds are available to the Trust. Based on management's internal valuation of the Trust's properties, most of which are free and clear of mortgages, the estimated value is considerably in excess of the outstanding mortgage indebtedness totaling $65.6 million. Accordingly, management believes that potential exists for additional mortgage financing as well as unsecured borrowing capacity from public debt financing, banks and other lenders.
(b) Results of Operations
Fiscal year Ended July 31, 1997 Compared to Fiscal Year Ended July 31, 1996
In fiscal 1997, total revenues increased $39.2 million to $206.8 million. The increase was in the rental income and related revenues category and came from properties in the portfolio which were acquired in fiscal 1997 or were owned for less than a full year in fiscal 1996. Interest and dividend income decreased slightly.
Operating expenses increased $32.7 million to $127.6 million. Operating costs, real estate and other taxes, and depreciation and amortization increased primarily because of property acquisitions. Interest expense increased $10.7 million to $28.3 million due to a higher level of outstanding debt during fiscal 1997. The increase in the provision for doubtful accounts reflects a larger revenue base and a higher level of receivables. Administrative expenses as a percent of revenue declined to 1.1% of revenue from 1.6% due to increased revenue from newly acquired properties; these costs do not increase in direct proportion to revenue due to economies of scale.
Income before (loss)/gain on sale of properties and securities increased $6.9 million to $77 million. During the fiscal year three former Nichols stores, in Annville and Hanover, Pennsylvania and Lumberton, North Carolina were sold.
Net income applicable to shares of beneficial interest increased $6.1 million to $77 million and earnings per share of beneficial interest increased to $1.31 per share from $1.25 per share.
Funds from operations, defined as net income plus depreciation and amortization of real estate less net gains from the sale of assets, increased $11.9 million to $102 million. Funds from operations per share of beneficial interest, defined as funds from operations less preferred stock dividend requirements divided by the weighted average number of shares of beneficial interest outstanding, increased to $1.74 from $1.60. Funds from operations do not necessarily represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to net income as an indicator of the Trust's operating performance or as an alternative to cash flow as a measure of liquidity.
During fiscal 1997, distributions declared and paid were $1.435 per share of beneficial interest, a $.04 per share increase over fiscal 1996. The most recent distribution declaration for shares of beneficial interest was $.365 per share which is $1.46 per share on an annualized basis.
Fiscal Year Ended July 31, 1996 Compared to Fiscal Year Ended July 31, 1995
In fiscal 1996, total revenues increased $37 million to $167.6 million. Rental income and related revenues increased $36.4 million to $162.8 million. The increase in rental revenue came primarily from properties in the portfolio which were acquired in fiscal 1996 or were owned for less than a full year in fiscal 1995. In addition, increased revenue from all property categories, apartments, factory outlets and shopping centers, owned prior to fiscal 1995 contributed to the rental revenue increase.
Interest and dividend income increased $.7 million due to higher average investment balances.
Operating expenses increased $29.3 million to $94.9 million. Operating costs, real estate and other taxes, and depreciation and amortization increased primarily because of property acquisitions. Interest expense increased $10.4 million to $17.6 million due to a higher level of outstanding debt during fiscal 1996. The increase in the provision for doubtful accounts reflects a much larger revenue base and a higher level of receivables. Administrative expenses as a percent of revenue declined to 1.6% from 1.9% due to increased revenue from newly acquired properties; these costs do not increase in direct proportion to revenue due to economies of scale.
Income before gain/(loss) on the sale of properties and securities increased $7.6 million to $70.1 million. During fiscal 1996, a shopping center in Chinoe, Kentucky and two former Nichols stores in Harrisonburg, Virginia and New Bern, North Carolina were sold for a net gain of $.5 million. The $.1 million loss on the sale of securities was due to bonds being called which had been issued at a premium.
Net income increased $7.8 million to $70.5 million and earnings per share of beneficial interest increased to $1.25 per share from $1.19 per share.
Funds from operations, defined as net income plus depreciation and amortization of real estate less net gains from the sale of assets, increased $12.6 million to $90.1 million, and funds from operations per share of beneficial interest increased to $1.60 from $1.47. Funds from operations do not necessarily represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to net income as an indicator of the Trust's operating performance or as an alternative to cash flow as a measure of liquidity.
During fiscal 1996, distributions declared and paid were $1.395 per share of beneficial interest, a $.04 per share of beneficial interest increase over the preceding year.
Fiscal Year Ended July 31, 1995 Compared to Fiscal Year Ended July 31, 1994
In fiscal 1995, total revenues increased $29.6 million to $130.6 million. Rental income and related revenues increased $30 million to $126.4 million. The rental revenue increase came primarily from properties in the portfolio which were acquired in fiscal 1995 or were owned for less than a full year in fiscal 1994. In addition, increased revenue from all property types owned prior to fiscal 1994 contributed to the rental revenue increase.
Interest and dividend income decreased $.4 million because of lower investment balances. Balances were lower because funds were used for property acquisitions and expansions.
Operating expenses increased $18.7 million to $65.6 million. Operating costs, real estate taxes and depreciation and amortization increased primarily because of property acquisitions. Interest expense increased because of the issuance of $181 million face amount of Senior Notes. The decrease in the provision for doubtful accounts was mostly due to higher recoveries in fiscal 1995. In fiscal 1995 the Trust had bad debt recoveries of $501,000 versus $261,000 in fiscal 1994. Administrative expenses as a percentage of revenue decreased to 1.9% from 2.67% due primarily to increased revenue from newly acquired properties; these costs do not vary in proportion to revenue.
Income before gains on sales of properties and securities increased $11.2 million to $62.5 million. During the year, a very small shopping center in Millersberg, Ohio and an outparcel at the New Bern, North Carolina shopping center were sold. Net income increased $10.4 million to $62.7 million and earnings per share of beneficial interest increased to $1.19 from $1.06.
Funds from operations, defined as net income plus depreciation and amortization of real estate less gains from the sale of assets, increased $14.9 million to $77.5 million, and funds from operations per share of beneficial interest increased to $1.47 from $1.27. Funds from operations do not represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to net income as an indicator of the Trust's operating performance or as an alternative to cash flow as a measure of liquidity.
During fiscal 1995, distributions declared and paid were $1.355 per share, a $.04 per share of beneficial interest increase over the preceding fiscal year.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The response to this item is included in Pages to attached to this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Trustees and Executive Officers of the Trust
Item 10 is incorporated herein pursuant to General Instruction G to this Form 10-K by reference to Registrant's definitive proxy statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year.
Executive Officers of the Trust
The executive officers of the Trust and their principal occupations are as follows:
Name Age - ---- ---
William Newman. . . . . . . . . . . .71 Chairman of the Board and Chief Chairman of the Board of Trustees Executive Officer of the Trust and Chief Executive Officer since its organization in 1972; President of the Trust from 1972 to 1988; President of the Trust's corporate predecessor from 1962 to 1972; formerly Chairman of National Association of Real Estate Investment Trusts; active in real estate for more than 47 years.
Arnold Laubich. . . . . . . . . . . .67 President and Chief Operating President, Chief Operating Officer Officer and Trustee of the Trust and Trustee since August 1, 1988; President of Dover Management Corp. (which managed the Trust's properties) from 1972 to 1988; Senior Vice President of the Trust's predecessor from 1962 to 1972.
James M. Steuterman . . . . . . . . .41 Executive Vice President since Executive Vice President and October 1994; Trustee since 1990; Trustee Senior Vice President from 1990 to 1994; Vice President from 1988 to 1990.
Dean Bernstein. . . . . . . . . . . .39 Vice President - Administration Vice President - Administration and Finance since October 1994; and Finance and Trustee Vice President and Trustee since 1992; Assistant Vice President from 1991 to 1992; previously a Vice President in the Real Estate Group at Chemical Bank for three years.
William Kirshenbaum . . . . . . . . .61 Vice President of the Trust since Vice President, Treasurer 1981; Treasurer since 1983.
Leonard N. Cancell. . . . . . . . . .64 Senior Vice President of the Senior Vice President - Operations Trust since August 1, 1988; Senior Vice President of Dover Management from 1972 to 1988; employee of the Trust's predecessor from 1964 to 1972.
Michael I. Brown. . . . . . . . . . .55 Chief Financial Officer since Chief Financial Officer and 1991; Controller of the Trust Controller since 1987.
Irwin E. Kwartler . . . . . . . . . .71 Vice President of the Trust since Vice President 1982; previously National Sales Manager, Kimball Division of Litton Industries.
Steven F. Siegel. . . . . . . . . . .37 General Counsel and Secretary of General Counsel and Secretary the Trust since October 1991.
Joseph Bosco. . . . . . . . . . . . .48 Vice President of the Trust since Vice President -- Apartment 1993; employee of the Trust since Operations 1983.
James DeCicco . . . . . . . . . . . .51 Senior Vice President of the Senior Vice President -- Leasing Trust since March, 1996; Vice President of the Trust since 1992; employee of the Trust since 1991.
Thomas J. Farrell . . . . . . . . . .40 Vice President and employee of Vice President -- Acquisitions the Trust since 1994; formerly a Vice President at The Balcor Company, a real estate company, for five years.
Item 11. Executive Compensation
Item 11 is incorporated herein pursuant to General Instruction G to this Form 10-K by reference to Registrant's definitive proxy statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 12 is incorporated herein pursuant to General Instruction G to this Form 10-K by reference to Registrant's definitive proxy statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A no later than 120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
Item 13 is incorporated herein pursuant to General Instruction G to this Form 10-K by reference to Registrant's definitive proxy statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year.
PART IV
Item 14. Exhibits, Consolidated Financial Statements, Consolidated Financial Statement Schedules, and Reports on Form 8-K
(a) Consolidated Financial Statements. The following documents are filed as a part of this report:
The response to this portion of Item 14 is submitted as a separate section of this report.
(b) Reports on Form 8-K.
1. Form 8-K dated June 18, 1997 containing items 2, 5 and 7.
2. Form 8-K dated June 30, 1997 containing items 2, 5 and 7.
3. Form 8-K dated July 2, 1997 containing items 5 and 7.
4. Form 8-K dated July 31, 1997 containing items 5 and 7.
5. Form 8-K/A dated September 19, 1997 containing items 5 and 7.
(c) Exhibits. The following documents are filed as exhibits to this report:
*3.1 Amended and Restated Declaration of Trust of New Plan Realty Trust filed as Exhibit 99.3 to the Registrant's Form 8-K dated May 24, 1996.
4.1 Specimen Certificate for Shares of Beneficial Interest.
*4.2 Certificate of Designation Supplementing the Amended and Restated Declaration of Trust of New Plan Realty Trust filed as Exhibit 4.1 to the Registrant's Form 8-K dated July 2, 1997.
4.3 Deposit Agreement dated as of July 3, 1997, among New Plan Realty Trust and BankBoston N.A.
4.4 Specimen Certificate for 7.80% Series A Cumulative Step-Up Premium Rate Preferred Shares.
4.5 Specimen Depositary Receipt.
*9.1 Agreement dated February 26, 1979 among William Newman, Joseph Newman and Melvin Newman filed as Exhibit 9 to Registration Statement No. 2-63669.
*9.2 Purchase Agreement dated December 18, 1990 between New Plan Realty Trust and Beleggingsmaatschappij Midas B.V. (presently known as Stichting Pensioenfonds) filed as Exhibit 9.5 to the Registrant's Form 10-K for the fiscal year ended July 31, 1994.
*9.3 Termination of Purchase Agreement dated December 17, 1981 between New Plan Realty Trust and Merchant Navy Officers Pension Fund Trustees Limited (presently known as MNOPF Trustees Limited) filed as Exhibit 9.6 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
10.1 Revolving Credit Agreement by and among New Plan Realty Trust, the Lenders party thereto and The Bank of New York, as agent, dated as of October 29, 1996.
*10.2 Senior Securities Indenture between New Plan Realty Trust and The First National Bank of Boston, as Trustee, dated as of March 29, 1995 filed as Exhibit 4.2 to Registration Statement No. 33-60045.
*10.3 7.75% Senior Note Due April 6, 2005 filed as Exhibit 10.7 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
*10.4 6.8% Senior Note Due May 15, 2002 filed as Exhibit 10.8 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
*10.5 Distribution Agreement dated May 24, 1996 by and among New Plan Realty Trust, Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Smith Barney Inc., filed as Exhibit 1 to the Registrant's Form 8-K dated May 24, 1996.
*10.6 Form of Medium Term Note (Fixed Rate) filed as Exhibit 99.1 to the Registrant's Form 8-K dated May 24, 1996.
*10.7 Form of Medium Term Note (Floating Rate) filed as Exhibit 99.2 to the Registrant's Form 8-K dated May 24, 1996.
*10.8 Distribution Agreement dated December 6, 1996 by and among New Plan Realty Trust, Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and Smith Barney Inc., filed as Exhibit 1 to the Registrant's Form 8-K dated December 12, 1996.
*10.9 Form of Medium Term Note (Fixed Rate) filed as Exhibit 4.1 to the Registrant's Form 8-K dated December 12, 1996.
*10.10 Form of Medium Term Note (Floating Rate) filed as Exhibit 4.2 to the Registrant's Form 8-K dated December 12, 1996.
11 Statement of Computation of Earnings Per Share for the Twelve Months Ended July 31, 1997.
12 Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P. dated October 9, 1997.
27(1) Financial Data Schedule.
______________________________ * Incorporated herein by reference as above indicated. (1) Filed as exhibit to electronic filing only.
(d) Financial Statement Schedules. The following documents are filed as a part of this report:
The response to this portion of Item 14 is submitted as a separate section of this report.
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEW PLAN REALTY TRUST (Registrant)
By:/s/ William Newman ----------------------- William Newman Chief Executive Officer Dated: October 10, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ----
/s/ William Newman Chief Executive Officer October 10, 1997 - ------------------------- and Trustee William Newman
/s/ Arnold Laubich President, Chief Operating October 10, 1997 - ------------------------- Officer and Trustee Arnold Laubich
/s/ Michael I. Brown Chief Financial Officer and October 10, 1997 - ------------------------- Chief Accounting Officer, Michael I. Brown Controller
/s/ James M. Steuterman Executive Vice President October 10, 1997 - ------------------------- and Trustee James M. Steuterman
/s/ Dean Bernstein Vice President - October 10, 1997 - ------------------------- Administration and Finance Dean Bernstein and Trustee
/s/ Melvin Newman Trustee October 10, 1997 - ------------------------- Melvin Newman
- ------------------------- Trustee _________, 1997 Norman Gold
- ------------------------- Trustee _________, 1997 Raymond H. Bottorf
- ------------------------- Trustee _________, 1997 John Wetzler
- ------------------------- Trustee _________, 1997 Gregory White
ANNUAL REPORT ON FORM 10-K
ITEM 8 AND ITEM 14(a)(1), (a)(2) AND (d)
LIST OF CONSOLIDATED FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED JULY 31, 1997
NEW PLAN REALTY TRUST AND SUBSIDIARIES
NEW YORK, NEW YORK
NEW PLAN REALTY TRUST AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of July 31, 1997 and 1996. . . . . . . .
Consolidated Statements of Income for the years ended July 31, 1997, 1996 and 1995. . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Shareholders' Equity for the years ended July 31, 1997, 1996 and 1995. . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended July 31, 1997, 1996 and 1995. . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . .
Schedules
II - Valuation and Qualifying Accounts . . . . . . . . . . . . . .F-19
III - Real Estate and Accumulated Depreciation. . . . . . . . . . .F-20
IV - Mortgage Loans on Real Estate . . . . . . . . . . . . . . . .F-36
All other schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders of New Plan Realty Trust:
We have audited the consolidated financial statements and financial statement schedules of New Plan Realty Trust and Subsidiaries listed in Item 14(a) of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of New Plan Realty Trust and Subsidiaries as of July 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended July 31, 1997 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
New York, New York September 9, 1997
NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 1997 AND 1996
1997 1996 ---- ---- ASSETS:
Real estate, at cost (Notes A and E) Land $ 232,501,644 $ 174,711,789 Buildings and improvements 1,045,273,400 803,229,718
- ------------------------------------ 1,277,775,044 977,941,507
Less accumulated depreciation and amortization 105,866,380 82,523,169
- ------------------------------------ 1,171,908,664 895,418,338
Cash and cash equivalents (Note A) 42,780,757 4,300,261 Marketable securities (Note B) 2,034,599 2,095,481 Mortgages and notes receivable (Note C) 23,106,633 23,597,342 Receivables Trade and notes, net of allowance for doubtful accounts (1997 - $5,581,000; 1996 - $3,976,500) (Note A) 12,035,327 11,586,091 Other (Note D) 1,463,943 1,109,164 Prepaid expenses and deferred charges 4,999,889 5,083,827 Other assets 2,813,978 2,203,221
- ------------------------------------ TOTAL ASSETS $1,261,143,790 $ 945,393,725
====================================
See Notes to Consolidated Financial Statements.
NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 1997 AND 1996
1997 1996 ---- ---- LIABILITIES:
Mortgages payable (Note E) $ 65,572,883 $ 48,935,776 Credit facility (Note E) - 19,500,000 Notes payable, net of unamortized discount 412,633,956 189,490,273 (1997 - $1,366,044; 1996 - $1,509,727) (Note F) Other liabilities (Note G) 33,359,165 24,984,134 Tenants' security deposits 4,622,687 3,129,524 -------------- ------------ TOTAL LIABILITIES 516,188,691 286,039,707 -------------- ------------
COMMITMENTS AND CONTINGENCIES (Notes H,I,J,N and P) - -
SHAREHOLDERS' EQUITY Preferred shares par value $1.00, authorized 1,000,000 shares; issued and outstanding (1997 - 150,000 Series A Cumulative Preferred Shares, 1996 - none), 72,775,000 - $75,000,000 redemption value (Note H) Shares of beneficial interest without par value, unlimited authorization; issued and outstanding (1997 - 58,934,371; 1996 - 58,069,362) (Note H) 738,010,825 719,080,157 Less: loans receivable for the purchase of shares of beneficial interest (Note H) 2,814,366 3,083,573 Add: unrealized gain on securities reported at fair value (Note B) 1,057,537 643,141 -------------- ------------ 809,028,996 716,639,725 Less distributions in excess of net income 64,073,897 57,285,707 -------------- ------------ TOTAL SHAREHOLDERS' EQUITY 744,955,099 659,354,018 -------------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,261,143,790 $945,393,725 ============== ============
See Notes to Consolidated Financial Statements.
NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995
1997 1996 1995 ---- ---- ---- Revenues: Rental income and related revenues $202,093,168 $162,821,434 $ 126,447,966 (Notes A and J) Interest and dividend income (Notes B and C) 4,727,760 4,784,547 4,128,163 ------------ ------------ ------------- 206,820,928 167,605,981 130,576,129 ------------ ------------ ------------- Operating Expenses: Operating costs 51,909,521 38,865,276 29,960,955 Leasehold rent (Note I) 675,434 665,237 614,084 Real estate and other taxes 18,448,503 15,787,643 11,809,539 Interest expense 28,256,473 17,561,362 7,174,028 Depreciation and amortization 25,005,629 20,004,378 15,055,225 Provision for doubtful accounts 3,282,871 1,983,634 958,394 ------------ ------------ ------------- Total operating expenses 127,578,431 94,867,530 65,572,225 ------------ ------------ ------------- 79,242,497 72,738,451 65,003,904
Other Expenses: Administrative expenses 2,203,045 2,616,138 2,515,669 ------------ ------------ ------------- Income Before (Loss)/Gain on Sale of Properties and Securities: 77,039,452 70,122,313 62,488,235
(Loss)/gain on sale of properties, net (9,625) 540,209 227,638 Gain/(loss) on sale of securities, net 6,968 (141,711) - ------------ - -------------------------------- (2,657) 398,498 227,638 ------------ ------------ ------------- Net Income $ 77,036,795 $ 70,520,811 $ 62,715,873 ------------ ------------ ------------- Net Income applicable to Shares of Beneficial Interest $ 76,575,795 $ 70,520,811 $ 62,715,873 ------------ ------------ ------------- Net Income Per Share of Beneficial Interest (Note A) $1.31 $1.25 $1.19 ------------ ------------ ------------- Cash Distribution Per Share of Beneficial Interest $1.435 $1.395 $1.355 ------------ ------------ ------------- See Notes to Consolidated Financial Statements.
NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995 (NOTE M)
1997 1996 1995 ---- ---- ---- OPERATING ACTIVITIES - -------------------- Net income $ 77,036,795 $70,520,811 $ 62,715,873 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,005,629 20,004,378 15,055,225 Gain on sale of properties, net 9,625 (540,209) (227,638) (Gain)/Loss on sale of securities, net (6,968) 141,711 - ------------ ----------- ----------- 102,045,081 90,126,691 77,543,460 Changes in operating assets and liabilities, net: Increase in trade and notes receivable (2,053,736) (5,775,617) (1,165,765) (Increase)/decrease in other receivables (354,781) 12,714 506,489 Increase in allowance for doubtful accounts 1,604,500 1,054,000 591,000 Increase in other liabilities 3,475,030 8,239,264 6,492,376 Decrease/(increase) in net sundry assets and liabilities 604,983 (250,994) (907,583) ------------ ----------- ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 105,321,077 93,406,058 83,059,977 ------------ ----------- ------------ INVESTING ACTIVITIES - -------------------- Sales of marketable securities 484,314 4,274,356 424,783 Purchases of marketable securities (2,068) - - Net proceeds from the sale of properties 3,862,557 3,473,913 1,025,000 Purchase and improvement of properties (282,606,924) (186,008,486) (136,310,299) Repayment of mortgage notes receivable 490,709 820,662 36,172 ------------ ----------- ------------ NET CASH USED IN INVESTING ACTIVITIES (277,771,412) (177,439,555) (134,824,344)
See Notes to Consolidated Financial Statements
(Continued on next page) NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995 (NOTE M) (CONTINUED FROM PREVIOUS PAGE)
1997 1996 1995 ---- ---- ---- FINANCING ACTIVITIES - -------------------- Distributions to shareholders (83,824,985) (78,961,556) (71,616,427) Issuance of preferred shares pursuant to a public offering, net of offering costs 72,775,000 Issuance of shares of beneficial interest pursuant to dividend reinvestment plan 16,475,143 15,126,326 13,472,493 Issuance of shares of beneficial interest pursuant to public offering, net of loans receivable and offering costs 81,227,800 - Issuance of shares of beneficial interest upon exercise of stock options 2,455,525 164,500 21,425 Proceeds from short-term borrowings 12,000,000 19,500,000 352,000,000 Repayment of short-term borrowings (31,500,000) - (359,500,000) Proceeds from sale of notes 223,143,682 10,000,000 179,322,720 Payment of deferred financing costs (956,990) Principal payments on mortgages (862,741) (364,422) (407,892) Repayment of mortgages (10,533,682) (12,059,000) Repayment of loans receivable for the purchase of shares of beneficial interest 269,207 285,985 260,863 ------------ ------------- -------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 210,930,831 36,444,951 100,537,192 ------------ ------------- -------------- INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 38,480,496 (47,588,546) 48,772,825
Cash and cash equivalents at beginning of year 4,300,261 51,888,807 3,115,982 ------------ ------------- -------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 42,780,757 $ 4,300,261 $ 51,888,807 ============ ============= ============== See Notes to Consolidated Financial Statements.
Notes To Consolidated Financial Statements
Note A - Summary of Significant Accounting Policies
Organization and Income Taxes: New Plan Realty Trust was organized July 31, 1972 as a Massachusetts Business Trust. New Plan Realty Trust and subsidiaries (the "Trust") have elected to be taxed as a Real Estate Investment Trust ("REIT") under the applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the Trust does not pay Federal income tax on income as long as income distributed to shareholders is at least equal to 95% of real estate investment trust taxable income and pays no Federal income tax on capital gains distributed to shareholders. The Trust may be subject to tax by certain states that do not recognize the REIT. Provision for such taxes has been included in real estate and other taxes.
Basis of Consolidation: The consolidated financial statements include the accounts of New Plan Realty Trust and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Certain prior period amounts have been reclassified to conform to the current year presentation.
Real Estate: Real estate is carried at cost less accumulated depreciation and amortization. For financial reporting purposes, depreciation is calculated on the straight-line method based on the estimated useful lives of the assets ranging from 5 to 40 years. Amortization of leasehold improvements is calculated on a straight-line basis over the shorter of the life of the lease or the estimated useful life of the asset. If there is an event or a change in circumstances that indicates that the basis of the Trust's property may not be recoverable the Trust's policy is to assess any impairment in value by making a comparison of the current and projected operating cash flows (excluding interest and income taxes) of the property over its remaining useful life, on an undiscounted basis, to the carrying amount of the property. Such carrying amounts would be adjusted, if necessary, to reflect an impairment in the value of the property.
The Trust records sales when, among other criteria, the parties are bound by the terms of a contract, all consideration has been exchanged and all conditions precedent to closing have been performed. These conditions are usually met at the time of closing. The cost and related accumulated depreciation of assets sold are removed from the respective accounts and any gain or loss is recognized in income.
New Accounting Standards: During 1997, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards: (i) No. 128 "Earnings Per Share" ("SFAS 128"), which will be effective for financial statements for both interim and annual periods ending after December 15, 1997, (ii) No. 129 "Disclosure of Information About Capital Structure" ("SFAS 129"), which is effective for financial statements for periods ending after December 15, 1997, (iii) No. 130 "Reporting Comprehensive Income" ("SFAS 130"), which is effective for fiscal years beginning after December 15, 1997, and (iv) No. 131 "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal years beginning after December 15, 1997. Management believes that the implementation of SFAS 128, 129 and 130 will not have a material impact on the Trust's financial statements. The Trust has yet to determine the impact of SFAS 131.
Cash Equivalents: Cash equivalents consist of short-term, highly liquid debt instruments with original maturities of three months or less. Items classified as cash equivalents include insured bank certificates of deposit and commercial paper. At times cash balances at a limited number of banks may exceed insurable amounts. The Trust believes it mitigates its risk by investing in or through major financial institutions. Recoverability of investments is dependent upon the performance of the issuer.
Revenue Recognition: Lease agreements between the Trust and retail tenants generally provide for additional rentals based on such factors as percentage of tenants' sales in excess of specified volumes, increases in real estate taxes, increases in Consumer Price Indices and common area maintenance charges. These additional rentals are generally included in income when reported to the Trust or when billed to tenants.
The Trust recognizes rental income from leases with scheduled rent increases on a straight-line basis over the lease term. Deferred rent receivable, included in trade and notes receivable, represents the difference between the straight-line rent and amounts currently due.
Concentration of Credit Risk: No tenant or single property accounts for more than 5.0% of the Trust's revenues.
Net Income Per Share of Beneficial Interest: Net income per share of beneficial interest is calculated using a weighted average number of shares outstanding during each year: 1997 - 58,461,056 shares; 1996 - 56,483,827 shares; 1995 - 52,894,355 shares.
Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The most significant estimates relate to depreciation and valuation of real estate.
Internal Software Costs: Any costs associated with modifying computer software for the year 2000 are expensed as incurred. Management does not believe these costs will be material.
Note B - Marketable Securities
The Trust has classified all investments in debt and equity securities as available-for-sale. All investments are recorded at current market value with an offsetting adjustment to shareholders' equity.
July 31, 1997 1996 - --------------------------------------------------------------------------- Equity Equity Debt
Amortized cost/cost basis $ 977,061 $ 977,061 $ 475,279 Unrealized holdings gains 1,057,538 643,141 -- Unrealized holdings losses -- -- -- ---------- ----------------------------- Fair value $2,034,599 $ 1,620,202 $ 475,279
The net increase in unrealized holding gains that has been included as a separate component of shareholders' equity is $414,396 for 1997. The weighted average method is used to determine realized gain or loss on securities sold. The market value of marketable securities is based on quoted market prices as of July 31, 1997 and 1996.
Note C - Mortgages & Notes Receivable
Mortgages and Notes Receivable are collateralized principally by real property and consist of the following:
July 31, 1997 1996 - ---------------------------------------------------------------------------
10% purchase money first mortgage, due August 31, 1998 $ 5,180,000 $ 5,420,000 9.38% purchase money first mortgage, due July 25, 1998 4,205,000 4,610,000 9.375% purchase money first mortgage, due July 27, 2002 10,350,000 10,350,000 12% leasehold mortgage, due June 1, 2011 890,273 913,999 10.5% second mortgage due February 1, 1999 - 500,000 11.5% note, due April 30, 2004 236,860 258,843 8.75% purchase money first mortgage, due July 23, 1998 794,500 794,500 7.2% purchase money first mortgage, due May 9, 2001 750,000 750,000 8.75% purchase money first mortgage, due July 23, 2001 700,000 - ------------ ----------- $ 23,106,633 $23,597,342 - ---------------------------------------------------------------------------
Note D - Other Receivables
July 31, 1997 1996
Interest and dividends $ 599,314 $ 312,733 Notes receivable 338,250 282,055 Due from officers, trustees and employees (1) 496,564 488,271 Miscellaneous receivables 29,815 26,105 ------------ ----------- $ 1,463,943 $ 1,109,164 - ---------------------------------------------------------------------------
(1) Amounts, which are interest bearing, are either due on demand or have scheduled maturities.
Note E - Mortgages and Credit Facility
Mortgages are collateralized by real property with a carrying value of $182,443,000 before accumulated depreciation and amortization. As of July 31, 1997, mortgages payable bear interest at rates ranging from 4.30% to 10.75%, having a weighted average rate of 7.79% per annum and mature from 1998 to 2010.
Scheduled principal payments during each of the next five fiscal years and thereafter are approximately as follows:
Year Ending July 31, Amount - --------------------------------------------------------------------------- 1998 $ 2,895,014 1999 10,427,652 2000 17,789,006 2001 6,962,917 2002 10,034,539 Thereafter 17,463,755 ------------ Total $ 65,572,883
The Trust has an unsecured revolving credit facility which provides for up to $50 million of borrowings until October 28, 1997. At July 31, 1997 there were no amounts outstanding under this facility. At the time of borrowing, the Trust can choose from three interest rate options. There are restrictive covenants that place a ceiling on total indebtedness of the lesser of 65% of tangible net worth or $350,000,000, a ceiling on mortgage indebtedness of $105,000,000, a minimum interest coverage ratio of 2.5 to 1 and a minimum tangible net worth of $400,000,000.
The Trust has outstanding approximately $1.4 million of letters of credit as of July 31, 1997.
Interest costs capitalized for the years ended July 31, 1997, 1996, and 1995 were approximately $868,000, $203,000, and $1,161,000, respectively.
Note F - Notes Payable
Notes Payable consists of the following:
Face Amount Description ($ in millions) Due Date 1997 1996 - ----------- --------------- -------- ---- ---- 7.75% Senior unsecured notes effective interest rate 7.95%, net of unamortized discount: 1997 - $1,132,255; 1996 - $1,236,986 $100 4/6/2005 $98,867,745 $98,763,014
6.80% Senior unsecured notes, effective interest rate 6.87% net of unamortized discount: 1997 - 233,789; 1996 - $272,741 81 5/15/2002 80,766,211 80,727,259
7.97% unsecured notes 10 8/14/2026 10,000,000 10,000,000
Variable rate unsecured notes 49 8/3/99 49,000,000
Variable rate unsecured notes 10 8/3/98 10,000,000
5.95% unsecured notes 49 11/2/26 49,000,000
7.65% unsecured notes 25 11/2/26 25,000,000
7.68% unsecured notes 20 11/2/26 20,000,000
Variable rate unsecured notes 40 5/15/00 40,000,000
7.35% unsecured notes 30 6/15/07 30,000,000 ------------ ------------ Total $412,633,956 $189,490,273 - ---------------------------------------------------------------------------
The Notes are subordinate to mortgages payable and rank equally with borrowings under the revolving credit facility. Where applicable, the discount is being amortized over the life of the respective Notes using the effective interest method. Interest is payable semi-annually or quarterly and the principal is due at maturity. Among other restrictive covenants, there is a restrictive covenant that limits the amount of total indebtedness to 65% of total assets. For the year ended July 31, 1997, $342,412 of amortized discount and issuing costs were included in interest expense.
Note G - Other Liabilities
July 31, 1997 1996 - ---------------------------------------------------------------------------
Accounts payable $ 2,095,888 $ 2,750,313 Real estate taxes payable 6,920,090 4,769,689 State and local taxes payable 2,369,004 3,906,163 Interest payable 7,779,381 3,633,896 Amounts due seller of property 1,466,713 970,104 Professional fees and costs 1,665,753 728,628 Accrued construction costs 4,871,656 -- Acquisition costs 1,884,419 2,574,000 Other 2,968,748 5,332,891 Deferred advance rent expense 1,337,513 318,450 ------------ ----------- $ 33,359,165 $24,984,134 - ---------------------------------------------------------------------------
Note H - Shareholders Equity
The Series A Cumulative Preferred Shares are redeemable at the option of the Trust on or after June 15, 2007 at the liquidation preference of $500 a share. The preferred shares pay dividends quarterly at the rate of 7.8% of the liquidation preference per annum through September 15, 2012 and at the rate of 9.8% of the liquidation preference per annum thereafter. In connection with the issuance of the Series A Cumulative Preferred Shares, 1,500,000 depositary shares, each representing a 1/10 fractional interest in a share of cumulative preferred, were sold to the public.
The Trust has the following stock option plans (the "Plans") pursuant to which the Trust has granted (and in one instance, may continue to grant) options to purchase Shares of Beneficial Interest of the Trust (the "Shares") to officers, trustees and certain key employees of the Trust: (i) the 1985 Incentive Stock Option Plan (the "1985 Plan"), (ii) the March 1991 Stock Option Plan (the "March 1991 Plan"), (iii) the Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), and (iv) the 1991 Stock Option Plan (the "1991 Plan"). The exercise price of a Share pursuant to each of the Plans is or was required (as the case may be) to be no less than the fair market value of a Share on the date of grant. Under the 1985 Plan, the 1991 Plan (with the exception of certain option grants of 10,000 Shares or more, as discussed below) and the Non-Qualified Plan, options are exercisable 20% per year commencing one year from the date of grant. In the case of certain option grants of 10,000 Shares or more under the 1991 Plan, such option grants are exercisable 10% after the first anniversary of the date of grant, 25% after the second anniversary of the date of grant, 45% after the third anniversary of the date of grant, 70% after the fourth anniversary of the date of grant and 100% after the fifth anniversary of the date of grant. In the case of the March 1991 Plan, 30% of the options granted are exercisable on the third anniversary of the date of grant and, thereafter, an additional 10% of the granted options are exercisable on a yearly basis. Future option grants can be made only under the 1991 Plan.
The following table shows the activity and balances for each stock option plan during the fiscal years indicated.
Non- March 1985 Qualified 1991 1991 Options Plan Plan Plan Plan - --------------------------------------------------------------------------- Outstanding July 31, 1994 345,500 5,000 1,300,000 179,000
Exercised (1,200) -- -- -- Cancelled (17,700) -- -- (6,000) Granted 25,000 -- -- 249,250 ------- ------- --------- -------- Outstanding July 31, 1995 351,600 5,000 1,300,000 422,250
Exercised (5,000) -- -- (4,000) Cancelled (800) -- -- (20,500) Granted 3,200 -- -- 31,300 ------- ------- --------- -------- Outstanding July 31, 1996 349,000 5,000 1,300,000 429,050
Exercised (72,700) -- -- (42,100) Cancelled -- -- -- (26,800) Granted -- -- -- 571,750 ------- ------- --------- -------- Outstanding July 31, 1997 276,300 5,000 1,300,000 931,900 - --------------------------------------------------------------------------- Options exercisable at July 31, 1997 232,480 4,000 910,000 173,660 Average outstanding option price, which was the market price of the shares on the dates of grant $ 21.75 $ 21.88 $ 18.88 $ 21.71
Average price of options exercised during fiscal 1997 $ 21.72 -- -- $ 20.82 - --------------------------------------------------------------------------- The Trust has adopted the disclosure-only provision of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Accordingly, no compensation expense has been recognized for the options described above which were granted on or after August 1, 1995. Had compensation cost for these options been determined based on the fair value on the grant date consistent with the provisions of SFAS 123, the Trust's net earnings and earnings per share of beneficial interest would have been changed to the following pro forma amounts:
Net Income Per Share of Beneficial Net Income Interest (in thousands) --------------- -------------- Year ended July 31, 1997 $76,465 $1.31
Year ended July 31, 1996 70,510 1.25
The Trust has a Dividend Reinvestment and Share Purchase Plan (the "Plan") whereby shareholders may invest cash distributions and make optional cash payments to purchase Shares of the Trust without payment of any brokerage commission or service charge. The price per share of the additional shares to be purchased with invested cash distributions is the midpoint between the day's high and low sales prices on the New York Stock Exchange, less 5%.
The Trust has made loans to officers, trustees and employees primarily for the purpose of purchasing its Shares. These loans are demand and term notes bearing interest at rates ranging from 5% to 9.75%. Interest is payable quarterly.
Note I - Lease Agreements
The Trust has entered into leases, as lessee, in connection with ground leases for shopping centers which it operates, an office building which it sublets and administrative office space for the Trust. These leases are accounted for as operating leases. The minimum annual rental commitments during the next five fiscal years and thereafter are approximately as follows (000's omitted):
Year Ending July 31, Amount - ---------------------------------------------------------------------------
1998 $1,045 1999 1,050 2000 1,049 2001 1,052 2002 1,183 Thereafter 20,332 ------ Total $25,711 - ---------------------------------------------------------------------------
For the years ended July 31, 1996 and 1995, the lease for office space included contingent rentals for real estate tax escalations and operating expense in the amount of $100,000, and $111,000, respectively. There were no contingent rentals for the year ended July 31, 1997. In addition, ground leases provide for fixed rent escalations and renewal options.
Note J - Rental Income Under Operating Leases
Minimum future rentals to be received during the next five fiscal years and thereafter with initial or remaining noncancellable lease terms in excess of one year are approximately as follows (000's omitted):
Year Ending July 31, Amount - ---------------------------------------------------------------------------
1998 $118,157 1999 106,241 2000 90,243 2001 75,217 2002 63,790 Thereafter 385,975 -------- Total $839,623 - ---------------------------------------------------------------------------
The above table assumes that all leases which expire are not renewed, therefore neither renewal rentals nor rentals from replacement tenants are included.
Minimum future rentals do not include contingent rentals, which may be received under certain leases on the basis of percentage of reported tenants' sales volume, increases in Consumer Price Indices, common area maintenance charges and real estate tax reimbursements. Contingent rentals included in income for the years ended July 31, 1997, 1996 and 1995 amounted to approximately $28,933,000, $26,173,000, and $19,388,000, respectively.
Note K - Pro Forma Financial Information (Unaudited)
The Trust acquired 16 shopping centers and 13 apartment complexes during the year ended July 31, 1997. The pro forma financial information for the years ended July 31, 1997 and 1996 shown below is based on the historical statements of the Trust after giving effect to the acquisitions as if such acquisitions took place on August 1, 1996 and 1995, respectively. The $280,814,000 aggregate acquisition cost included existing mortgages and $259,914,000 in cash.
The pro forma financial information is presented for informational purposes only and may not be indicative of results that would have actually occurred had the acquisitions taken place at the dates indicated or of what may occur in the future. (Amounts In Thousands, Except Share Data) Year Ended July 31, 1997 1996 - ---------------------------------------------------------------------------
Pro forma total revenues $ 228,038 $ 209,212 Pro forma net income $ 79,322 $ 73,900 Pro forma earnings per share of beneficial interest $ 1.36 $ 1.31 - ---------------------------------------------------------------------------
Note L - Quarterly Financial Information (Unaudited) (Amounts In Thousands, Except Share Data)
Income Before Gain on Sale Year Ended of Property Net Earnings July 31, Revenue and Securities Income Per Share - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- First $ 47,783 $ 19,076 $ 19,076 $ .33 Second 51,147 19,023 19,092 .33 Third 52,066 19,224 19,088 .32 Fourth 55,825 19,716 19,781 .33 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- First $ 37,795 $ 16,273 $ 16,274 $ .31 Second 41,523 17,230 18,012 .31 Third 43,353 17,799 17,297 .30 Fourth 44,935 18,820 18,938 .33 - ---------------------------------------------------------------------------
Note M - Supplemental Cash Flow Information
The Trust entered into the following non-cash investing and financing activities:
Year Ended July 31, 1997 1996 - --------------------------------------------------------------------------- Mortgages payable assumed in the acquisition of properties $ 17,500,000 $ 32,538,000 Mortgages receivable in connection with the sale of properties $ 700,000 $ 1,544,500
State and local income taxes paid for the year ended July 31, 1997 were $872,000. No state and local income taxes were paid by the Trust for the year ended July 31, 1996. Interest paid for the years ended July 31, 1997 and 1996 was $24,642,000 and $17,085,000, respectively. - ---------------------------------------------------------------------------
Note N - Retirement Savings Plan
The Trust has a Retirement Savings Plan (the "Savings Plan"). Participants in the Savings Plan may elect to contribute a portion of their earnings to the Savings Plan and the Trust may, at the discretion of the Board of Trustees, make a voluntary contribution to the Savings Plan. For the years ended July 31, 1997, 1996 and 1995, the Trust's expense for the Savings Plan was $250,000, $228,000 and $191,000, respectively.
- ---------------------------------------------------------------------------
Note O - Financial Instruments
The estimated fair values of the Trust's financial instruments are as follows (000's omitted)
At July 31, 1997 1996 - --------------------------------------------------------------------------- Corres- Carrying Fair Carrying Fair ponding Value Value Value Value Footnote -------- ----- -------- ----- -------- Assets:
Cash and cash equivalents $ 42,781 $ 42,781 $ 4,300 $ 4,300 A Marketable securities 2,035 2,035 2,095 2,095 B Mortgages and notes receivable 23,107 24,200 23,597 (1) C Other receivables 1,464 1,464 1,109 (1) D
Liabilities:
Mortgages payable 65,573 67,500 48,935 (2) E Notes payable 412,634 429,200 189,490 (2) F Other liabilities 35,359 35,359 24,984 24,984 G
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable:
Cash and cash equivalents: The carrying amount approximates fair value because of the short maturity of those instruments.
Marketable securities: Fair value is based on quoted market prices in accordance with SFAS 115.
(1) Mortgages and notes receivable: The fair value approximates the carrying value and is estimated based on discounting the future cash flows at a year-end risk adjusted lending rate that the Trust would utilize for loans of similar risk and duration.
(2) Mortgages payable and Notes payable: The fair value approximates the carrying value and is estimated based on discounting future cash flows at a year-end adjusted borrowing rate which reflects the risks associated with mortgages and notes of similar risk and duration.
- --------------------------------------------------------------------------- Note P - Subsequent Events
Subsequent to July 31, 1997 the Trust purchased one apartment complex containing 184 units and three shopping centers containing an aggregate of approximately 479,000 gross leasable square feet. The properties are located in New York, North Carolina and Florida. The aggregate purchase price for such properties was approximately $28.7 million.
On August 28, 1997 the Trustees declared a cash distribution to shareholders of record of the shares of beneficial interest as of September 18, 1997 in the amount of $.365 per share (approximately $21.5 million) payable on October 7, 1997.
On August 21, 1997 the Trustees declared a cash distribution to shareholders of record of the Series A Cumulative Preferred Shares as of September 1, 1997 in the amount of $8.125 per share ($.8125 per depositary share, approximately $1,220,000) payable on September 15, 1997.
NEW PLAN REALTY TRUST AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II
Additions Charged Balance at to Costs Credited Balance Beginning and to Other at End Description of Period Expenses Revenues Deductions of Period - ----------- ---------- -------- -------- ---------- --------- Year Ended July 31, 1997 - ------------- Allowance for doubtful accounts $ 3,976,500 $ 3,282,871 -- $ 1,678,371(1) $ 5,581,000
Year Ended July 31, 1996 - ------------- Allowance for doubtful accounts $ 2,922,500 $ 1,966,715 - $ 912,715(1) $ 3,976,500
Year Ended July 31, 1995 - ------------- Allowance for doubtful accounts $ 2,331,500 $ 993,710 -- $ 402,710(1) $ 2,922,500
- ------------------- (1) Trade receivables charged to the reserve.
(1) Aggregate cost is the same for Federal income tax purposes
(1) Aggregate cost is the same for Federal income tax purposes
NEW PLAN REALTY TRUST REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III
JULY 31, 1997 (continued)
Reconciliation of "Real Estate and Accumulated Depreciation":
1997 1996 1995 ---- ---- ---- INVESTMENT IN REAL ESTATE Balance at beginning of period $ 977,941,507 $ 765,080,457 $ 621,342,318
Additions during the period: Land 58,502,501 40,640,504 23,964,530 Buildings and improvements 246,887,815 177,887,917 120,636,110 -------------- ------------- ------------- 1,283,331,823 983,608,878 765,942,958
Less: Costs of assets sold and written-off 5,556,779 5,667,371 862,501 -------------- ------------- ------------- Balance at end of period $1,277,775,044 $ 977,941,507 $ 765,080,457 ============== ============= =============
ACCUMULATED DEPRECIATION Balance at beginning of period $82,523,169 $64,006,509 $ 49,101,916
Additions charged to operating expenses 24,620,418 19,724,387 14,968,266 -------------- ------------- ------------- 107,143,587 83,730,896 64,070,182
Less: Accumulated depreciation on assets sold and written-off 1,277,207 1,207,727 63,673 -------------- ------------- ------------- Balance at end of period $ 105,866,380 $ 82,523,169 $ 64,006,509 ============== ============= =============
Year Ended July 31,
1997 1996 1995
Balance, beginning of period $23,597,342 $22,873,504 $22,909,676
Additions during period: New mortgage loans 700,000 1,544,500 --
Reductions during period: Collection of principal (1,190,709) (820,662) (36,172)
------------ ----------- -----------
Balance, end of period $23,106,633 $23,597,342 $22,873,504 =========== =========== ===========
EXHIBIT INDEX
Page Number in Signed Exhibit No. Description Registration Statement
*3.1 Amended and Restated Declaration of Trust of New Plan Realty Trust filed as Exhibit 99.3 to the Registrant's Form 8-K dated May 24, 1996.
4.1 Specimen Certificate for Shares of Beneficial Interest.
*4.2 Certificate of Designation Supplementing the Amended and Restated Declaration of Trust of New Plan Realty Trust filed as Exhibit 4.1 to the Registrant's Form 8-K dated July 2, 1997.
4.3 Deposit Agreement dated as of July 3, 1997, among New Plan Realty Trust and BankBoston N.A.
4.4 Specimen Certificate for 7.80% Series A Cumulative Step-Up Premium Rate Preferred Shares.
4.5 Specimen Depositary Receipt.
*9.1 Agreement dated February 26, 1979 among William Newman, Joseph Newman and Melvin Newman filed as Exhibit 9 to Registration Statement No. 2- 63669.
*9.2 Purchase Agreement dated December 18, 1990 between New Plan Realty Trust and Beleggingsmaatschappij Midas B.V. (presently known as Stichting Pensioenfonds) filed as Exhibit 9.5 to the Registrant's Form 10-K for the fiscal year ended July 31, 1994.
*9.3 Termination of Purchase Agreement dated December 17, 1981 between New Plan Realty Trust and Merchant Navy Officers Pension Fund Trustees Limited (presently known as MNOPF Trustees Limited) filed as Exhibit 9.6 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
10.1 Credit Agreement by and among New Plan Realty Trust, the Lenders party thereto and The Bank of New York, as agent, dated as of October 29, 1996.
*10.2 Senior Securities Indenture between New Plan Realty Trust and The First National Bank of Boston, as Trustee, dated as of March 29, 1995 filed as Exhibit 4.2 to Registration Statement No. 33-60045.
*10.3 7.75% Senior Note Due April 6, 2005 filed as Exhibit 10.7 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
*10.4 6.8% Senior Note Due May 15, 2002 filed as Exhibit 10.8 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
*10.5 Distribution Agreement dated May 24, 1996 by and among New Plan Realty Trust, Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Smith Barney Inc., filed as Exhibit 1 to the Registrant's Form 8-K dated May 24, 1996.
*10.6 Form of Medium Term Note (Fixed Rate) filed as Exhibit 99.1 to the Registrant's Form 8-K dated May 24, 1996.
*10.7 Form of Medium Term Note (Floating Rate) filed as Exhibit 99.2 to the Registrant's Form 8-K dated May 24, 1996.
*10.8 Distribution Agreement dated December 6, 1996 by and among New Plan Realty Trust, Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and Smith Barney Inc., filed as Exhibit 1 to the Registrant's Form 8-K dated December 12, 1996.
*10.9 Form of Medium Term Note (Fixed Rate) filed as Exhibit 4.1 to the Registrant's Form 8-K dated December 12, 1996.
*10.10 Form of Medium Term Note (Floating Rate) filed as Exhibit 4.2 to the Registrant's Form 8-K dated December 12, 1996.
11 Statement of Computation of Earnings Per Share for the Twelve Months Ended July 31, 1997.
12 Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P. dated October 9, 1997.
27(1) Financial Data Schedule.
*Incorporated herein by reference as above indicated. (1) Filed as exhibit to electronic filing only.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
(a) Liquidity and Capital Resources
At July 31, 1997, the Trust had approximately $42.8 million in available cash and cash equivalents, $2 million in marketable securities and $23.1 million in mortgages receivable.
During the year the Trust issued $223 million of unsecured notes. Three of these note issues, aggregating $99 million, have variable interest rates ranging from 5.86% to 5.91% per annum and four of these note issues, aggregating $124 million, have interest rates ranging from 5.95% to 7.68% per annum. In July 1997 the Trust issued 150,000 Series A Cumulative Preferred Shares with a liquidation preference of $75 million for $73 million net of issuance costs. The shares pay dividends at the rate of 7.8% of the liquidation preference through September 15, 2012 and at the rate of 9.8% thereafter. They are redeemable at the option of the Trust on or after June 15, 2007 at the liquidation preference of $500 per share. The Trust maintains a $50 million unsecured credit facility, which it expects to renew under substantially similar terms prior to such credit facility's expiration in December 1997.
Debt at July 31, 1997 consisted of $65.6 million of mortgages payable with a weighted average interest rate of 7.79% and unsecured notes aggregating $412.6 million with a weighted average interest rate of 6.88%. The $16.6 million increase in mortgages payable was the net result of the assumption of $17.5 million in connection with the purchase of properties and the repayment of $900,000 of existing mortgages. The increase in other liabilities is due to increases in interest payable, accrued construction costs and real estate taxes payable. These increases are due primarily to the larger portfolio of properties and the increase in notes payable. Short term debt consists of normal trade payables and the current portion of mortgages payable.
During the fiscal year $16.5 million of funds were provided from the Dividend Reinvestment and Share Purchase Plan. The Trust made distributions of $83.8 million to shareholders, paid $274.6 million to acquire properties and complete the construction of the Six Flags Factory Outlet Center, and invested $8 million in expansion and improvement of properties.
Other sources of funds are available to the Trust. Based on management's internal valuation of the Trust's properties, most of which are free and clear of mortgages, the estimated value is considerably in excess of the outstanding mortgage indebtedness totaling $65.6 million. Accordingly, management believes that potential exists for additional mortgage financing as well as unsecured borrowing capacity from public debt financing, banks and other lenders.
(b) Results of Operations
Fiscal year Ended July 31, 1997 Compared to Fiscal Year Ended July 31, 1996
In fiscal 1997, total revenues increased $39.2 million to $206.8 million. The increase was in the rental income and related revenues category and came from properties in the portfolio which were acquired in fiscal 1997 or were owned for less than a full year in fiscal 1996. Interest and dividend income decreased slightly.
Operating expenses increased $32.7 million to $127.6 million. Operating costs, real estate and other taxes, and depreciation and amortization increased primarily because of property acquisitions. Interest expense increased $10.7 million to $28.3 million due to a higher level of outstanding debt during fiscal 1997. The increase in the provision for doubtful accounts reflects a larger revenue base and a higher level of receivables. Administrative expenses as a percent of revenue declined to 1.1% of revenue from 1.6% due to increased revenue from newly acquired properties; these costs do not increase in direct proportion to revenue due to economies of scale.
Income before (loss)/gain on sale of properties and securities increased $6.9 million to $77 million. During the fiscal year three former Nichols stores, in Annville and Hanover, Pennsylvania and Lumberton, North Carolina were sold.
Net income applicable to shares of beneficial interest increased $6.1 million to $77 million and earnings per share of beneficial interest increased to $1.31 per share from $1.25 per share.
Funds from operations, defined as net income plus depreciation and amortization of real estate less net gains from the sale of assets, increased $11.9 million to $102 million. Funds from operations per share of beneficial interest, defined as funds from operations less preferred stock dividend requirements divided by the weighted average number of shares of beneficial interest outstanding, increased to $1.74 from $1.60. Funds from operations do not necessarily represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to net income as an indicator of the Trust's operating performance or as an alternative to cash flow as a measure of liquidity.
During fiscal 1997, distributions declared and paid were $1.435 per share of beneficial interest, a $.04 per share increase over fiscal 1996. The most recent distribution declaration for shares of beneficial interest was $.365 per share which is $1.46 per share on an annualized basis.
Fiscal Year Ended July 31, 1996 Compared to Fiscal Year Ended July 31, 1995
In fiscal 1996, total revenues increased $37 million to $167.6 million. Rental income and related revenues increased $36.4 million to $162.8 million. The increase in rental revenue came primarily from properties in the portfolio which were acquired in fiscal 1996 or were owned for less than a full year in fiscal 1995. In addition, increased revenue from all property categories, apartments, factory outlets and shopping centers, owned prior to fiscal 1995 contributed to the rental revenue increase.
Interest and dividend income increased $.7 million due to higher average investment balances.
Operating expenses increased $29.3 million to $94.9 million. Operating costs, real estate and other taxes, and depreciation and amortization increased primarily because of property acquisitions. Interest expense increased $10.4 million to $17.6 million due to a higher level of outstanding debt during fiscal 1996. The increase in the provision for doubtful accounts reflects a much larger revenue base and a higher level of receivables. Administrative expenses as a percent of revenue declined to 1.6% from 1.9% due to increased revenue from newly acquired properties; these costs do not increase in direct proportion to revenue due to economies of scale.
Income before gain/(loss) on the sale of properties and securities increased $7.6 million to $70.1 million. During fiscal 1996, a shopping center in Chinoe, Kentucky and two former Nichols stores in Harrisonburg, Virginia and New Bern, North Carolina were sold for a net gain of $.5 million. The $.1 million loss on the sale of securities was due to bonds being called which had been issued at a premium.
Net income increased $7.8 million to $70.5 million and earnings per share of beneficial interest increased to $1.25 per share from $1.19 per share.
Funds from operations, defined as net income plus depreciation and amortization of real estate less net gains from the sale of assets, increased $12.6 million to $90.1 million, and funds from operations per share of beneficial interest increased to $1.60 from $1.47. Funds from operations do not necessarily represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to net income as an indicator of the Trust's operating performance or as an alternative to cash flow as a measure of liquidity.
During fiscal 1996, distributions declared and paid were $1.395 per share of beneficial interest, a $.04 per share of beneficial interest increase over the preceding year.
Fiscal Year Ended July 31, 1995 Compared to Fiscal Year Ended July 31, 1994
In fiscal 1995, total revenues increased $29.6 million to $130.6 million. Rental income and related revenues increased $30 million to $126.4 million. The rental revenue increase came primarily from properties in the portfolio which were acquired in fiscal 1995 or were owned for less than a full year in fiscal 1994. In addition, increased revenue from all property types owned prior to fiscal 1994 contributed to the rental revenue increase.
Interest and dividend income decreased $.4 million because of lower investment balances. Balances were lower because funds were used for property acquisitions and expansions.
Operating expenses increased $18.7 million to $65.6 million. Operating costs, real estate taxes and depreciation and amortization increased primarily because of property acquisitions. Interest expense increased because of the issuance of $181 million face amount of Senior Notes. The decrease in the provision for doubtful accounts was mostly due to higher recoveries in fiscal 1995. In fiscal 1995 the Trust had bad debt recoveries of $501,000 versus $261,000 in fiscal 1994. Administrative expenses as a percentage of revenue decreased to 1.9% from 2.67% due primarily to increased revenue from newly acquired properties; these costs do not vary in proportion to revenue.
Income before gains on sales of properties and securities increased $11.2 million to $62.5 million. During the year, a very small shopping center in Millersberg, Ohio and an outparcel at the New Bern, North Carolina shopping center were sold. Net income increased $10.4 million to $62.7 million and earnings per share of beneficial interest increased to $1.19 from $1.06.
Funds from operations, defined as net income plus depreciation and amortization of real estate less gains from the sale of assets, increased $14.9 million to $77.5 million, and funds from operations per share of beneficial interest increased to $1.47 from $1.27. Funds from operations do not represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to net income as an indicator of the Trust's operating performance or as an alternative to cash flow as a measure of liquidity.
During fiscal 1995, distributions declared and paid were $1.355 per share, a $.04 per share of beneficial interest increase over the preceding fiscal year.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data
The response to this item is included in Pages to attached to this report.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10.
Item 10. Trustees and Executive Officers of the Trust
Item 10 is incorporated herein pursuant to General Instruction G to this Form 10-K by reference to Registrant's definitive proxy statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year.
Executive Officers of the Trust
The executive officers of the Trust and their principal occupations are as follows:
Name Age - ---- ---
William Newman. . . . . . . . . . . .71 Chairman of the Board and Chief Chairman of the Board of Trustees Executive Officer of the Trust and Chief Executive Officer since its organization in 1972; President of the Trust from 1972 to 1988; President of the Trust's corporate predecessor from 1962 to 1972; formerly Chairman of National Association of Real Estate Investment Trusts; active in real estate for more than 47 years.
Arnold Laubich. . . . . . . . . . . .67 President and Chief Operating President, Chief Operating Officer Officer and Trustee of the Trust and Trustee since August 1, 1988; President of Dover Management Corp. (which managed the Trust's properties) from 1972 to 1988; Senior Vice President of the Trust's predecessor from 1962 to 1972.
James M. Steuterman . . . . . . . . .41 Executive Vice President since Executive Vice President and October 1994; Trustee since 1990; Trustee Senior Vice President from 1990 to 1994; Vice President from 1988 to 1990.
Dean Bernstein. . . . . . . . . . . .39 Vice President - Administration Vice President - Administration and Finance since October 1994; and Finance and Trustee Vice President and Trustee since 1992; Assistant Vice President from 1991 to 1992; previously a Vice President in the Real Estate Group at Chemical Bank for three years.
William Kirshenbaum . . . . . . . . .61 Vice President of the Trust since Vice President, Treasurer 1981; Treasurer since 1983.
Leonard N. Cancell. . . . . . . . . .64 Senior Vice President of the Senior Vice President - Operations Trust since August 1, 1988; Senior Vice President of Dover Management from 1972 to 1988; employee of the Trust's predecessor from 1964 to 1972.
Michael I. Brown. . . . . . . . . . .55 Chief Financial Officer since Chief Financial Officer and 1991; Controller of the Trust Controller since 1987.
Irwin E. Kwartler . . . . . . . . . .71 Vice President of the Trust since Vice President 1982; previously National Sales Manager, Kimball Division of Litton Industries.
Steven F. Siegel. . . . . . . . . . .37 General Counsel and Secretary of General Counsel and Secretary the Trust since October 1991.
Joseph Bosco. . . . . . . . . . . . .48 Vice President of the Trust since Vice President -- Apartment 1993; employee of the Trust since Operations 1983.
James DeCicco . . . . . . . . . . . .51 Senior Vice President of the Senior Vice President -- Leasing Trust since March, 1996; Vice President of the Trust since 1992; employee of the Trust since 1991.
Thomas J. Farrell . . . . . . . . . .40 Vice President and employee of Vice President -- Acquisitions the Trust since 1994; formerly a Vice President at The Balcor Company, a real estate company, for five years.
Item 11.
Item 11. Executive Compensation
Item 11 is incorporated herein pursuant to General Instruction G to this Form 10-K by reference to Registrant's definitive proxy statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 12 is incorporated herein pursuant to General Instruction G to this Form 10-K by reference to Registrant's definitive proxy statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A no later than 120 days after the close of the fiscal year.
Item 13.
Item 13. Certain Relationships and Related Transactions
Item 13 is incorporated herein pursuant to General Instruction G to this Form 10-K by reference to Registrant's definitive proxy statement which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year.
PART IV
Item 14.
Item 14. Exhibits, Consolidated Financial Statements, Consolidated Financial Statement Schedules, and Reports on Form 8-K
(a) Consolidated Financial Statements. The following documents are filed as a part of this report:
The response to this portion of Item 14 is submitted as a separate section of this report.
(b) Reports on Form 8-K.
1. Form 8-K dated June 18, 1997 containing items 2, 5 and 7.
2. Form 8-K dated June 30, 1997 containing items 2, 5 and 7.
3. Form 8-K dated July 2, 1997 containing items 5 and 7.
4. Form 8-K dated July 31, 1997 containing items 5 and 7.
5. Form 8-K/A dated September 19, 1997 containing items 5 and 7.
(c) Exhibits. The following documents are filed as exhibits to this report:
*3.1 Amended and Restated Declaration of Trust of New Plan Realty Trust filed as Exhibit 99.3 to the Registrant's Form 8-K dated May 24, 1996.
4.1 Specimen Certificate for Shares of Beneficial Interest.
*4.2 Certificate of Designation Supplementing the Amended and Restated Declaration of Trust of New Plan Realty Trust filed as Exhibit 4.1 to the Registrant's Form 8-K dated July 2, 1997.
4.3 Deposit Agreement dated as of July 3, 1997, among New Plan Realty Trust and BankBoston N.A.
4.4 Specimen Certificate for 7.80% Series A Cumulative Step-Up Premium Rate Preferred Shares.
4.5 Specimen Depositary Receipt.
*9.1 Agreement dated February 26, 1979 among William Newman, Joseph Newman and Melvin Newman filed as Exhibit 9 to Registration Statement No. 2-63669.
*9.2 Purchase Agreement dated December 18, 1990 between New Plan Realty Trust and Beleggingsmaatschappij Midas B.V. (presently known as Stichting Pensioenfonds) filed as Exhibit 9.5 to the Registrant's Form 10-K for the fiscal year ended July 31, 1994.
*9.3 Termination of Purchase Agreement dated December 17, 1981 between New Plan Realty Trust and Merchant Navy Officers Pension Fund Trustees Limited (presently known as MNOPF Trustees Limited) filed as Exhibit 9.6 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
10.1 Revolving Credit Agreement by and among New Plan Realty Trust, the Lenders party thereto and The Bank of New York, as agent, dated as of October 29, 1996.
*10.2 Senior Securities Indenture between New Plan Realty Trust and The First National Bank of Boston, as Trustee, dated as of March 29, 1995 filed as Exhibit 4.2 to Registration Statement No. 33-60045.
*10.3 7.75% Senior Note Due April 6, 2005 filed as Exhibit 10.7 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
*10.4 6.8% Senior Note Due May 15, 2002 filed as Exhibit 10.8 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
*10.5 Distribution Agreement dated May 24, 1996 by and among New Plan Realty Trust, Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Smith Barney Inc., filed as Exhibit 1 to the Registrant's Form 8-K dated May 24, 1996.
*10.6 Form of Medium Term Note (Fixed Rate) filed as Exhibit 99.1 to the Registrant's Form 8-K dated May 24, 1996.
*10.7 Form of Medium Term Note (Floating Rate) filed as Exhibit 99.2 to the Registrant's Form 8-K dated May 24, 1996.
*10.8 Distribution Agreement dated December 6, 1996 by and among New Plan Realty Trust, Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and Smith Barney Inc., filed as Exhibit 1 to the Registrant's Form 8-K dated December 12, 1996.
*10.9 Form of Medium Term Note (Fixed Rate) filed as Exhibit 4.1 to the Registrant's Form 8-K dated December 12, 1996.
*10.10 Form of Medium Term Note (Floating Rate) filed as Exhibit 4.2 to the Registrant's Form 8-K dated December 12, 1996.
11 Statement of Computation of Earnings Per Share for the Twelve Months Ended July 31, 1997.
12 Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P. dated October 9, 1997.
27(1) Financial Data Schedule.
______________________________ * Incorporated herein by reference as above indicated. (1) Filed as exhibit to electronic filing only.
(d) Financial Statement Schedules. The following documents are filed as a part of this report:
The response to this portion of Item 14 is submitted as a separate section of this report.
SIGNATURES ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEW PLAN REALTY TRUST (Registrant)
By:/s/ William Newman ----------------------- William Newman Chief Executive Officer Dated: October 10, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ----
/s/ William Newman Chief Executive Officer October 10, 1997 - ------------------------- and Trustee William Newman
/s/ Arnold Laubich President, Chief Operating October 10, 1997 - ------------------------- Officer and Trustee Arnold Laubich
/s/ Michael I. Brown Chief Financial Officer and October 10, 1997 - ------------------------- Chief Accounting Officer, Michael I. Brown Controller
/s/ James M. Steuterman Executive Vice President October 10, 1997 - ------------------------- and Trustee James M. Steuterman
/s/ Dean Bernstein Vice President - October 10, 1997 - ------------------------- Administration and Finance Dean Bernstein and Trustee
/s/ Melvin Newman Trustee October 10, 1997 - ------------------------- Melvin Newman
- ------------------------- Trustee _________, 1997 Norman Gold
- ------------------------- Trustee _________, 1997 Raymond H. Bottorf
- ------------------------- Trustee _________, 1997 John Wetzler
- ------------------------- Trustee _________, 1997 Gregory White
ANNUAL REPORT ON FORM 10-K
ITEM 8 AND ITEM 14(a)(1), (a)(2) AND (d)
LIST OF CONSOLIDATED FINANCIAL STATEMENTS, SUPPLEMENTARY DATA AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED JULY 31, 1997
NEW PLAN REALTY TRUST AND SUBSIDIARIES
NEW YORK, NEW YORK
NEW PLAN REALTY TRUST AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of July 31, 1997 and 1996. . . . . . . .
Consolidated Statements of Income for the years ended July 31, 1997, 1996 and 1995. . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Shareholders' Equity for the years ended July 31, 1997, 1996 and 1995. . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended July 31, 1997, 1996 and 1995. . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . .
Schedules
II - Valuation and Qualifying Accounts . . . . . . . . . . . . . .F-19
III - Real Estate and Accumulated Depreciation. . . . . . . . . . .F-20
IV - Mortgage Loans on Real Estate . . . . . . . . . . . . . . . .F-36
All other schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders of New Plan Realty Trust:
We have audited the consolidated financial statements and financial statement schedules of New Plan Realty Trust and Subsidiaries listed in Item 14(a) of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of New Plan Realty Trust and Subsidiaries as of July 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended July 31, 1997 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
New York, New York September 9, 1997
NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 1997 AND 1996
1997 1996 ---- ---- ASSETS:
Real estate, at cost (Notes A and E) Land $ 232,501,644 $ 174,711,789 Buildings and improvements 1,045,273,400 803,229,718
- ------------------------------------ 1,277,775,044 977,941,507
Less accumulated depreciation and amortization 105,866,380 82,523,169
- ------------------------------------ 1,171,908,664 895,418,338
Cash and cash equivalents (Note A) 42,780,757 4,300,261 Marketable securities (Note B) 2,034,599 2,095,481 Mortgages and notes receivable (Note C) 23,106,633 23,597,342 Receivables Trade and notes, net of allowance for doubtful accounts (1997 - $5,581,000; 1996 - $3,976,500) (Note A) 12,035,327 11,586,091 Other (Note D) 1,463,943 1,109,164 Prepaid expenses and deferred charges 4,999,889 5,083,827 Other assets 2,813,978 2,203,221
- ------------------------------------ TOTAL ASSETS $1,261,143,790 $ 945,393,725
====================================
See Notes to Consolidated Financial Statements.
NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 1997 AND 1996
1997 1996 ---- ---- LIABILITIES:
Mortgages payable (Note E) $ 65,572,883 $ 48,935,776 Credit facility (Note E) - 19,500,000 Notes payable, net of unamortized discount 412,633,956 189,490,273 (1997 - $1,366,044; 1996 - $1,509,727) (Note F) Other liabilities (Note G) 33,359,165 24,984,134 Tenants' security deposits 4,622,687 3,129,524 -------------- ------------ TOTAL LIABILITIES 516,188,691 286,039,707 -------------- ------------
COMMITMENTS AND CONTINGENCIES (Notes H,I,J,N and P) - -
SHAREHOLDERS' EQUITY Preferred shares par value $1.00, authorized 1,000,000 shares; issued and outstanding (1997 - 150,000 Series A Cumulative Preferred Shares, 1996 - none), 72,775,000 - $75,000,000 redemption value (Note H) Shares of beneficial interest without par value, unlimited authorization; issued and outstanding (1997 - 58,934,371; 1996 - 58,069,362) (Note H) 738,010,825 719,080,157 Less: loans receivable for the purchase of shares of beneficial interest (Note H) 2,814,366 3,083,573 Add: unrealized gain on securities reported at fair value (Note B) 1,057,537 643,141 -------------- ------------ 809,028,996 716,639,725 Less distributions in excess of net income 64,073,897 57,285,707 -------------- ------------ TOTAL SHAREHOLDERS' EQUITY 744,955,099 659,354,018 -------------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,261,143,790 $945,393,725 ============== ============
See Notes to Consolidated Financial Statements.
NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995
1997 1996 1995 ---- ---- ---- Revenues: Rental income and related revenues $202,093,168 $162,821,434 $ 126,447,966 (Notes A and J) Interest and dividend income (Notes B and C) 4,727,760 4,784,547 4,128,163 ------------ ------------ ------------- 206,820,928 167,605,981 130,576,129 ------------ ------------ ------------- Operating Expenses: Operating costs 51,909,521 38,865,276 29,960,955 Leasehold rent (Note I) 675,434 665,237 614,084 Real estate and other taxes 18,448,503 15,787,643 11,809,539 Interest expense 28,256,473 17,561,362 7,174,028 Depreciation and amortization 25,005,629 20,004,378 15,055,225 Provision for doubtful accounts 3,282,871 1,983,634 958,394 ------------ ------------ ------------- Total operating expenses 127,578,431 94,867,530 65,572,225 ------------ ------------ ------------- 79,242,497 72,738,451 65,003,904
Other Expenses: Administrative expenses 2,203,045 2,616,138 2,515,669 ------------ ------------ ------------- Income Before (Loss)/Gain on Sale of Properties and Securities: 77,039,452 70,122,313 62,488,235
(Loss)/gain on sale of properties, net (9,625) 540,209 227,638 Gain/(loss) on sale of securities, net 6,968 (141,711) - ------------ - -------------------------------- (2,657) 398,498 227,638 ------------ ------------ ------------- Net Income $ 77,036,795 $ 70,520,811 $ 62,715,873 ------------ ------------ ------------- Net Income applicable to Shares of Beneficial Interest $ 76,575,795 $ 70,520,811 $ 62,715,873 ------------ ------------ ------------- Net Income Per Share of Beneficial Interest (Note A) $1.31 $1.25 $1.19 ------------ ------------ ------------- Cash Distribution Per Share of Beneficial Interest $1.435 $1.395 $1.355 ------------ ------------ ------------- See Notes to Consolidated Financial Statements.
NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995 (NOTE M)
1997 1996 1995 ---- ---- ---- OPERATING ACTIVITIES - -------------------- Net income $ 77,036,795 $70,520,811 $ 62,715,873 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 25,005,629 20,004,378 15,055,225 Gain on sale of properties, net 9,625 (540,209) (227,638) (Gain)/Loss on sale of securities, net (6,968) 141,711 - ------------ ----------- ----------- 102,045,081 90,126,691 77,543,460 Changes in operating assets and liabilities, net: Increase in trade and notes receivable (2,053,736) (5,775,617) (1,165,765) (Increase)/decrease in other receivables (354,781) 12,714 506,489 Increase in allowance for doubtful accounts 1,604,500 1,054,000 591,000 Increase in other liabilities 3,475,030 8,239,264 6,492,376 Decrease/(increase) in net sundry assets and liabilities 604,983 (250,994) (907,583) ------------ ----------- ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 105,321,077 93,406,058 83,059,977 ------------ ----------- ------------ INVESTING ACTIVITIES - -------------------- Sales of marketable securities 484,314 4,274,356 424,783 Purchases of marketable securities (2,068) - - Net proceeds from the sale of properties 3,862,557 3,473,913 1,025,000 Purchase and improvement of properties (282,606,924) (186,008,486) (136,310,299) Repayment of mortgage notes receivable 490,709 820,662 36,172 ------------ ----------- ------------ NET CASH USED IN INVESTING ACTIVITIES (277,771,412) (177,439,555) (134,824,344)
See Notes to Consolidated Financial Statements
(Continued on next page) NEW PLAN REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JULY 31, 1997, 1996 AND 1995 (NOTE M) (CONTINUED FROM PREVIOUS PAGE)
1997 1996 1995 ---- ---- ---- FINANCING ACTIVITIES - -------------------- Distributions to shareholders (83,824,985) (78,961,556) (71,616,427) Issuance of preferred shares pursuant to a public offering, net of offering costs 72,775,000 Issuance of shares of beneficial interest pursuant to dividend reinvestment plan 16,475,143 15,126,326 13,472,493 Issuance of shares of beneficial interest pursuant to public offering, net of loans receivable and offering costs 81,227,800 - Issuance of shares of beneficial interest upon exercise of stock options 2,455,525 164,500 21,425 Proceeds from short-term borrowings 12,000,000 19,500,000 352,000,000 Repayment of short-term borrowings (31,500,000) - (359,500,000) Proceeds from sale of notes 223,143,682 10,000,000 179,322,720 Payment of deferred financing costs (956,990) Principal payments on mortgages (862,741) (364,422) (407,892) Repayment of mortgages (10,533,682) (12,059,000) Repayment of loans receivable for the purchase of shares of beneficial interest 269,207 285,985 260,863 ------------ ------------- -------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 210,930,831 36,444,951 100,537,192 ------------ ------------- -------------- INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 38,480,496 (47,588,546) 48,772,825
Cash and cash equivalents at beginning of year 4,300,261 51,888,807 3,115,982 ------------ ------------- -------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 42,780,757 $ 4,300,261 $ 51,888,807 ============ ============= ============== See Notes to Consolidated Financial Statements.
Notes To Consolidated Financial Statements
Note A - Summary of Significant Accounting Policies
Organization and Income Taxes: New Plan Realty Trust was organized July 31, 1972 as a Massachusetts Business Trust. New Plan Realty Trust and subsidiaries (the "Trust") have elected to be taxed as a Real Estate Investment Trust ("REIT") under the applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, the Trust does not pay Federal income tax on income as long as income distributed to shareholders is at least equal to 95% of real estate investment trust taxable income and pays no Federal income tax on capital gains distributed to shareholders. The Trust may be subject to tax by certain states that do not recognize the REIT. Provision for such taxes has been included in real estate and other taxes.
Basis of Consolidation: The consolidated financial statements include the accounts of New Plan Realty Trust and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Certain prior period amounts have been reclassified to conform to the current year presentation.
Real Estate: Real estate is carried at cost less accumulated depreciation and amortization. For financial reporting purposes, depreciation is calculated on the straight-line method based on the estimated useful lives of the assets ranging from 5 to 40 years. Amortization of leasehold improvements is calculated on a straight-line basis over the shorter of the life of the lease or the estimated useful life of the asset. If there is an event or a change in circumstances that indicates that the basis of the Trust's property may not be recoverable the Trust's policy is to assess any impairment in value by making a comparison of the current and projected operating cash flows (excluding interest and income taxes) of the property over its remaining useful life, on an undiscounted basis, to the carrying amount of the property. Such carrying amounts would be adjusted, if necessary, to reflect an impairment in the value of the property.
The Trust records sales when, among other criteria, the parties are bound by the terms of a contract, all consideration has been exchanged and all conditions precedent to closing have been performed. These conditions are usually met at the time of closing. The cost and related accumulated depreciation of assets sold are removed from the respective accounts and any gain or loss is recognized in income.
New Accounting Standards: During 1997, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards: (i) No. 128 "Earnings Per Share" ("SFAS 128"), which will be effective for financial statements for both interim and annual periods ending after December 15, 1997, (ii) No. 129 "Disclosure of Information About Capital Structure" ("SFAS 129"), which is effective for financial statements for periods ending after December 15, 1997, (iii) No. 130 "Reporting Comprehensive Income" ("SFAS 130"), which is effective for fiscal years beginning after December 15, 1997, and (iv) No. 131 "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"), which is effective for fiscal years beginning after December 15, 1997. Management believes that the implementation of SFAS 128, 129 and 130 will not have a material impact on the Trust's financial statements. The Trust has yet to determine the impact of SFAS 131.
Cash Equivalents: Cash equivalents consist of short-term, highly liquid debt instruments with original maturities of three months or less. Items classified as cash equivalents include insured bank certificates of deposit and commercial paper. At times cash balances at a limited number of banks may exceed insurable amounts. The Trust believes it mitigates its risk by investing in or through major financial institutions. Recoverability of investments is dependent upon the performance of the issuer.
Revenue Recognition: Lease agreements between the Trust and retail tenants generally provide for additional rentals based on such factors as percentage of tenants' sales in excess of specified volumes, increases in real estate taxes, increases in Consumer Price Indices and common area maintenance charges. These additional rentals are generally included in income when reported to the Trust or when billed to tenants.
The Trust recognizes rental income from leases with scheduled rent increases on a straight-line basis over the lease term. Deferred rent receivable, included in trade and notes receivable, represents the difference between the straight-line rent and amounts currently due.
Concentration of Credit Risk: No tenant or single property accounts for more than 5.0% of the Trust's revenues.
Net Income Per Share of Beneficial Interest: Net income per share of beneficial interest is calculated using a weighted average number of shares outstanding during each year: 1997 - 58,461,056 shares; 1996 - 56,483,827 shares; 1995 - 52,894,355 shares.
Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The most significant estimates relate to depreciation and valuation of real estate.
Internal Software Costs: Any costs associated with modifying computer software for the year 2000 are expensed as incurred. Management does not believe these costs will be material.
Note B - Marketable Securities
The Trust has classified all investments in debt and equity securities as available-for-sale. All investments are recorded at current market value with an offsetting adjustment to shareholders' equity.
July 31, 1997 1996 - --------------------------------------------------------------------------- Equity Equity Debt
Amortized cost/cost basis $ 977,061 $ 977,061 $ 475,279 Unrealized holdings gains 1,057,538 643,141 -- Unrealized holdings losses -- -- -- ---------- ----------------------------- Fair value $2,034,599 $ 1,620,202 $ 475,279
The net increase in unrealized holding gains that has been included as a separate component of shareholders' equity is $414,396 for 1997. The weighted average method is used to determine realized gain or loss on securities sold. The market value of marketable securities is based on quoted market prices as of July 31, 1997 and 1996.
Note C - Mortgages & Notes Receivable
Mortgages and Notes Receivable are collateralized principally by real property and consist of the following:
July 31, 1997 1996 - ---------------------------------------------------------------------------
10% purchase money first mortgage, due August 31, 1998 $ 5,180,000 $ 5,420,000 9.38% purchase money first mortgage, due July 25, 1998 4,205,000 4,610,000 9.375% purchase money first mortgage, due July 27, 2002 10,350,000 10,350,000 12% leasehold mortgage, due June 1, 2011 890,273 913,999 10.5% second mortgage due February 1, 1999 - 500,000 11.5% note, due April 30, 2004 236,860 258,843 8.75% purchase money first mortgage, due July 23, 1998 794,500 794,500 7.2% purchase money first mortgage, due May 9, 2001 750,000 750,000 8.75% purchase money first mortgage, due July 23, 2001 700,000 - ------------ ----------- $ 23,106,633 $23,597,342 - ---------------------------------------------------------------------------
Note D - Other Receivables
July 31, 1997 1996
Interest and dividends $ 599,314 $ 312,733 Notes receivable 338,250 282,055 Due from officers, trustees and employees (1) 496,564 488,271 Miscellaneous receivables 29,815 26,105 ------------ ----------- $ 1,463,943 $ 1,109,164 - ---------------------------------------------------------------------------
(1) Amounts, which are interest bearing, are either due on demand or have scheduled maturities.
Note E - Mortgages and Credit Facility
Mortgages are collateralized by real property with a carrying value of $182,443,000 before accumulated depreciation and amortization. As of July 31, 1997, mortgages payable bear interest at rates ranging from 4.30% to 10.75%, having a weighted average rate of 7.79% per annum and mature from 1998 to 2010.
Scheduled principal payments during each of the next five fiscal years and thereafter are approximately as follows:
Year Ending July 31, Amount - --------------------------------------------------------------------------- 1998 $ 2,895,014 1999 10,427,652 2000 17,789,006 2001 6,962,917 2002 10,034,539 Thereafter 17,463,755 ------------ Total $ 65,572,883
The Trust has an unsecured revolving credit facility which provides for up to $50 million of borrowings until October 28, 1997. At July 31, 1997 there were no amounts outstanding under this facility. At the time of borrowing, the Trust can choose from three interest rate options. There are restrictive covenants that place a ceiling on total indebtedness of the lesser of 65% of tangible net worth or $350,000,000, a ceiling on mortgage indebtedness of $105,000,000, a minimum interest coverage ratio of 2.5 to 1 and a minimum tangible net worth of $400,000,000.
The Trust has outstanding approximately $1.4 million of letters of credit as of July 31, 1997.
Interest costs capitalized for the years ended July 31, 1997, 1996, and 1995 were approximately $868,000, $203,000, and $1,161,000, respectively.
Note F - Notes Payable
Notes Payable consists of the following:
Face Amount Description ($ in millions) Due Date 1997 1996 - ----------- --------------- -------- ---- ---- 7.75% Senior unsecured notes effective interest rate 7.95%, net of unamortized discount: 1997 - $1,132,255; 1996 - $1,236,986 $100 4/6/2005 $98,867,745 $98,763,014
6.80% Senior unsecured notes, effective interest rate 6.87% net of unamortized discount: 1997 - 233,789; 1996 - $272,741 81 5/15/2002 80,766,211 80,727,259
7.97% unsecured notes 10 8/14/2026 10,000,000 10,000,000
Variable rate unsecured notes 49 8/3/99 49,000,000
Variable rate unsecured notes 10 8/3/98 10,000,000
5.95% unsecured notes 49 11/2/26 49,000,000
7.65% unsecured notes 25 11/2/26 25,000,000
7.68% unsecured notes 20 11/2/26 20,000,000
Variable rate unsecured notes 40 5/15/00 40,000,000
7.35% unsecured notes 30 6/15/07 30,000,000 ------------ ------------ Total $412,633,956 $189,490,273 - ---------------------------------------------------------------------------
The Notes are subordinate to mortgages payable and rank equally with borrowings under the revolving credit facility. Where applicable, the discount is being amortized over the life of the respective Notes using the effective interest method. Interest is payable semi-annually or quarterly and the principal is due at maturity. Among other restrictive covenants, there is a restrictive covenant that limits the amount of total indebtedness to 65% of total assets. For the year ended July 31, 1997, $342,412 of amortized discount and issuing costs were included in interest expense.
Note G - Other Liabilities
July 31, 1997 1996 - ---------------------------------------------------------------------------
Accounts payable $ 2,095,888 $ 2,750,313 Real estate taxes payable 6,920,090 4,769,689 State and local taxes payable 2,369,004 3,906,163 Interest payable 7,779,381 3,633,896 Amounts due seller of property 1,466,713 970,104 Professional fees and costs 1,665,753 728,628 Accrued construction costs 4,871,656 -- Acquisition costs 1,884,419 2,574,000 Other 2,968,748 5,332,891 Deferred advance rent expense 1,337,513 318,450 ------------ ----------- $ 33,359,165 $24,984,134 - ---------------------------------------------------------------------------
Note H - Shareholders Equity
The Series A Cumulative Preferred Shares are redeemable at the option of the Trust on or after June 15, 2007 at the liquidation preference of $500 a share. The preferred shares pay dividends quarterly at the rate of 7.8% of the liquidation preference per annum through September 15, 2012 and at the rate of 9.8% of the liquidation preference per annum thereafter. In connection with the issuance of the Series A Cumulative Preferred Shares, 1,500,000 depositary shares, each representing a 1/10 fractional interest in a share of cumulative preferred, were sold to the public.
The Trust has the following stock option plans (the "Plans") pursuant to which the Trust has granted (and in one instance, may continue to grant) options to purchase Shares of Beneficial Interest of the Trust (the "Shares") to officers, trustees and certain key employees of the Trust: (i) the 1985 Incentive Stock Option Plan (the "1985 Plan"), (ii) the March 1991 Stock Option Plan (the "March 1991 Plan"), (iii) the Non-Qualified Stock Option Plan (the "Non-Qualified Plan"), and (iv) the 1991 Stock Option Plan (the "1991 Plan"). The exercise price of a Share pursuant to each of the Plans is or was required (as the case may be) to be no less than the fair market value of a Share on the date of grant. Under the 1985 Plan, the 1991 Plan (with the exception of certain option grants of 10,000 Shares or more, as discussed below) and the Non-Qualified Plan, options are exercisable 20% per year commencing one year from the date of grant. In the case of certain option grants of 10,000 Shares or more under the 1991 Plan, such option grants are exercisable 10% after the first anniversary of the date of grant, 25% after the second anniversary of the date of grant, 45% after the third anniversary of the date of grant, 70% after the fourth anniversary of the date of grant and 100% after the fifth anniversary of the date of grant. In the case of the March 1991 Plan, 30% of the options granted are exercisable on the third anniversary of the date of grant and, thereafter, an additional 10% of the granted options are exercisable on a yearly basis. Future option grants can be made only under the 1991 Plan.
The following table shows the activity and balances for each stock option plan during the fiscal years indicated.
Non- March 1985 Qualified 1991 1991 Options Plan Plan Plan Plan - --------------------------------------------------------------------------- Outstanding July 31, 1994 345,500 5,000 1,300,000 179,000
Exercised (1,200) -- -- -- Cancelled (17,700) -- -- (6,000) Granted 25,000 -- -- 249,250 ------- ------- --------- -------- Outstanding July 31, 1995 351,600 5,000 1,300,000 422,250
Exercised (5,000) -- -- (4,000) Cancelled (800) -- -- (20,500) Granted 3,200 -- -- 31,300 ------- ------- --------- -------- Outstanding July 31, 1996 349,000 5,000 1,300,000 429,050
Exercised (72,700) -- -- (42,100) Cancelled -- -- -- (26,800) Granted -- -- -- 571,750 ------- ------- --------- -------- Outstanding July 31, 1997 276,300 5,000 1,300,000 931,900 - --------------------------------------------------------------------------- Options exercisable at July 31, 1997 232,480 4,000 910,000 173,660 Average outstanding option price, which was the market price of the shares on the dates of grant $ 21.75 $ 21.88 $ 18.88 $ 21.71
Average price of options exercised during fiscal 1997 $ 21.72 -- -- $ 20.82 - --------------------------------------------------------------------------- The Trust has adopted the disclosure-only provision of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Accordingly, no compensation expense has been recognized for the options described above which were granted on or after August 1, 1995. Had compensation cost for these options been determined based on the fair value on the grant date consistent with the provisions of SFAS 123, the Trust's net earnings and earnings per share of beneficial interest would have been changed to the following pro forma amounts:
Net Income Per Share of Beneficial Net Income Interest (in thousands) --------------- -------------- Year ended July 31, 1997 $76,465 $1.31
Year ended July 31, 1996 70,510 1.25
The Trust has a Dividend Reinvestment and Share Purchase Plan (the "Plan") whereby shareholders may invest cash distributions and make optional cash payments to purchase Shares of the Trust without payment of any brokerage commission or service charge. The price per share of the additional shares to be purchased with invested cash distributions is the midpoint between the day's high and low sales prices on the New York Stock Exchange, less 5%.
The Trust has made loans to officers, trustees and employees primarily for the purpose of purchasing its Shares. These loans are demand and term notes bearing interest at rates ranging from 5% to 9.75%. Interest is payable quarterly.
Note I - Lease Agreements
The Trust has entered into leases, as lessee, in connection with ground leases for shopping centers which it operates, an office building which it sublets and administrative office space for the Trust. These leases are accounted for as operating leases. The minimum annual rental commitments during the next five fiscal years and thereafter are approximately as follows (000's omitted):
Year Ending July 31, Amount - ---------------------------------------------------------------------------
1998 $1,045 1999 1,050 2000 1,049 2001 1,052 2002 1,183 Thereafter 20,332 ------ Total $25,711 - ---------------------------------------------------------------------------
For the years ended July 31, 1996 and 1995, the lease for office space included contingent rentals for real estate tax escalations and operating expense in the amount of $100,000, and $111,000, respectively. There were no contingent rentals for the year ended July 31, 1997. In addition, ground leases provide for fixed rent escalations and renewal options.
Note J - Rental Income Under Operating Leases
Minimum future rentals to be received during the next five fiscal years and thereafter with initial or remaining noncancellable lease terms in excess of one year are approximately as follows (000's omitted):
Year Ending July 31, Amount - ---------------------------------------------------------------------------
1998 $118,157 1999 106,241 2000 90,243 2001 75,217 2002 63,790 Thereafter 385,975 -------- Total $839,623 - ---------------------------------------------------------------------------
The above table assumes that all leases which expire are not renewed, therefore neither renewal rentals nor rentals from replacement tenants are included.
Minimum future rentals do not include contingent rentals, which may be received under certain leases on the basis of percentage of reported tenants' sales volume, increases in Consumer Price Indices, common area maintenance charges and real estate tax reimbursements. Contingent rentals included in income for the years ended July 31, 1997, 1996 and 1995 amounted to approximately $28,933,000, $26,173,000, and $19,388,000, respectively.
Note K - Pro Forma Financial Information (Unaudited)
The Trust acquired 16 shopping centers and 13 apartment complexes during the year ended July 31, 1997. The pro forma financial information for the years ended July 31, 1997 and 1996 shown below is based on the historical statements of the Trust after giving effect to the acquisitions as if such acquisitions took place on August 1, 1996 and 1995, respectively. The $280,814,000 aggregate acquisition cost included existing mortgages and $259,914,000 in cash.
The pro forma financial information is presented for informational purposes only and may not be indicative of results that would have actually occurred had the acquisitions taken place at the dates indicated or of what may occur in the future. (Amounts In Thousands, Except Share Data) Year Ended July 31, 1997 1996 - ---------------------------------------------------------------------------
Pro forma total revenues $ 228,038 $ 209,212 Pro forma net income $ 79,322 $ 73,900 Pro forma earnings per share of beneficial interest $ 1.36 $ 1.31 - ---------------------------------------------------------------------------
Note L - Quarterly Financial Information (Unaudited) (Amounts In Thousands, Except Share Data)
Income Before Gain on Sale Year Ended of Property Net Earnings July 31, Revenue and Securities Income Per Share - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- First $ 47,783 $ 19,076 $ 19,076 $ .33 Second 51,147 19,023 19,092 .33 Third 52,066 19,224 19,088 .32 Fourth 55,825 19,716 19,781 .33 - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- First $ 37,795 $ 16,273 $ 16,274 $ .31 Second 41,523 17,230 18,012 .31 Third 43,353 17,799 17,297 .30 Fourth 44,935 18,820 18,938 .33 - ---------------------------------------------------------------------------
Note M - Supplemental Cash Flow Information
The Trust entered into the following non-cash investing and financing activities:
Year Ended July 31, 1997 1996 - --------------------------------------------------------------------------- Mortgages payable assumed in the acquisition of properties $ 17,500,000 $ 32,538,000 Mortgages receivable in connection with the sale of properties $ 700,000 $ 1,544,500
State and local income taxes paid for the year ended July 31, 1997 were $872,000. No state and local income taxes were paid by the Trust for the year ended July 31, 1996. Interest paid for the years ended July 31, 1997 and 1996 was $24,642,000 and $17,085,000, respectively. - ---------------------------------------------------------------------------
Note N - Retirement Savings Plan
The Trust has a Retirement Savings Plan (the "Savings Plan"). Participants in the Savings Plan may elect to contribute a portion of their earnings to the Savings Plan and the Trust may, at the discretion of the Board of Trustees, make a voluntary contribution to the Savings Plan. For the years ended July 31, 1997, 1996 and 1995, the Trust's expense for the Savings Plan was $250,000, $228,000 and $191,000, respectively.
- ---------------------------------------------------------------------------
Note O - Financial Instruments
The estimated fair values of the Trust's financial instruments are as follows (000's omitted)
At July 31, 1997 1996 - --------------------------------------------------------------------------- Corres- Carrying Fair Carrying Fair ponding Value Value Value Value Footnote -------- ----- -------- ----- -------- Assets:
Cash and cash equivalents $ 42,781 $ 42,781 $ 4,300 $ 4,300 A Marketable securities 2,035 2,035 2,095 2,095 B Mortgages and notes receivable 23,107 24,200 23,597 (1) C Other receivables 1,464 1,464 1,109 (1) D
Liabilities:
Mortgages payable 65,573 67,500 48,935 (2) E Notes payable 412,634 429,200 189,490 (2) F Other liabilities 35,359 35,359 24,984 24,984 G
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable:
Cash and cash equivalents: The carrying amount approximates fair value because of the short maturity of those instruments.
Marketable securities: Fair value is based on quoted market prices in accordance with SFAS 115.
(1) Mortgages and notes receivable: The fair value approximates the carrying value and is estimated based on discounting the future cash flows at a year-end risk adjusted lending rate that the Trust would utilize for loans of similar risk and duration.
(2) Mortgages payable and Notes payable: The fair value approximates the carrying value and is estimated based on discounting future cash flows at a year-end adjusted borrowing rate which reflects the risks associated with mortgages and notes of similar risk and duration.
- --------------------------------------------------------------------------- Note P - Subsequent Events
Subsequent to July 31, 1997 the Trust purchased one apartment complex containing 184 units and three shopping centers containing an aggregate of approximately 479,000 gross leasable square feet. The properties are located in New York, North Carolina and Florida. The aggregate purchase price for such properties was approximately $28.7 million.
On August 28, 1997 the Trustees declared a cash distribution to shareholders of record of the shares of beneficial interest as of September 18, 1997 in the amount of $.365 per share (approximately $21.5 million) payable on October 7, 1997.
On August 21, 1997 the Trustees declared a cash distribution to shareholders of record of the Series A Cumulative Preferred Shares as of September 1, 1997 in the amount of $8.125 per share ($.8125 per depositary share, approximately $1,220,000) payable on September 15, 1997.
NEW PLAN REALTY TRUST AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II
Additions Charged Balance at to Costs Credited Balance Beginning and to Other at End Description of Period Expenses Revenues Deductions of Period - ----------- ---------- -------- -------- ---------- --------- Year Ended July 31, 1997 - ------------- Allowance for doubtful accounts $ 3,976,500 $ 3,282,871 -- $ 1,678,371(1) $ 5,581,000
Year Ended July 31, 1996 - ------------- Allowance for doubtful accounts $ 2,922,500 $ 1,966,715 - $ 912,715(1) $ 3,976,500
Year Ended July 31, 1995 - ------------- Allowance for doubtful accounts $ 2,331,500 $ 993,710 -- $ 402,710(1) $ 2,922,500
- ------------------- (1) Trade receivables charged to the reserve.
(1) Aggregate cost is the same for Federal income tax purposes
(1) Aggregate cost is the same for Federal income tax purposes
NEW PLAN REALTY TRUST REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III
JULY 31, 1997 (continued)
Reconciliation of "Real Estate and Accumulated Depreciation":
1997 1996 1995 ---- ---- ---- INVESTMENT IN REAL ESTATE Balance at beginning of period $ 977,941,507 $ 765,080,457 $ 621,342,318
Additions during the period: Land 58,502,501 40,640,504 23,964,530 Buildings and improvements 246,887,815 177,887,917 120,636,110 -------------- ------------- ------------- 1,283,331,823 983,608,878 765,942,958
Less: Costs of assets sold and written-off 5,556,779 5,667,371 862,501 -------------- ------------- ------------- Balance at end of period $1,277,775,044 $ 977,941,507 $ 765,080,457 ============== ============= =============
ACCUMULATED DEPRECIATION Balance at beginning of period $82,523,169 $64,006,509 $ 49,101,916
Additions charged to operating expenses 24,620,418 19,724,387 14,968,266 -------------- ------------- ------------- 107,143,587 83,730,896 64,070,182
Less: Accumulated depreciation on assets sold and written-off 1,277,207 1,207,727 63,673 -------------- ------------- ------------- Balance at end of period $ 105,866,380 $ 82,523,169 $ 64,006,509 ============== ============= =============
Year Ended July 31,
1997 1996 1995
Balance, beginning of period $23,597,342 $22,873,504 $22,909,676
Additions during period: New mortgage loans 700,000 1,544,500 --
Reductions during period: Collection of principal (1,190,709) (820,662) (36,172)
------------ ----------- -----------
Balance, end of period $23,106,633 $23,597,342 $22,873,504 =========== =========== ===========
EXHIBIT INDEX
Page Number in Signed Exhibit No. Description Registration Statement
*3.1 Amended and Restated Declaration of Trust of New Plan Realty Trust filed as Exhibit 99.3 to the Registrant's Form 8-K dated May 24, 1996.
4.1 Specimen Certificate for Shares of Beneficial Interest.
*4.2 Certificate of Designation Supplementing the Amended and Restated Declaration of Trust of New Plan Realty Trust filed as Exhibit 4.1 to the Registrant's Form 8-K dated July 2, 1997.
4.3 Deposit Agreement dated as of July 3, 1997, among New Plan Realty Trust and BankBoston N.A.
4.4 Specimen Certificate for 7.80% Series A Cumulative Step-Up Premium Rate Preferred Shares.
4.5 Specimen Depositary Receipt.
*9.1 Agreement dated February 26, 1979 among William Newman, Joseph Newman and Melvin Newman filed as Exhibit 9 to Registration Statement No. 2- 63669.
*9.2 Purchase Agreement dated December 18, 1990 between New Plan Realty Trust and Beleggingsmaatschappij Midas B.V. (presently known as Stichting Pensioenfonds) filed as Exhibit 9.5 to the Registrant's Form 10-K for the fiscal year ended July 31, 1994.
*9.3 Termination of Purchase Agreement dated December 17, 1981 between New Plan Realty Trust and Merchant Navy Officers Pension Fund Trustees Limited (presently known as MNOPF Trustees Limited) filed as Exhibit 9.6 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
10.1 Credit Agreement by and among New Plan Realty Trust, the Lenders party thereto and The Bank of New York, as agent, dated as of October 29, 1996.
*10.2 Senior Securities Indenture between New Plan Realty Trust and The First National Bank of Boston, as Trustee, dated as of March 29, 1995 filed as Exhibit 4.2 to Registration Statement No. 33-60045.
*10.3 7.75% Senior Note Due April 6, 2005 filed as Exhibit 10.7 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
*10.4 6.8% Senior Note Due May 15, 2002 filed as Exhibit 10.8 to the Registrant's Form 10-K for the fiscal year ended July 31, 1995.
*10.5 Distribution Agreement dated May 24, 1996 by and among New Plan Realty Trust, Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated and Smith Barney Inc., filed as Exhibit 1 to the Registrant's Form 8-K dated May 24, 1996.
*10.6 Form of Medium Term Note (Fixed Rate) filed as Exhibit 99.1 to the Registrant's Form 8-K dated May 24, 1996.
*10.7 Form of Medium Term Note (Floating Rate) filed as Exhibit 99.2 to the Registrant's Form 8-K dated May 24, 1996.
*10.8 Distribution Agreement dated December 6, 1996 by and among New Plan Realty Trust, Lehman Brothers, Lehman Brothers Inc., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, Salomon Brothers Inc and Smith Barney Inc., filed as Exhibit 1 to the Registrant's Form 8-K dated December 12, 1996.
*10.9 Form of Medium Term Note (Fixed Rate) filed as Exhibit 4.1 to the Registrant's Form 8-K dated December 12, 1996.
*10.10 Form of Medium Term Note (Floating Rate) filed as Exhibit 4.2 to the Registrant's Form 8-K dated December 12, 1996.
11 Statement of Computation of Earnings Per Share for the Twelve Months Ended July 31, 1997.
12 Ratio of Earnings to Fixed Charges.
21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P. dated October 9, 1997.
27(1) Financial Data Schedule.
*Incorporated herein by reference as above indicated. (1) Filed as exhibit to electronic filing only.