ITEM 3. LEGAL PROCEEDINGS
The Operating Partnership is not aware of any pending or threatened litigation at this time that will have a materially adverse effect on the Company, the Operating Partnership or any of the Properties or its development parcels.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the limited partners of the Operating Partnership during the fourth quarter period covered by this report.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At December 31, 2001, there was no established public trading market for the Operating Partnership's common units of limited partner interest (the "OP Units"), Series A Preferred Units, Series B Preferred Units or Series C Preferred Units. As of February 6, 2002, there were 62 holders of OP Units, one holder of Series A Preferred Units, two holders of Series B Preferred Units and one holder of Series C Preferred Units.
The following table sets forth the distributions declared per OP Unit for each of the quarters presented:
During 2001 and 2000, the Operating Partnership recorded regular quarterly distributions to common unitholders totaling $39,720,000 and $38,343,000, respectively, or $1.995 and $1.935 per OP Unit, respectively. Future distributions will be determined by the Board of Directors of the Company, the general partner of the Operating Partnership, and will be dependent upon cash available for distribution, financial position and cash requirements of the Company and the Operating Partnership.
The Operating Partnership makes quarterly distributions to the Series A, Series B and Series C preferred unitholders on the last day of each March, June, September and December. For the year ended December 31, 2001, distributions for the Series A, Series B and Series C Preferred Units were $1,116,000, $8,502,000 and $700,000, respectively. For the year ending 2000, distributions for the Series A, Series B and Series C Preferred Units were $1,116,000, $8,502,000 and $467,000, respectively.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial and other data for the Operating Partnership for the years ended December 31, 2001, 2000, 1999, 1998 and 1997. The historical financial information for all the periods have been derived from the audited historical consolidated financial statements.
The following selected financial information should be read in conjunction with all of the financial statements included elsewhere herein and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
SELECTED FINANCIAL DATA (Dollars in thousands except per share amounts)
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
- -------------------------- (1) Basic Earnings Per OP Unit based on 19,929,000, 19,934,000, 21,238,000, 21,298,000 and 21,119,000 weighted average number of OP Units outstanding for the years ended December 31, 2001, 2000, 1999, 1998 and 1997, respectively. Diluted Earnings Per OP Unit based on 19,989,000, 19,935,000, 21,267,000, 21,401,000 and 21,285,000 weighted diluted average number of OP Units outstanding for years ended December 31, 2001, 2000, 1999, 1998, and 1997, respectively. (2) The Company, the general partner of the Operating Partnership, considers funds from operations to be an appropriate measure of the performance of an equity REIT. Funds from operations ("FFO") is defined by the National Association of Real Estate Investment Trusts ("NAREIT") as "net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." While the Company believes that FFO is the most relevant and widely used measure of its operating performance, it does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indication of the Company's or the Operating Partnership's operating performance or as an alternative to cash flow as a measure of liquidity. The Company's presentation of FFO, however, may not be comparable to other similarly titled measures used by other equity REITs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." (3) Revenues less operating expenses before interest, depreciation and amortization.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with "Selected Financial Data" and the consolidated financial statements of the Company and the notes thereto appearing elsewhere herein.
The Company is a fully integrated, self-administered and self-managed REIT primarily engaged in the ownership, leasing, management, operation, development, redevelopment and acquisition of retail properties in the Intermountain Region, as well as in Oregon, Washington and California. JP Realty, Inc. conducts all of its business operations through, and holds a controlling interest in, the Operating Partnership. The Operating Partnership's existing portfolio consists of 50 properties, in three operating segments, including 18 enclosed regional malls, 25 community centers together with one free-standing retail Property and six mixed-use commercial Properties. The Company completed the following: a development of Spokane Valley Mall Plaza a new community center in Spokane, Washington adjacent to Spokane Valley Mall in October 2001, a development an expansion on NorthTown Mall, in Spokane, Washington, in September 2000; the opening of Cinemark Theater at Provo Towne Centre, in Provo, Utah, on November 11, 1999; the opening of the Mall at Sierra Vista, in Sierra Vista, Arizona, on October 20, 1999; and the expansion at Boise Towne Plaza, in Boise, Idaho, in 1999. The Operating Partnership's acquisition and development activities added a combined 826,000 square feet of Total GLA to the retail portfolio during 2001, 2000 and 1999.
SIGNIFICANT ACCOUNTING POLICIES
Certain minimum rents are recognized monthly based upon amounts which are currently due from tenants, when such amounts are not materially different than recognizing the fixed cash flow over the initial term of the lease using the straight-line method. Certain leases have in-lieu rents which cover all rent charges and recoveries and are recorded as minimum rents. All other minimum rents are recognized using the straight-line method.
The Company recognizes revenues for Percentage and Overage Rents in the period earned, based upon the accounting guidance issued by Staff Accounting Bulletin No. 101 "Revenue Recognition".
An allowance for doubtful accounts is provided against the portion of tenant accounts receivable which is estimated to be uncollectible.
The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with the taxable year ended December 31, 1994. To qualify as a REIT, the Company must distribute annually to its stockholders at least 90% of its REIT taxable income, as defined in the Code, and satisfy certain other requirements. The Company intends to distribute at least 100% of its estimated REIT taxable income each year and, as a result, it is not taxed under the Code.
The Company accounts for all its affiliates in the Company's consolidated financial statements and all significant intercompany balances have been eliminated.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 2001 TO YEAR ENDED DECEMBER 31,
REVENUES
Total revenues increased 1.5%, or $2,155,000, for the year ended December 31, 2001. Of the $2,155,000 increase, $1,523,000 was the result of increased revenues at the regional malls, $905,000 was the result of increased revenues at the community centers and $89,000 was the result of increased revenues at the commercial properties. A decrease of $362,000 was not allocated to a particular property segment.
MINIMUM RENTS
Minimum rents increased 2.7%, or $2,797,000, for the year ended December 31, 2001. Minimum rents increased by $1,978,000 at the regional malls primarily due to the September 2000 completion of the expansion at the NorthTown Mall, in Spokane, Washington, the August 2000 addition of Dillard's as an anchor tenant to the North Plains Mall, in Clovis, New Mexico, and overall growth throughout the regional mall portfolio, offset by a decrease in straight-line rents of $206,000 and a decrease of lease terminations from tenant settlements of $604,000. Minimum rents increased by $766,000 at the community centers primarily due to overall growth throughout the community center portfolio and $231,000 from lease termination settlements, offset by a decrease in straight-line rents of $192,000. Minimum rents at the commercial properties increased by $53,000. Straight-line rents recognized were $1,298,000 during 2001 and $1,689,000 during 2000. Minimum rents from lease terminations were $1,047,000 during 2001 and $1,410,000 during 2000.
PERCENTAGE AND OVERAGE RENTS
Percentage and overage rents decreased 5.7%, or $257,000, for the year ended December 31, 2001. Percentage and overage rents decreased by $249,000 at the regional malls and decreased by $8,000 at the community centers.
RECOVERIES FROM TENANTS
Recoveries from tenants increased 3.5%, or $1,080,000, for the year ended December 31, 2001. Recoveries from tenants increased by $908,000 at the regional malls, $136,000 at the community centers and $36,000 at the commercial properties.
INTEREST AND OTHER REVENUES
Interest and other revenues decreased 48.2%, or $1,465,000, for the year ended December 31, 2001. Interest decreased $240,000 and other revenues decreased $1,225,000. The decrease in other revenues is primarily due to $729,000 received in 2000 from a local governmental redevelopment agency as payment for a prior year incentive to build in its community, along with a decrease in the amount of such incentives for the year ended December 31, 2001 compared to the same period of the prior year.
Other revenues decreased at the regional malls by $1,211,000, increased in the community centers by $10,000 and a decrease of $24,000 was not allocated to a particular property segment.
EXPENSES
Total expenses increased 0.04%, or $38,000, for the year ended December 31, 2001. Property operating expenses (operating and maintenance; real estate taxes and insurance; and advertising and promotions) increased by $546,000, general and administrative expenses increased by $395,000, depreciation and amortization increased by $1,615,000 and interest decreased by $2,594,000.
PROPERTY OPERATING EXPENSES
Property operating expenses (operating and maintenance; real estate taxes and insurance; and advertising and promotions) increased by $691,000 at the regional malls, decreased by $59,000 at the community centers and $86,000 at the commercial properties.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased $395,000 for the year ended December 31, 2001. The increase is primarily related to increased insurance expense related to the Company's health insurance plan which, in 2000, was lower due to the receipt of certain reinsurance proceeds and increases in personnel incentive plan costs for the year.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $1,615,000 for the year ended December 31, 2001. This increase is attributable to higher depreciation expense from newly developed GLA and tenant improvements, offset by the effect of reducing asset lives on tenant improvements. In 2001, the effect of reducing asset lives on tenant improvements was $895,000 compared to $1,469,000 in 2000.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense decreased $2,594,000 for the year ended December 31, 2001. The decrease in interest expense is the result of lower interest rates on the Company's variable rate debt. Interest capitalized on projects under development was $513,000 in 2001 compared to $1,289,000 in 2000.
MINORITY INTEREST IN (INCOME) LOSS OF CONSOLIDATED PARTNERSHIPS
Income attributable to minority interest increased $560,000 to $120,000 income in 2001 compared to $440,000 loss in 2000. This is mainly due to a consolidated partnership where cumulative losses now exceed the limited partners' investment in such consolidated partnership and such losses previously attributable to its limited partners are now recognized by the Company.
GAIN ON SALES OF REAL ESTATE
Gain on sales of real estate increased $3,081,000 in 2001 due to a sales of out parcels with a gain of $990,000 and the sale of Fry's Shopping Plaza, a community center in Glendale, Arizona, with a gain of $4,093,000 compared to the gain on sales of real estate of $2,002,000 in 2000.
COMPARISON OF YEAR ENDED DECEMBER 31, 2000 TO YEAR ENDED DECEMBER 31,
REVENUES
Total revenues increased 6.5%, or $8,636,000, for the year ended December 31, 2000. Of the $8,636,000 increase, $9,640,000 was the result of increased revenues at the regional malls, $735,000 was the result of decreased revenues at the community centers which was primarily the result of a one-time, non-cash transaction in the amount of $1,957,000 in which a consolidated partnership of the Operating Partnership received a building in exchange for cancellation of a long-term ground lease recorded in 1999, and $186,000 was the result of increased revenues at the commercial properties. A decrease of $455,000 was not allocated to a particular property segment.
MINIMUM RENTS
Minimum rents increased 5.9%, or $5,769,000, for the year ended December 31, 2000. Minimum rents increased by $6,887,000 at the regional malls primarily due to the October 20, 1999 opening of the Mall at Sierra Vista, in Sierra Vista, Arizona, the November 11, 1999 opening of the Cinemark Theater at Provo Towne Centre, in Provo, Utah, the 1999 expansion of Boise Towne Plaza, in Boise, Idaho, the September 2000 completion of the expansion at the NorthTown Mall, in Spokane, Washington, the August 2000 addition of Dillard's as an anchor tenant to the North Plains Mall, in Clovis, New Mexico, lease terminations from tenant settlements and overall growth throughout the regional mall portfolio. Minimum rents decreased by $1,250,000 at the community centers primarily due to a $1,957,000 one-time, non-cash transaction recorded in 1999. Minimum rents at the commercial properties increased by $132,000.
PERCENTAGE AND OVERAGE RENTS
Percentage and overage rents decreased 8.7%, or $427,000, for the year ended December 31, 2000. Percentage and overage rents decreased by $481,000 at the regional malls and increased by $54,000 at the community centers.
RECOVERIES FROM TENANTS
Recoveries from tenants increased 5.5%, or $1,613,000, for the year ended December 31, 2000. Recoveries from tenants increased by $1,298,000 at the regional malls, $261,000 at the community centers and $54,000 at the commercial properties.
INTEREST AND OTHER REVENUES
Interest and other revenues increased 123.7%, or $1,681,000, for the year ended December 31, 2000. Interest increased $95,000 and other revenues increased $1,586,000. The increase in other revenues is primarily due to $729,000 received in 2000 from a local governmental redevelopment agency as payment for a prior year incentive to build in its community, along with amounts of such incentives for the year ended December 31, 2000 compared to the same period of the prior year.
Other revenues increased at the regional malls by $1,911,000, at the community centers by $196,000 and a decrease of $521,000 was not allocated to a particular property segment
EXPENSES
Total expenses increased 8.7%, or $8,445,000, for the year ended December 31, 2000. Property operating expenses (operating and maintenance; real estate taxes and insurance; and advertising and promotions) increased by $2,113,000, general and administrative expenses decreased by $417,000, depreciation and amortization increased by $3,138,000 and interest increased by $3,611,000.
PROPERTY OPERATING EXPENSES
Property operating expenses (operating and maintenance; real estate taxes and insurance; and advertising and promotions) increased by $1,896,000 at the regional malls, increased by $299,000 at the community centers and decreased by $82,000 at the commercial properties.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased $417,000 for the year ended December 31, 2000. The decrease is primarily related to the Company's health insurance plan which, in 2000, was lower due to the receipt of certain reinsurance proceeds and decreases in personnel incentive plan costs for the year.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $3,138,000 for the year ended December 31, 2000. This increase is attributable to higher depreciation expense from newly developed GLA and tenant improvements. In 2000, the effect of reducing asset lives on tenant improvements was $1,469,000 compared to $1,218,000 in 1999.
INTEREST EXPENSE/CAPITALIZED INTEREST
Interest expense increased $3,611,000 for the year ended December 31, 2000. The increase in interest expense is the result of higher interest rates on higher borrowings and a decrease in capitalized interest due to completed GLA. Interest capitalized on projects under development was $1,289,000 in 2000 compared to $2,404,000 in 1999. The Operating Partnership issued preferred units of limited partnership interest in three separate transactions, one in each of the second and third quarters of 1999 and the second quarter of 2000, which resulted in net proceeds of approximately $112,327,000. The Operating Partnership used approximately $110,100,000 to reduce then-outstanding borrowings. Subsequently, borrowings were increased during 1999 and 2000 in connection with development activities and the Company's repurchase of Common Stock. The payment of preferred unit dividends reduced net income for the years ended December 31, 2000 and 1999 in the amount of $10,085,000 and $4,429,000, respectively. Net income was positively impacted by the savings in interest costs from the reduction of Company debt with proceeds from the issuance of preferred stock. The interest expense reduction, net of minority interest, associated with the issuance of preferred stock was approximately $6,391,000 and $1,578,000 for the years ended December 31, 2000 and 1999, respectively.
MINORITY INTEREST IN (INCOME) LOSS OF CONSOLIDATED PARTNERSHIPS
Net income was positively impacted by the increase of $922,000 in minority interest due to the allocation of losses to the minority interest in certain consolidated partnerships during 2000 while income was allocated during 1999.
GAIN ON SALES OF REAL ESTATE
Gain on sales of real estate in 2000 was $2,002,000 as compared to no sales in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal uses of its liquidity and capital resources have historically been for dividends, property acquisitions, development, expansion and renovation programs and debt repayment. To maintain its qualification as a REIT under the Code, the Company is required to distribute to its stockholders at least 90% of its "Real Estate Investment Trust Taxable Income" as defined in the Code. The Company declared quarterly dividends aggregating $1.995 per share in 2001. Approximately 26% of the Company's 2001 dividends represented a return of capital. Future dividends will be determined by the Board of Directors and will be dependent on cash available for distribution, financial position and cash requirements of the Company.
The Company's principal source of liquidity is the cash flow from operating activities generated from its real estate investments. As the economy slows and tenant sales decrease, the Company's cash flow from operating activities may be impacted by those tenants that are paying rents based on a percentage of sales (i.e., in-lieu minimum rents) and those tenants that are paying a percentage of sales over a specified amount (i.e., percentage and overage rents). The Company may also be affected to the extent that tenant occupancy decreases as a result of a slower economy. The Company expects that its property operations for 2002 will be similar to 2001 if the economy continues to be depressed. Cash flow from operations has been positively affected by the Company's interest expense which decreased in 2001 due to the interest rate decreases applied to the Company's variable rate debt. The Company anticipates that interest rates may rise during the last half of 2002 which higher expense will affect the Company's cash from operations. As of December 31, 2001, the Company's cash and restricted cash amounted to approximately $17.1 million. In addition to its cash and restricted cash, unused capacity under the 2000 Credit Facility totaled $76 million at year end.
The Company generally intends to distribute cash in the form of common dividends and distributions to common unitholders approximating 65% to 75% of its funds from operations with the remaining amounts to be held for capital expenditures and additional growth. The Company expects to meet its other short-term cash requirements, including recurring capital expenditures related to maintenance and improvements of existing Properties, through the balance of its cash from operations, its cash balances and advances under the 2000 Credit Facility.
The Company prepares an annual capital expenditure and maintenance budget for each Property which includes provisions for all necessary recurring capital improvements. The Company believes that its cash flows from operating activities will provide the necessary funding for these requirements. The Company believes that these funds will be sufficient to cover (i) tenant finish costs associated with the renewal or replacement of current tenants as existing leases expire and (ii) capital expenditures which will not be reimbursed by tenants. During 2001, the Company had capital expenditures, totaling approximately $28.4 million. This amount consisted of $20.3 million in revenue enhancing construction and development, $4.4 million in revenue enhancing tenant allowances, $2.2 million in non-revenue enhancing tenant allowances and $0.6 million in other non-revenue enhancing capital expenditures. The Company also paid $883,000 in leasing commissions to outside parties. Of this amount, $785,000 was considered revenue enhancing and $98,000 was considered non- revenue enhancing. Exclusive of construction and development, capital expenditures (both revenue and non-revenue enhancing) for the existing Properties are budgeted in 2002 to be approximately $5.0 million.
The Company's principal long-term liquidity requirements will be the repayment of principal on its outstanding secured and unsecured indebtedness and payments on its operating leases, principally ground leases. At December 31, 2001, the Company's total outstanding indebtedness was approximately $478.7 million. Such indebtedness included: (i) the Provo Towne Centre construction loan of approximately $44.1 million maturing July 2003; (ii) the Spokane Valley Mall loan facility of $47.3 million maturing July 2003; (iii) the 2000 Credit Facility with a balance of $124.0 million maturing July 2003; (iv) the $100
million senior notes with a principal payable of $25 million per year beginning March 2005; (v) the $81.6 million 6.68% first mortgage on NorthTown Mall which requires a balloon payment of approximately $73.0 million in September 2008; and (vi) the $78.3 million 6.64% first mortgage on Boise Towne Square which requires a balloon payment of approximately $68.4 million in February 2011. Obligations under the operating leases for 2002, 2003, 2004, 2005, 2006 and thereafter are approximately $1.0 million, $1.0 million, $0.9 million, $0.9 million, $0.9 million and $23.8 million, respectively.
The Company is also contemplating the expansion and renovation of several of its existing Properties and additional development projects and acquisitions as a means to expand its portfolio. The Company does not expect to generate sufficient cash flows from operating activities to meet such long-term needs and intends to finance these amounts primarily through advances under the 2000 Credit Facility, together with equity and debt offerings, including public financing and individual property financings, and from selective asset sales. The availability of such financing will influence the Company's decision to proceed with, and the pace of, its development and acquisition activities.
On April 23, 1999, the Operating Partnership issued 510,000 Series A 8.75% Preferred Units in a private placement. Each Series A Preferred Unit represents a limited partner interest of the Operating Partnership with a liquidation value of twenty-five dollars per unit. The Operating Partnership used the net proceeds of approximately $12.3 million for the partial repayment of borrowings outstanding under the Prior Credit Facility. On July 28, 1999, the Operating Partnership also issued 3,800,000 Series B 8.95% Preferred Units in a private placement. Each Series B Preferred Unit represents a limited partnership interest of the Operating Partnership with a liquidation value of twenty-five dollars per unit. The Company used the proceeds of approximately $92.2 million to repay $90 million in borrowings outstanding under the Prior Credit Facility and increase operating cash. On May 1, 2000, the Operating Partnership issued 320,000 Series C 8.75% Preferred Units in a private placement. Each Series C Preferred Unit represents a unit of limited partner interest of the Operating Partnership with a liquidation value of twenty-five dollars per unit. The Operating Partnership used the net proceeds of approximately $7.8 million for the partial repayment of borrowings outstanding under the Prior Credit Facility. Quarterly distributions of approximately $278,900, $2,125,600 and $175,000 are due to the holders of the Series A, Series B and Series C Preferred Units, respectively, on the last day of each March, June, September and December. If the last day of each payment period falls on a non-business day, payment is due on the immediately preceding business day for Series A and C and the following business day for Series B, except that payment for the Series B fourth quarter distributions must be made in December.
On September 2, 1997, the Company and the Operating Partnership filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission for the purpose of registering common stock, preferred stock, depositary shares, common stock warrants, debt securities and guarantees. This registration statement, when combined with the Company's unused portion of its previous shelf registration, allowed for up to an aggregate of $400 million of securities to be offered by the Company and the Operating Partnership. On March 11, 1998, the Operating Partnership under this registration statement, issued $100 million of ten-year senior unsecured notes bearing annual interest at a rate of 7.29%. The Operating Partnership had entered into an interest rate protection agreement in anticipation of issuing these notes and received $270,000 as a result of terminating this agreement making the effective rate of interest on these notes at 7.26%. Interest payments are due semi-annually on March 11 and September 11 of each year. Principal payments of $25 million are due annually beginning March 2005. The proceeds were used to partially repay outstanding borrowings under the Prior Credit Facility. At December 31, 2001, the Company and the Operating Partnership had an aggregate of $300 million in registered securities available under its effective shelf registration statement.
The Company intends to fund its distribution, development, expansion, renovation, acquisition and debt repayment activities from the 2000 Credit Facility as well as other debt and equity financings, including public financings, individual property financings, and from selective asset sales. The Company's ratio of debt-to-total market capitalization was approximately 45% as of December 31, 2001.
Net cash provided by operating activities for the year ended December 31, 2001 was $65,169,000 versus $62,173,000 for the corresponding period of 2000. Net income adjusted for non-cash items accounted for a $3,808,000 increase, while changes in operating assets and liabilities accounted for a $812,000 decrease.
Net cash used in investing activities for the year ended December 31, 2001 was $20,854,000 verses $39,783,000 for the corresponding period of 2000. It primarily reflects real estate asset investments of $28,359,000, an increase in restricted cash of $1,814,000 and proceeds from the sale of real estate of $9,319,000.
Net cash used in financing activities for the year ended December 31, 2001 was $35,458,000 verses $27,521,000 for the corresponding period of 2000. Cash was generated from the issuance of Common Stock upon the exercise of outstanding stock options in the amount of $2,319,000, from borrowings of $160,713,000, which were used to repay outstanding borrowings in the amount of $146,493,000. Cash was used for distributions to preferred unitholders in the amount of $10,318,000; to minority interests in the amount of $440,000; to common stockholders in the amount of $32,461,000; and to common unitholders in the amount of $7,259,000; along with the payment of $1,519,000 for deferred financing costs.
The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results, the Company's net income should be examined in conjunction with funds from operations. The Company considers funds from operations to be an appropriate measure of the performance of an equity REIT. Funds from operations ("FFO") is defined by NAREIT as "net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures." While the Company believes that FFO is the most relevant and widely used measure of its operating performance, it does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indication of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. The Company's presentation of FFO, however, may not be comparable to other similarly titled measures used by other equity REITs.
The Company's calculation of FFO is as follows:
INFLATION
Inflation has remained relatively low during the past three years and has had minimal impact on the operating performance of the Properties. Nonetheless, substantially all of the retail tenants' leases contain provisions designed to protect the Company from the impact of inflation. Such provisions include clauses enabling the Company to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rents during the terms of the leases. In addition, many of the leases are for terms less than ten years, which may enable the Company to replace existing leases with new leases at higher base and/or percentage rents if rents of the existing leases are below then-existing market rates. Substantially all of the leases, other than those for anchors, require the tenants to pay a proportionate share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation.
However, inflation may have a negative impact on some of the Company's other operating items. Interest and general and administrative expenses may be adversely affected by inflation as these specified costs could increase at a rate higher than rents. Also, for tenant leases with specified rent increases, inflation may have a negative effect as the specified rent increases in these leases could be lower than the increase in the inflation rate at any given time.
OTHER MATTERS
The Company has reviewed all recently issued accounting standards in order to determine their effects, if any, on the results of operations or financial position of the Company.
The Company adopted the accounting guidance provided by Staff Accounting Bulletin No. 101, "Revenue Recognition, beginning January 1, 2000. The cumulative effect of adopting this guidance was not material as it changed the timing of when the Company recognizes percentage and overage rents on a quarterly basis, but did not have a material impact on the Company's annual financial statements.
On January 1, 2001 the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS No. 138. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company did not hold any derivative instruments at December 31, 2001 or 2000, and as such, the Company does not expect this pronouncement to have a significant impact on the Company's financial statements.
On July 1, 2001 the Company adopted SFAS No. 141, "Business Combinations". SFAS No. 141 requires that the purchase method of accounting be used for all business combinations for which the date of acquisition is after June 30, 2001. SFAS No.141 also establishes specific criteria for the recognition of intangible assets. This pronouncement did not have an impact on its financial statements.
The Financial Accounting Standards Board issued SFAS No. 142, "Goodwill And Other Intangible Assets". SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. The Company does not expect the adoption of this standard to have a significant impact on its financial statements.
The Financial Accounting Standards Board issued SFAS No. 143, "Accounting For Asset Retirement Obligations". SFAS No. 143 requires that an entity shall recognize the fair value of a liability for an asset retirement obligation in the period in which a reasonable estimate of fair value can be made. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, with early adoption permitted. The Company does not expect the adoption of this standard to have a significant impact on its financial statements.
The Financial Accounting Standards Board issued SFAS No. 144, "Accounting For Impairment or Disposal of Long-lived Assets". SFAS No. 144 supersedes SFAS No. 121 and requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and broadens the presentation of discontinued operations to include more disposal transactions. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, with early adoption permitted. The Company expects the adoption of this standard to impact the presentation of its financial statements by requiring the Company to classify the disposals of properties with operations that can be distinguished from the rest of the entity as discontinued operations.
The statements contained in this Annual Report of Form 10-K that are not purely historical fact are forward looking statements and as such may involve known and unknown risks, uncertainties and assumptions. Actual future performance, achievements and results of the Operating Partnership may differ materially from those expressed or implied by such forward-looking statements as a result of such known and unknown risks, uncertainties, assumptions and other factors. Representative examples of these factors include, without limitation, general industry and economic conditions, interest rate trends, terrorist activities, cost of capital and capital requirements, availability of real estate properties, competition from other companies and venues for the sale/distribution of goods and services, shifts in customer demands, tenant bankruptcies, governmental and public policy changes and the continued availability of financing in the amounts and on the terms necessary to support the future business of the Company. Readers are cautioned that the Operating Partnership's actual results could differ materially from those set forth in such forward-looking statements.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk is limited to fluctuations in the general level of interest rates on its current and future fixed and variable rate debt obligations. The Company is vulnerable to significant fluctuations in interest rates on its variable rate debt, on any future repricing or refinancing of its fixed rate debt and on future debt.
The Company uses long-term and medium-term debt as a source of capital. At December 31, 2001, the Company had approximately $263,257,000 in outstanding fixed rate debt, consisting of $100,000,000 unsecured senior notes and $163,257,000 in mortgages and notes secured by real estate. The various fixed rate debt instruments mature starting in the year 2003 through 2095. The weighted average rate of interest on the fixed rate debt was approximately 6.97% for the year ended December 31, 2001. When debt instruments of this type mature, the Company typically refinances such debt at the then-existing market interest rates which may be more or less than the interest rates on the maturing debt. Changes in general market interest rates will affect the fair value of the Company's fixed rate debt (i.e. as the interest rates increase the fair value of the debt decreases and as interest rates decrease the fair value of the debt increases), but will not have an effect on the interest rate, interest expense or cash flow of such debt. In addition, while no such agreements are in place at December 31, 2001, the Company may attempt to reduce interest rate risk associated with a forecasted issuance of new fixed rate debt by entering into interest rate protection agreements.
The 2000 Credit Facility, loan facility and existing construction loans have variable interest rates and any fluctuation in interest rates will increase or decrease the Company's interest expense. The Operating Partnership's credit facility borrowings under the 2000 Credit Facility are primarily transacted utilizing a variable interest rate tied to LIBOR, which as of December 31, 2001 was equal to LIBOR plus 110 basis points. The interest rate on the construction loan and loan facility as of December 31, 2001 was equal to LIBOR plus 150 basis points. The LIBOR rate used is at the Company's option and is based upon the 30, 60, or 90 day LIBOR rate. A change in the LIBOR rate will effect the Company's interest expense and cash flow. At December 31, 2001, the Company had approximately $215,425,000 in outstanding variable rate debt. The weighted average rate of interest on the variable interest rate debt was approximately 5.36% for the year ended December 31, 2001. If the interest rate for the Company's variable rate debt increased or decreased by 1%, the Company's subsequent annual interest expense on its then outstanding variable rate debt would increase or decrease, as the case may be, by approximately $2,154,000.
Due to the uncertainty of fluctuations in interest rates and the specific actions that might be taken by the Company to mitigate the impact of such fluctuations and their possible effects, the foregoing sensitivity analysis assumes no changes in the Company's financial structure.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed in the Index to Financial Statements and Financial Statement Schedules appearing on Page of this Annual Report on Form 10-K.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the two most recent fiscal years, the Operating Partnership has not experienced any changes in or disagreements with its independent auditors.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Operating Partnership does not have any directors or executive officers. The Company, as the sole general partner of the Operating Partnership, controls the day-to-day operations of the Operating Partnership. Information regarding (i) the Company's Directors appears under the appropriate caption in the Company's proxy statement for its 2002 Annual Meeting of Stockholders to be filed with the Commission pursuant to Regulation 14A and (ii) the Company's Executive Officers appears in Item 4A of the Company's Annual Report on Form 10-K for the year ended December 31, 2001. The Operating Partnership does not have any equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 and, therefore, is not required to provide the information requested by Item 405 of Regulation S-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Operating Partnership does not have any directors or executive officers. The Company, as the sole general partner of the Operating Partnership, controls the day-to-day operations of the Operating Partnership. Information regarding executive compensation of the Company's Executive Officers appears under the appropriate caption in the Company's proxy statement for its 2002 Annual Meeting of Stockholders to be filed with the Commission pursuant to Regulation 14A.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Operating Partnership does not have any voting securities or any directors or executive officers and, therefore, is not required to provide the information requested by Item 403 of Regulation S-K.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Operating Partnership does not have any voting securities or any directors or executive officers and, therefore, is not required to provide the information requested by Item 404 of Regulation S-K.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Financial Statements Schedules
See Index to Financial Statements and Financial Statement Schedules appearing on page of this Form 10-K
(b) Reports on Form 8-K
None
(c) Exhibits
ITEM 14A.SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE EXCHANGE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE EXCHANGE ACT
No annual report to security holders or any proxy statement, form of proxy or other proxy soliciting material will be sent by the Registrant to security holders.
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, hereunto duly authorized.
----------------------------------- 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.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (No. 333-34835 and No. 333-34835-01) of Price Development Company, Limited Partnership of our report dated January 30, 2002, relating to the consolidated financial statements and financial statements schedules, which appears in Price Development Company, Limited Partnership's Annual Report on Form 10-K for the year ended December 31, 2001.
/s/ PRICEWATERHOUSECOOPERS LLP - ---------------------------------- PricewaterhouseCoopers LLP Salt Lake City, Utah February 14, 2002
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Price Development Company, Limited Partnership
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Price Development Company, Limited Partnership and its subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company'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 of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP - ------------------------------- PricewaterhouseCoopers LLP Salt Lake City, Utah January 30, 2002
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
See accompanying notes to consolidated financial statements.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS - EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
See accompanying notes to consolidated financial statements.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DOLLARS IN THOUSANDS)
See accompanying notes to consolidated financial statements.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN THOUSANDS)
See accompanying notes to consolidated financial statements.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
1. BUSINESS AND BASIS OF PRESENTATION
BUSINESS
Price Development Company, Limited Partnership (the "Operating Partnership") is primarily engaged in the business of owning, leasing, managing, operating, developing and redeveloping regional malls, community centers and other commercial properties in Utah, Idaho, Colorado, Arizona, Nevada, New Mexico and Wyoming, as well as in Oregon, Washington and California. The tenant base includes primarily national, regional and retail chains and local retail companies. Consequently, the credit risk is concentrated in the retail industry. JP Realty, Inc., a Maryland corporation (the "Company"), is the sole general partner of the Operating Partnership. The Company conducts all of its business operations through, and holds a controlling interest in, the Operating Partnership. Since there are no material differences between the Company and the Operating Partnership they will be collectively referred to as the "Company" unless the context requires otherwise.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the Company, the Operating Partnership and all affiliates. All significant intercompany balances and transactions have been eliminated in the consolidated presentation. Certain amounts in the 2000 and 1999 financial statements have been reclassified to conform to the 2001 presentation.
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REAL ESTATE ASSETS
Real estate assets are stated at cost less accumulated depreciation. At each balance sheet date, the Company reviews recorded book values of real estate assets for possible impairment based upon expectations of future nondiscounted cash flows (excluding interest) from each property. There have been no impairments as of December 31, 2001.
Costs directly related to the acquisition and development of real estate assets, including overhead costs directly attributable to property development, are capitalized. Interest and real estate taxes incurred during the development and construction periods are also capitalized.
Depreciation is computed on a straight-line basis generally over 40 years for buildings and four to ten years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the shorter of the assets' estimated useful life or the life of the related lease. Expenditures for maintenance and repairs are charged to operations as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful lives.
REVENUE RECOGNITION
Certain minimum rents are recognized monthly based upon amounts which are currently due from tenants, when such amounts are not materially different than recognizing the fixed cash flow over the initial term of the lease using the straight-line method. Certain leases have in-lieu rents which cover all rent charges and recoveries and are recorded in minimum rents. All other minimum rents are recognized using the straight-line method.
The Company recognizes revenues for Percentage and Overage Rents in the period earned, based upon the accounting guidance issued by Staff Accounting Bulletin No. 101 "Revenue Recognition".
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
An allowance for doubtful accounts has been provided against the portion of tenant accounts receivable which is estimated to be uncollectible. Tenant accounts receivable in the accompanying consolidated balance sheet are shown net of allowance for doubtful accounts of $1,420, and $1,368 as of December 31, 2001 and 2000, respectively.
RESTRICTED CASH
Restricted cash is held under terms of loan agreements to be used for certain capital expenditures, certain reserves for space lease up, property tax payments and funds held in reserve by a trustee for principal and interest.
DEFERRED CHARGES
Deferred charges consist principally of financing fees and leasing commissions paid to third parties. These costs are amortized on a straight- line basis and are recorded in the consolidated statement of operations in amortization of deferred financing costs and amortization of deferred leasing costs which amounts, for deferred financing fees, approximate those amortized using the effective interest method, over the terms of the respective agreements. Deferred charges in the accompanying consolidated balance sheet are shown net of accumulated amortization of $6,224 and $7,325 as of December 31, 2001 and 2000, respectively.
INCOME TAXES
Income taxes have not been provided in the accompanying financial statements as the tax effects of the Operating Partnership's operations accrue directly to the partners.
RECENT ACCOUNTING PRONOUNCEMENTS
On January 1, 2001 the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS No. 138. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company did not hold any derivative instruments at December 31, 2001 or 2000 and, as such, the Company does not expect this pronouncement to have a significant impact on the Company's financial statements.
On July 1, 2001 the Company adopted SFAS No. 141, "Business Combinations". SFAS No. 141 requires that the purchase method of accounting be used for all business combinations for which the date of acquisition is after June 30, 2001. SFAS No.141 also establishes specific criteria for the recognition of intangible assets. This pronouncement did not have an impact on its financial statements.
The Financial Accounting Standards Board issued SFAS No. 142, "Goodwill And Other Intangible Assets". SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. The Company does not expect the adoption of this standard to have a significant impact on its financial statements.
The Financial Accounting Standards Board issued SFAS No. 143, "Accounting For Asset Retirement Obligations". SFAS No. 143 requires that an entity shall recognize the fair value of a liability for an asset retirement obligation in the period in which a reasonable estimate of fair value can be made. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, with early adoption permitted. The Company does not expect the adoption of this standard to have a significant impact on its financial statements.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Financial Accounting Standards Board issued SFAS No.144, "Accounting For Impairment or Disposal of Long-lived Assets". SFAS No. 144 supersedes SFAS No. 121 and requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and broadens the presentation of discontinued operations to include more disposal transactions. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, with early adoption permitted. The Company expects the adoption of this standard to impact the presentation of its financial statements by requiring the Company to classify the disposals of properties with operations that can be distinguished from the rest of the entity as discontinued operations.
3. DEVELOPMENTS (GLA AMOUNTS UNAUDITED)
In October 2001, Spokane Mall Development Company, Ltd. Partnership, a consolidated partnership of which the Operating Partnership is the general partner, opened Spokane Valley Mall Plaza, a new community center development in Spokane, Washington. This property is adjacent to the Spokane Valley Mall and it contains approximately 132,000 square feet of GLA ((Company-owned leasable area within the Company Properties ("GLA")). is 100% occupied, and had development expenses of approximately $9,907 and a transfer of land from the Spokane Valley Mall with a book value of $1,259.
In September 2000, the Company completed an addition to NorthTown Mall, in Spokane, Washington, adding approximately 103,000 square feet of GLA. The addition included a 12- screen Regal Cinemas occupying approximately 50,000 square feet of GLA, a Barnes & Noble occupying approximately 27,000 square feet of GLA and a Nordstrom Rack occupying approximately 26,000 square feet of GLA. An additional 912-stall parking garage was also completed. In 1998, the Operating Partnership issued a letter of credit to the first mortgage holder in the amount of $9,500 to guarantee the completion of additional property development work. The issued letter of credit was allowed to expire on October 16, 2000.
During 2000, the Operating Partnership developed an addition to Grand Teton Mall, in Idaho Falls, Idaho, adding approximately 12,900 square feet of GLA for an Old Navy Store and expended approximately $781 for development costs.
4. BORROWINGS
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
4. BORROWINGS (CONTINUED)
CREDIT FACILITY
On October 16, 1997, the Operating Partnership obtained a $150,000 three- year unsecured credit facility (the "Prior Credit Facility") from a syndicate of banks. On December 18, 1997, the amount of the Prior Credit Facility was increased to $200,000. On July 28, 2000, the Operating Partnership replaced the Prior Credit Facility with a new $200,000 unsecured credit facility (the "2000 Credit Facility") from a syndicate of banks lead by Bank One, NA. The 2000 Credit Facility has a three-year term and bears interest, at the option of the Operating Partnership, at one or a combination of (i) the higher of the federal funds rate plus 50 basis points or the prime rate or (ii) LIBOR plus a spread of 85 to 145 basis points. The LIBOR spread is determined by the Operating Partnership's credit rating and/or leverage ratio. The 2000 Credit Facility also includes a competitive bid option in the amount of $100,000 which will allow the Operating Partnership to solicit bids for borrowings from the bank syndicate. The 2000 Credit Facility will be used for general corporate purposes including development, working capital, repayment of indebtedness and/or amortization payments. The 2000 Credit Facility contains restrictive covenants, including limitations on the amount of outstanding secured and unsecured debt of the Operating Partnership and requires the Operating Partnership to maintain certain financial ratios. The 2000 Credit Facility was used to payoff and replace the Prior Credit Facility. The write-off of deferred financing cost related to the early extinguishment of the Prior Credit Facility makes up the extraordinary loss of $80, net of minority interest of $18 in 2000. The Operating Partnership paid commitment fees on the Prior Credit Facility and the 2000 Credit Facility totaling $464, $2,001 and $506, in 2001, 2000 and 1999, respectively. At December 31, 2001 and 2000, the 2000 Credit Facility had a balance of $124,000 and $130,000, respectively.
NOTES
On March 11, 1998, the Operating Partnership, under its shelf registration, issued $100,000 of ten-year senior unsecured notes bearing interest at a fixed 7.29% per annum. The Operating Partnership had entered into an interest rate protection agreement in anticipation of issuing these notes and received $270 as a result of terminating this agreement, making the effective fixed rate of interest on these notes 7.26% per annum. Interest payments are due semi-annually on March 11 and September 11, of each year. Principal payments of $25,000 are due annually beginning March 2005. The proceeds were used to partially repay outstanding borrowings under the Prior Credit Facility.
On January 21, 1994, a subsidiary of the Operating Partnership issued $95,000 in secured notes bearing interest at a fixed 6.37% per annum. On July 21, 1999, the Operating Partnership borrowed $33,777 from the Prior Credit Facility to reduce the notes to $61,223. The transaction unencumbered four regional mall Properties. The write-off of deferred financing costs related to the reduction of the notes plus direct expenses, including a prepayment penalty, make up the extraordinary loss of $801, net of minority interest of $184, in 1999. The notes required quarterly interest payments and were due on January 22, 2001. The notes were paid off and canceled January 22, 2001.
On July 31, 2001, Spokane Mall Development Company, Ltd. Partnership, a consolidated partnership of which the Operating Partnership is the general partner, obtained a new loan facility from a group of banks led by Bank One, Arizona, NA. The new loan facility totaled $47,340, of which $41,600 was drawn at closing and used to pay-off and terminate the maturing $50,000 Spokane Valley Mall construction loan, which had a balance of $41,600. The new loan facility is for two years, maturing on July 31, 2003, with an interest rate of LIBOR plus 150 basis points. The LIBOR rate used is at the Company's option and is based upon the 30, 60 or 90 day LIBOR rate. An additional $5,740 was drawn on the loan facility in December 2001 to fund the construction of Spokane Valley Mall Plaza. The balance outstanding under this loan facility, as of December 31, 2001, was $47,340. Commitment fees paid were $503 on this new loan facility.
CONSTRUCTION LOANS
On September 4, 1998, Provo Mall Development Company, LTD., a consolidated partnership of which the Operating Partnership is the general partner, entered into a $50,000 construction loan facility. The proceeds from the construction loan facility have been used to fund the development and construction of Provo Towne Centre in Provo, Utah. On June 28, 2001, the right to extend the construction loan facility for an additional two years was exercised changing the maturity date to July 1, 2003. The construction facility is collateralized by Provo Towne Centre and guaranteed by the Operating Partnership. The loan
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
4. BORROWINGS (CONTINUED)
bears interest at a variable rate indexed to the LIBOR rate plus 150 basis points. The LIBOR rate used is at the Company's option and is based upon the 30, 60 or 90 day LIBOR rate. Commitment fees paid were $75, $100 and $84, in 2001, 2000 and 1999, respectively. At December 31, 2001 and 2000, the loan had a balance of $44,085 and $43,792, respectively.
On July 30, 1996, Spokane Mall Development Company Limited Partnership, a consolidated partnership of which the Operating Partnership is the general partner, entered into a $50,000 construction loan facility. The proceeds from this construction loan facility have been used to fund the development and construction of the Spokane Valley Mall, in Spokane, Washington. The construction loan facility was collateralized by the Spokane Valley Mall and was guaranteed by the Operating Partnership. This construction loan facility was paid-off and terminated on July 31, 2001. The loan bore interest at a variable interest rate indexed to the LIBOR rate plus 150 basis points. At December 31, 2000, the loan had a balance of $41,600. Commitment fees paid in 2001, 2000 and 1999 were $0, $50 and $154, respectively.
MORTGAGES PAYABLE
On January 22, 2001, the Operating Partnership through Boise Mall, LLC, a wholly-owned subsidiary, obtained a first mortgage on Boise Towne Square, in Boise, Idaho, in the amount of $79,000 with a ten-year term. The payment is based on a thirty-year amortization schedule with a balloon payment of $68,315 on February 10, 2011, bearing interest at a fixed 6.64% per annum. The Operating Partnership used the proceeds to pay off $61,223 of notes, secured by real estate, with an interest rate of 6.37% and reduced amounts outstanding under the Operating Partnership's 2000 Credit Facility. The properties unencumbered by this transaction include Cottonwood Mall, in Holladay, Utah; North Plains Mall, in Clovis, New Mexico; and Three Rivers Mall, in Kelso, Washington. At December 31, 2001 the loan had a balance of $78,331.
On August 6, 1998, the Company, through a consolidated partnership, acquired NorthTown Mall, in Spokane, Washington. The partnership obtained a new first mortgage in the amount of $84,500. The loan has a ten year term, 6.68% fixed rate, and a thirty-year amortization payoff schedule with a balloon payment of approximately $73,000. At December 31, 2001 and 2000, the loan had a balance of $81,571 and $82,540, respectively.
In June 1997, the Operating Partnership assumed a mortgage note of $24,755 as part of the acquisition of Silver Lake Mall, in Coeur d'Alene, Idaho, and retired portions of the debt principally using borrowings under a credit facility. The assumed debt bore interest at a fixed 8.5% per annum. On August 1, 2000, the Operating Partnership paid-off the principal balance of $11,950 with borrowings from the 2000 Credit Facility.
On October 12, 2001, the Operating Partnership used operating cash to pay off a loan on the Company's Sears-East Bay property in Provo, Utah, which was scheduled to mature on November 30, 2001 for $1,243,000. The loan had a stated interest rate of 9.38% per annum.
SCHEDULE OF MATURITIES OF BORROWINGS
The following summarizes the scheduled maturities of borrowings at December 31, 2001:
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
5. CAPITAL TRANSACTIONS
The limited partners of the Operating Partnership have the right to exchange their common units of limited partner interests ("OP Units") into shares of the Company's Common Stock on a one-for-one basis (subject to adjustment in certain events); provided, however, that the Company may, at its option, elect to deliver to limited partners, instead of shares of Common Stock, cash in an amount equal to the market value of such shares. In the event that shares of Common Stock are issued in exchange for OP Units, the Operating Partnership will issue an equivalent number of units to the Company as general partner interests in the Operating Partnership. In 2001 and 2000, respectively, zero and 125 OP Units were converted into shares.
In October 1999, the Board of Directors authorized the Company to repurchase up to $25,000 of the Company's Common Stock through open market purchases and private transactions. The Company repurchased a total of 1,463,100 shares from October 25, 1999 to March 20, 2000. During 2000 and 1999, the Company repurchased 606,500 and 856,600 shares at a cost of $10,632 and $14,366, respectively. The Operating Partnership purchased an equivalent number of units of general partner interest from the Company.
In April 1999, the Operating Partnership issued 510,000 Series A 8.75% cumulative redeemable preferred units of limited partner interests (the "Series A Preferred Units") in exchange for a gross contribution of $12,750. Each Series A Preferred Unit represents a limited partner interest in the Operating Partnership with a liquidation value of twenty-five dollars per unit. The Operating Partnership used the proceeds, less applicable transaction costs of $405, for the repayment of borrowings outstanding under the Prior Credit Facility. The Series A Preferred Units, which may be redeemed for cash at the option of the Operating Partnership on or after April 23, 2004, have no stated maturity or mandatory redemption and are not convertible into any other securities of the Operating Partnership. The Series A Preferred Units are exchangeable at the option of the preferred unitholder at a rate of one Series A Preferred Unit for one share of the Company's Series A 8.75% cumulative redeemable preferred stock beginning April 23, 2009, or earlier under certain circumstances. In the event that shares of Series A preferred stock are issued in exchange for Series A Preferred Units, the Operating Partnership will issue an equivalent number of Series A Preferred Units to the Company. Any shares of Series A preferred stock issued in exchange for Series A Preferred Units will have the same rights, terms and conditions with respect to redemption as the Series A Preferred Units and will not be convertible into any other securities of the Company. The income allocated and distributions paid to the holder of the Series A Preferred Units are based upon the rate of 8.75% on $12,750 or $1,116 for the years ended December 31, 2001 and 2000 and $768 in 1999.
On July 28, 1999, the Operating Partnership issued 3,800,000 Series B 8.95% cumulative redeemable preferred units of limited partner interest (the "Series B Preferred Units") in exchange for a gross contribution of $95,000. Each Series B Preferred Unit represents a limited partner interest in the Operating Partnership with a liquidation value of twenty-five dollars per unit. The Operating Partnership used the proceeds, less applicable transaction costs of $2,774, to repay $90,000 in borrowings under the Prior Credit Facility and increase operating cash. The Series B Preferred Units, which may be redeemed for cash at the option of the Operating Partnership on or after July 28, 2004, have no stated maturity or mandatory redemption and are not convertible into any other securities of the Operating Partnership. The Series B Preferred Units are exchangeable at the option of the preferred unitholder at a rate of one Series B Preferred Unit for one share of the Company's Series B 8.95% cumulative redeemable preferred stock beginning July 28, 2009, or earlier under certain circumstances. In the event that shares of Series B preferred stock are issued in exchange for Series B Preferred Units, the Operating Partnership will issue an equivalent number of Series B Preferred Units to the Company. Any shares of Series B preferred stock issued in exchange for Series B Preferred Units will have the same rights, terms and conditions with respect to redemption as the Series B Preferred Units and will not be convertible into any other securities of the Company. The income allocated to holders of the Series B Preferred Unit are base upon the rate of 8.95% on the $95,000 for the years ended December 31, 2001 and 2000. Distributions are paid on the last day of the quarter providing that day is a business day. If the payment day falls on a non-business day, the payment is due on the following business day, except that payment for the fourth quarter distributions must be made in December. Income allocated and distributions paid for the years ended December 31, 2001 and 2000 were $8,502 and $3,661 in 1999.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
5. CAPITAL TRANSACTIONS (CONTINUED)
On May 1, 2000, the Operating Partnership issued 320,000 Series C 8.75% cumulative redeemable preferred units of limited partner interest (the "Series C Preferred Units"), in exchange for a gross contribution of $8,000. Each Series C Preferred Unit represents a limited interest in the Operating Partnership with a liquidation value of twenty-five dollars per unit. The Operating Partnership used the proceeds, less applicable transaction costs and expenses of $244, to pay down the borrowings under the Prior Credit Facility. The Series C Preferred Units, which may be redeemed for cash at the option of the Operating Partnership on or after May 1, 2005, have no stated maturity or mandatory redemption and are not convertible into any other securities of the Operating Partnership. The Series C Preferred Units are exchangeable at the option of the preferred unitholder at a rate of one Series C Preferred Unit for one share of the Company's Series C 8.75% cumulative redeemable preferred stock beginning May 1, 2010, or earlier under certain circumstances. In the event that shares of Series C preferred stock are issued in exchange for Series C Preferred Units, the Operating Partnership will issue an equivalent number of Series C Preferred Units to the Company. Any shares of Series C preferred stock issued in exchange for Series C Preferred Units will have the same rights, terms and conditions with respect to redemption as the Series C Preferred Units and will not be convertible into any other securities of the Company. Income allocated and distributions paid to the holder of the Series C Preferred Units are based upon the rate of 8.75% on the $8,000 or $700 and $467 for the years ended December 31, 2001 and 2000 respectively.
For the year ended December 31, 2001, dividends for the Series A, Series B and Series C Preferred Units were $1,116, $8,502 and $700, respectively. For the year ended December 31, 2000, dividends for the Series A, Series B and Series C Preferred Units were $1,116, $8,502 and $467, respectively.
On February 20, 2001, the Operating Partnership issued 2,500 OP Units to New Mexico I Partners in connection with it purchase of land and building at Animas Valley Mall from New Mexico I Partners. The value of the units issued on February 20, 2001 was $47.
During 2001, options to purchase 129,145 shares of common stock were exercised with proceeds of $2,319 to the Company. The Company used the proceeds to purchase an equal number of OP Units.
6. RENTAL INCOME
Substantially all real estate held for investment is leased to retail and commercial tenants. These operating leases generally range from one to 25 years and provide for minimum monthly rents, and in certain instances percentage rents based on the tenants' sales, and generally require the tenants to pay property taxes, insurance and maintenance charges.
All non-cancelable leases, assuming no new or renegotiated leases or option extensions, in effect at December 31, 2001 provide for the following minimum future rental income:
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
7. COMMITMENTS AND CONTINGENCIES
Future minimum rental payments under the terms of all non-cancelable operating leases under which the Operating Partnership is the lessee, principally for ground leases, are as follows:
The Company recorded rental expense of $1,057, $1,003 and $983 for 2001, 2000 and 1999, respectively.
The Company is a defendant in certain litigation relating to its business activities. Management does not believe that the resolution of these matters will have a materially adverse effect upon the financial position, results of operations or cash flows of the Company.
8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During 1999, Price-James Company, a consolidated partnership of the Operating Partnership, received a building appraised at $2,000 in exchange for accounts receivable of $43 and $1,957 for termination of a long-term ground lease, which amount was recorded in minimum rents.
During 2001, 2000 and 1999, non-cash investing and financing transactions included an increase in accounts payable of $0, $0 and $4,645, respectively, related to building and development activities, the write-off of capitalized tenant allowances of $4,496, $6,351 and $2,313, respectively, and in 2000 the transfer from Real Estate assets to other assets of $24 net of accumulated depreciation of $31. In addition, the holders of OP Units elected to convert zero, 125 and 41,718 OP Units, having a recorded value of $0, $1 and $437, into Common Stock in 2001, 2000 and 1999, respectively.
On February 20, 2001, the Operating Partnership issued 2,500 OP Units to New Mexico I Partners in connection with its purchase of land and building at Animas Valley Mall, in Farmington, New Mexico, from New Mexico I Partners. The value of the units issued on February 20, 2001 was $47.
Interest paid (net of capitalized amounts of $513, $1,289 and $2,404 in 2001, 2000 and 1999) aggregated $29,954, $30,712 and $28,553 in 2001, 2000 and 1999, respectively.
9. RELATED PARTY TRANSACTIONS
The Operating Partnership contracted for computer services from Alta Computer Services, Inc. ("Alta"). Alta is majority owned by three directors of the Company. This contract was terminated in July 2001. The Operating Partnership paid $110, $154 and $192 in 2001, 2000 and 1999, respectively, for such services.
The Operating Partnership has entered into a management agreement under which the Operating Partnership performs certain accounting and management functions on behalf of a company, whose majority owner is the Chairman of the Board of Directors of the Company. Management fees collected by the Operating Partnership under this agreement totaled $72 for each of the three years ended December 31, 2001.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
9. RELATED PARTY TRANSACTIONS (continued)
The Company provided third-party management services for certain properties owned directly or indirectly by the Chairman of the Board of Directors of the Company as follows: (i) an office building in Salt Lake City, Utah, the owner of which paid the Company a management fee of $121, $118 and $113 in 2001, 2000 and 1999, respectively (Fairfax, a company which is wholly-owned by the Chairman of the Board, is a general partner of the owner of this building), (ii) five commercial buildings located in Albuquerque, New Mexico; Creve Coeur, Missouri; Dallas, Texas; Escondido, California; and Houston, Texas, the owner of which paid the Company a management fee of $18, $20 and $6 in 2001, 2000 and 1999, respectively (the Chairman of the Board is the general partner owner of the buildings), and (iii) an office building in Park City, Utah, the owner of which paid the Company $5 and $2 in 2001 and 2000, respectively (owned by the Chairman of the Board and his family).
10. STOCK INCENTIVE PLAN
On October 26, 1993, the Company adopted the 1993 Stock Option Plan (the "Plan") which authorizes the discretionary grant by the Executive Compensation Committee of options intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code to key employees of the Company and the discretionary grant of nonqualified stock options to key employees, directors and consultants of the Company. The maximum number of shares of Common Stock subject to option under the Company's Plan is 1,100,000. The proceeds received by the Company upon exercise of options are contributed to the Operating Partnership in exchange for the issuance of an equivalent number of OP Units. No stock options may be granted after ten years from the date of adoption and options must be granted at a price generally not less than the fair market value of the Company's Common Stock at the date of grant. These options vest over a period of not more than five years.
A summary of the Company's 1993 Stock Option Plan activity is set forth below:
- ----------------------- * The weighted average remaining contractual life of options outstanding as of December 31, 2001 was four years. The range of option prices was $17.50 to $25.38 per share.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
10. STOCK INCENTIVE PLAN (CONTINUED)
The Company has applied Accounting Principles Board Opinion 25 in accounting for its plan. Accordingly, no compensation costs have been recognized. Had compensation costs for the Company's plan been determined based on the fair value at the grant date, in accordance with the method required by SFAS No. 123, "Accounting for Stock-Based Compensation", the Operating Partnerships' net income and net income per share would have been reduced to the proforma amounts as follows:
The fair value of each option grant was estimated on the date of grant using the Black-Scholes options pricing model using the following assumptions:
11. EMPLOYEE BENEFIT PLAN
The Company has a 401(k) profit sharing plan which permits participating employees to defer up to a maximum of 15% of their compensation up to the maximum allowed by the Code. The Company matches 50% of the qualified employees' contributions up to a maximum of $1 per employee each year. Employees working a minimum of 1,000 hours per year who have completed at least one year of service and attained the age of 21 are qualified to participate in the plan. The employees' contributions are immediately vested. Additionally, the Company annually contributes 3% of base salary to the plan for each qualified employee. Contributions from the Company vest based upon employees' years of service beginning at 20% per year after one year of service. The Company's contributions to the plan in 2001, 2000 and 1999 were $400, $375 and $333, respectively.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by management using available market information. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The carrying value of cash, accounts receivable and accounts payable at December 31, 2001 and 2000 are reasonable estimates of their fair values because of the short maturity of these financial instruments.
Borrowings with an aggregate carrying value of $478,682 and $464,462 have an estimated aggregate fair value of $476,799 and $458,762 at December 31, 2001 and 2000, respectively. Estimated fair value is based on interest rates currently available to the Company for issuance of borrowings with similar terms and remaining maturities.
13. EARNINGS PER OPERATING PARTNERSHIP COMMON UNIT
The following table provides a reconciliation of both income before extraordinary items and the number of OP Units used in the computations of basic earnings per OP Unit, which utilizes the weighted average number of OP Units outstanding without regard to potentially dilutive OP Units and diluted earnings per OP Unit, which includes all such OP Units. Effect has been given to the Company's stock option plan (Note 10) since proceeds received by the Company upon exercise of options are contributed to the Operating Partnership in exchange for the issuance of an equivalent number of OP Units.
Options to purchase 570,000, 694,000 and 687,000 shares of Common Stock were outstanding at December 31, 2001, 2000 and 1999, respectively (Note 10), a portion of which has been reflected above using the treasury stock method.
14. SEGMENT INFORMATION (GLA AMOUNTS UNAUDITED)
The following information presents the Company's three reportable segments - (1) regional malls, (2) community centers and (3) commercial Properties in conformity with SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information".
The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies." Segment data includes total revenues and property net operating income (revenues less operating and maintenance expense, real estate taxes and insurance expense and advertising and promotions expense ("Property NOI")). The Company evaluates the performance of its segments and allocates resources to them based on Property NOI.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
14. SEGMENT INFORMATION (GLA AMOUNTS UNAUDITED) (CONTINUED)
The regional mall segment consists of 18 regional malls in eight states containing approximately 10,414,000 square feet of Total GLA and which range in size from approximately 301,000 to 1,166,000 square feet of Total GLA.
The community center segment consists of 25 Properties in eight states containing approximately 3,427,000 square feet of Total GLA and one freestanding retail Property containing approximately 2,000 square feet of GLA.
The commercial Properties include six mixed-use commercial/business Properties with 38 commercial buildings containing approximately 1,355,000 square feet of GLA which are located primarily in the Salt Lake City, Utah area where the Company's headquarters is located.
The table below presents information about the Company's reportable segments for the years ended December 31:
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER PARTNERSHIP UNIT AMOUNTS)
14. SEGMENT INFORMATION (GLA AMOUNTS UNAUDITED) (CONTINUED) - ----------------------------- (1) Property operating expenses consist of operating, maintenance, real estate taxes, insurance, advertising and promotion expenses as listed in the consolidated statement of operations. (2) Total revenues minus property operating expenses. (3) Unallocated expenses consist of general and administrative, depreciation, amortization of deferred financing costs, amortization of deferred leasing costs and interest as listed in the consolidated statement of operations. (4) Unallocated minority interest includes minority interest in income of consolidated partnerships. (5) Unallocated other includes gain on sales of real estate and extraordinary loss on extinguishment of debt as listed in the consolidated statement of operations. (6) Unallocated other total assets include cash, corporate offices, miscellaneous real estate and deferred financing costs.
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Financial information for each of the quarters in 2001 and 2000 are as follows:
- ----------------------------------- (1) The sum of quarterly earnings per share may differ from yearly totals due to rounding and the fluctuation of weighted average shares of stock on a quarterly basis.
16. SUBSEQUENT EVENTS
As of January 28, 2002, the Operating Partnership had reduced its borrowings under the 2000 Credit Facility by $7,000 from $124,000 to $117,000.
SCHEDULE II PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (DOLLARS IN THOUSANDS)
SCHEDULE III
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION (DOLLARS IN THOUSANDS)
SCHEDULE III
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION (DOLLARS IN THOUSANDS)
(1) Included are development costs subsequent to acquisition or opening of property. (2) This property is encumbered with the Spokane Valley Mall loan facility.
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION (Dollars in thousands)