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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12588
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CENTER TRUST, INC.
(Exact name of registrant as specified in charter)
Maryland 95-4444963
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3500 Sepulveda Boulevard, Manhattan Beach, California 90266
(Address of principal executive offices) (Zip Code)
(310) 546-4520
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for at least the past 90 days. YES [X] NO [_]
As of August 10, 2001, 27,622,072 shares of Common Stock, Par Value $.01 Per
Share, were outstanding.
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CENTER TRUST, INC.
FORM 10-Q
INDEX
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements............................................
Consolidated Balance Sheets as of June 30, 2001 (unaudited) and
December 31, 2000............................................... 1
Consolidated Statements of Operations for the three and six
months ended June 30, 2001 and 2000 (unaudited)................. 2
Consolidated Statements of Cash Flows for the six months ended
June 30, 2001 and 2000 (unaudited).............................. 3
Notes to Consolidated Financial Statements (unaudited).......... 4
Management's Discussion and Analysis of Financial Condition and
Item 2. Results of Operations........................................... 6
PART II OTHER INFORMATION............................................... 12
SIGNATURES............................................................... 13
CENTER TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
2001 2000
----------- ------------
(unaudited)
ASSETS
Rental properties..................................... $ 729,191 $ 776,667
Accumulated depreciation and amortization............. (140,650) (136,828)
--------- ---------
Rental properties, net................................ 588,541 639,839
Cash and cash equivalents............................. 6,049 6,164
Tenant receivables, net............................... 7,239 11,920
Other receivables..................................... 6,251 5,603
Restricted cash securities............................ 9,656 9,531
Deferred charges, net................................. 16,045 18,030
Other assets.......................................... 3,090 3,492
--------- ---------
TOTAL............................................... $ 636,871 $ 694,579
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Secured debt........................................ $ 405,599 $ 318,052
7 1/2% Convertible subordinated debentures.......... -- 128,548
Accrued dividends and distributions................. 1,173 6,035
Accrued interest.................................... 1,087 5,827
Accounts payable and other accrued expenses......... 10,652 10,161
Accrued construction costs.......................... 629 1,060
Tenant security and other deposits.................. 1,703 1,797
--------- ---------
Total liabilities................................. 420,843 471,480
--------- ---------
MINORITY INTERESTS:
Operating Partnership (1,339,644 and 2,015,692 units
issued as of June 30, 2001 and December 31, 2000,
respectively)...................................... 11,796 15,075
Other minority interests............................ 1,366 1,620
--------- ---------
Total minority interests.......................... 13,162 16,695
--------- ---------
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' EQUITY:
Common stock ($.01 par value, 100,000,000 shares
authorized; 27,622,072 and 26,721,226 shares issued
and outstanding as of June 30, 2001 and
December 31, 2000, respectively)................... 276 266
Additional paid-in capital.......................... 362,798 359,419
Accumulated distributions and deficit............... (160,208) (153,281)
--------- ---------
Total stockholders' equity........................ 202,866 206,404
--------- ---------
TOTAL............................................... $ 636,871 $ 694,579
========= =========
See Notes to Consolidated Financial Statements.
1
CENTER TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- ----------------
2001 2000 2001 2000
------- ------- ------- -------
REVENUES:
Rental revenues............................ $17,272 $24,452 $35,011 $49,661
Expense reimbursements..................... 5,964 7,715 11,906 15,425
Percentage rents........................... 173 661 694 994
Other income............................... 1,108 1,512 2,534 3,101
------- ------- ------- -------
Total revenues......................... 24,517 34,340 50,145 69,181
------- ------- ------- -------
EXPENSES:
Interest................................... 8,443 15,009 18,131 29,700
Property Operating Costs:
Common Area.............................. 4,513 5,146 8,879 10,272
Property taxes........................... 2,390 3,340 4,910 6,674
Leasehold rentals........................ 269 361 534 725
Marketing................................ 411 314 594 532
Other operating.......................... 1,149 838 2,330 1,941
Depreciation and amortization.............. 5,175 6,314 10,414 12,783
Reorganization Costs....................... 2,613 -- 2,613 --
General and administrative................. 1,646 1,324 3,011 2,631
------- ------- ------- -------
Total expenses......................... 26,609 32,646 51,416 65,258
------- ------- ------- -------
(LOSS) INCOME FROM OPERATIONS BEFORE OTHER
ITEMS..................................... (2,092) 1,694 (1,271) 3,923
(LOSS) GAIN ON SALE OF RENTAL PROPERTIES... (3,279) 9,149 (2,379) 11,724
MINORITY INTERESTS:
Operating Partnership...................... 333 (675) 281 (821)
Other minority interests................... (140) (76) (169) (150)
------- ------- ------- -------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM.... (5,178) 10,092 (3,538) 14,676
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT
OF DEBT................................... (566) -- (1,385) (1,864)
------- ------- ------- -------
NET (LOSS) INCOME.......................... $(5,744) $10,092 $(4,923) $12,812
======= ======= ======= =======
BASIC AND DILUTED INCOME PER SHARE:
(Loss) Income before extraordinary item.... $ (0.19) $ 0.38 $ (0.13) $ 0.55
Extraordinary loss on early extinguishment
of debt................................... (0.02) -- (0.05) (0.07)
------- ------- ------- -------
Net (Loss) Income.......................... (0.21) $ 0.38 (0.18) $ 0.48
======= ======= ======= =======
Weighted Average Basic and Diluted Shares
Outstanding............................... 27,372 26,686 27,232 26,667
======= ======= ======= =======
See Notes to Consolidated Financial Statements
2
CENTER TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30,
------------------
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income......................................... $ (4,923) $ 12,812
Adjustment to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization of rental properties...... 10,414 12,783
Amortization of deferred financing costs................ 2,047 1,712
Extraordinary loss on early extinguishment of debt...... 1,385 1,864
Net loss on sale of rental properties................... 2,379 (11,724)
Minority interests in operations........................ (112) 971
Net changes in operating assets and liabilities........... (3,550) (13,063)
-------- --------
Net cash provided by operating activities............. 7,640 5,355
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction and development costs........................ (4,458) (7,790)
Net proceeds from sale of rental property................. 45,074 36,109
-------- --------
Net cash provided by investing activities............. 40,616 28,319
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable....................... (139,023) (2,273)
Proceeds from mortgages................................... -- 17,390
Repayment of mortgages.................................... -- (17,390)
Borrowings on secured line of credit...................... 133,369 190,250
Repayment of secured line of credit....................... (35,347) (200,191)
Proceeds from the sale of common stock.................... -- 344
Increase in restricted cash............................... (125) (4,596)
Dividends to shareholders................................. (6,678) (15,191)
Distributions to minority interests....................... (567) (1,240)
-------- --------
Net cash used in financing activities................. (48,371) (32,897)
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...... (115) 777
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD......... 6,164 5,204
-------- --------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD............... $ 6,049 $ 5,981
======== ========
See Notes to Consolidated Financial Statements
3
CENTER TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis Of Presentation
Center Trust, Inc., (the "Company"), a Maryland Corporation, is a self-
administered and self-managed real estate investment trust ("REIT"). The
Company engages in the ownership, management, leasing, acquisition,
development and redevelopment of unenclosed retail shopping centers in the
western United States. As of June 30, 2001 the Company owned 35 retail
shopping centers (the "Properties") comprising 6.4 million square feet of
total shopping center gross leasable area ("GLA").
The accompanying financial statements and related notes of the Company are
unaudited; however, they have been prepared in accordance with generally
accepted accounting principles for interim financial reporting and the
instructions to Form 10-Q and the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared under generally accepted
accounting principles have been condensed or omitted pursuant to such rule. In
the opinion of management, all adjustments considered necessary for fair
presentation of the Company's financial position, results of operations and
cash flows have been included. These financial statements should be read in
conjunction with the Company's Form 10-K for the year ended December 31, 2000.
2. Secured Debt
On January 16, 2001, the Company repaid in full its 7 1/2% Convertible
Subordinated Debentures. The outstanding balance of $128.5 million was repaid
with proceeds from the Company's Secured Credit Facility.
Subsequent to June 30, 2001, the Company refinanced an existing mortgage on
North Mountain Village, located in Phoenix, Arizona. The $7.1 million mortgage
bears interest at 7.68% and matures in 2011
3. Property Disposition
In March 2001, the Company sold three community shopping centers and one
single tenant facility for a combined sales price of $38.4 million. The assets
sold included Westgate North Shopping Center, a 104,000 square foot shopping
center located in Tacoma, Washington, Center of El Centro, a 179,000 square
foot shopping center located in El Centro, California, Madera Marketplace a
169,000 square foot shopping center located in Madera, California, and K-Mart
Madera, a 86,000 square foot single tenant facility, located in Madera,
California. After repayment of debt of $16.9 million, net proceeds of $17
million were used to reduce the outstanding balance on the Company's Credit
Facility. During the fourth quarter of 2000, the Company recorded a $4.8
million impairment of assets held for sale, a result of the anticipated sales
of the Westgate North Shopping Center and the Center of El Centro. After
consideration of the fourth quarter impairment loss adjustment, the Company
recorded a gain on the sale of assets of $0.9 million during 2001. In
addition, the Company recorded an extraordinary loss of $0.8 million for the
early extinguishment of debt related to the payment of certain prepayment
penalties and elimination of certain deferred costs.
During the 2nd quarter of 2001, the Company sold one community shopping
center and one single tenant facility. The assets sold were K-Mart Rocklin, a
86,000 single tenant facility located in Rocklin, California and Marshalls'
Plaza, a 79,000 square foot shopping center located in Modesto, California.
After repayment of debt of $1.4 million, net proceeds of $8.3 million were
used to reduce the outstanding balance on the Company's Credit Facility. The
Company recorded a loss of $3.3 million on the sale. In addition, the Company
recorded an extraordinary loss of $566,000 for the early extinguishment of
debt related to the payment of certain prepayment penalties and elimination of
certain deferred costs.
4
CENTER TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. Per Share Data
In accordance with SFAS No. 128 (Earnings Per Share), basic earnings per
share ("EPS") is based on the weighted average number of shares of common
stock outstanding during the period and diluted EPS is based on the weighted
average number of shares of common stock outstanding combined with the
incremental weighted average shares that would have been outstanding if all
dilutive potential common shares had been issued as of the beginning of the
period. The weighted average number of shares of common stock used in the
computation of basic and diluted EPS for the three and six-month periods ended
June 30, 2001 were 28,962,000 and 28,850,000, respectively. The weighted
average number of common shares for the same periods ended June 30, 2000 were
28,446,000 and 28,379,000, respectively. Units held by limited partners in the
Operating Partnership may be exchanged for shares of common stock of the
Company on a one-for-one basis, in certain circumstances, and therefore are
not dilutive.
On July 20, 2001, the Company paid a $0.04 dividend per share to
shareholders of record as of July 2, 2001. Year-to-date the Company has paid
dividends of $0.08 per share or $2.2 million.
5. Reorganization Costs
At the end of the second quarter of 2001, the Company recorded a non-
recurring Reorganization expense of $2.6 million. The expense consists of
employee severance and other related costs. Substantially all amounts have
been paid as of August, 2001.
5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The following discussion should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
Forward Looking Statements
The following discussion of financial condition and Results of Operations
contains certain forward-looking statements that are subject to risk and
uncertainty. In particular, statements pertaining to our capital resources,
portfolio performance and results of operations contain forward-looking
statements. Likewise, all our statements regarding anticipated growth in our
funds from operations and anticipated market conditions, demographics and
results of operations are forward-looking statements. Forward looking
statements involve numerous risks and uncertainties and you should not rely on
them as predictions of future events. Forward-looking statements depend on
assumptions, data or methods which may be incorrect or imprecise and we may
not be able to realize them. We do not guarantee that the transactions and
events described will happen as described, or that they will happen at all.
You can identify forward-looking statements by the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should," "would,"
"seeks," "approximately," "intends," "plans," "pro forma" "estimates" or
"anticipates" or the negative of these words and phrases or similar words or
phrases. You can also identify forward-looking statements by discussions of
strategy, plans or intentions. The following factors, among others, could
cause actual results and future events to differ materially from those set
forth or contemplated in the forward-looking statements:
. defaults on or non-renewal of leases by tenants;
. increased interest rates and operations costs;
. our failure to obtain necessary outside financing;
. difficulties in identifying properties to acquire and completing
acquisitions;
. difficulties in disposing of properties;
. our failure to successfully operate acquired properties and operations;
. our failure to successfully develop property;
. our failure to maintain our status as a REIT;
. environmental uncertainties and risks related to natural disasters;
. financial market fluctuations; and
. changes in real estate and zoning laws and increases in real property
tax rates.
Our success also depends upon economic trends generally, as well as income
tax laws, governmental regulation, legislation, population changes and other
matters discussed above in section entitled "Risk Factors." We caution you,
however, that any list of risk factors may not be exhaustive.
Results of Operations
Comparison of the three months ended June 30, 2001 to the three months ended
June 30, 2000.
Rental revenues decreased by $7.2 million to $17.3 million for the three
months ended June 30, 2001 from $24.5 million for the three months ended June
30, 2000. The entire decrease was due to the sale of 16 community shopping
centers and four single tenant facilities, for a total of 20 properties sold
since June 30, 2000.
6
Property operating costs decreased by 1.3 million to $8.7 million for the
three months ended June 30, 2001 from $10.0 million for the three months ended
June 30, 2000. Substantially all of the decrease was a result of decreased
operating costs from the sale of the properties previously discussed.
Interest expense decreased to $8.4 million for the three months ended June
30, 2001 from $15.0 million for the three months ended June 30, 2000. The
decrease resulted from lower average debt outstanding and lower effective
interest rates in the second quarter of 2001 compared to the same period in
2000. The lower average debt outstanding was due to the repayment of the
$128.5 million 7 1/2% Convertible Subordinated Debentures and proceeds from
the sale of assets during the later half of 2000 and the first half of 2001,
which were used to reduce the Company's Secured Credit Facility.
General and Administrative costs increased slightly by $0.3 million from
$1.3 million for the three months ended June 30, 2000 to $1.6 million for the
three months ended June 30, 2001.
At the end of the second quarter of 2001, the Company recorded a non-
recurring Reorganization expense of $2.6 million. The expense consists of
employee severance and other related costs. The Company anticipates that cost
savings related to the reorganization will be realized during the remaining
quarters of 2001.
The Company reported a net loss of $5.7 million for the three months ended
June 30, 2001 compared to net income of $10.1 million for the same period
ended June 30, 2001. The net loss was primarily due to lower net operating
income of $8.3 million from the sale of properties, $2.6 million in
reorganization costs and a $3.3 million loss on the sale of assets partially
offset by lower interest of $8.4 million as noted above. The gain in 2000
resulted primarily from a $9.1 million gain on the sale of assets.
Comparison of the six months ended June 30, 2001 to the six months ended June
30, 2000.
Rental revenues decreased by $14.7 million to $35.0 million for the six
months ended June 30, 2001 from $49.7 million for the six months ended June
30, 2000. The decrease of $14.3 million is due to the sale of 16 community
shopping centers and four single tenant facilities, for a total of 20
properties sold since June 30, 2000.
Property operating costs decreased by $2.9 million to $17.2 million for the
six months ended June 30, 2001 from $20.1 million for the six months ended
June 30, 2000. Substantially all of the decrease was a result of decreased
property taxes and operating costs from the sale of the properties previously
discussed.
Interest expense decreased to $18.1 million for the six months ended June
30, 2001 from $29.7 million for the six months ended June 30, 2000. The
decrease is the result of lower average debt outstanding and lower interest
rates as previously discussed.
General and Administrative costs increased slightly by $0.4 million from
$2.6 million for the six months ended June 30, 2000 to $3.0 million for the
six months ended June 30, 2001.
The Company reported a net loss of $4.9 million for the six months ended
June 30, 2001 compared to net income of $12.8 million for the same period
ended June 30, 2001. The net loss was primarily due to lower net operating
income of $15.6 million from the sale of properties, $2.6 million in
reorganization costs and a $2.4 million loss on the sale of assets partially
offset by lower interest of $18.1 million as noted above. The gain in 2000
resulted primarily from a $11.7 million gain on the sale of assets.
7
Selected Property Financial Information
Net operating income (defined as revenues, less property operating costs)
for the Company's properties is as follows:
Six Months
Ended
June 30,
---------------
2001 2000
------- -------
Retail Properties (35 in 2001 and 55 in 2000):
Regional Malls............................................ $ 8,240 $ 8,623
Community Centers......................................... 23,368 38,007
Single Tenants............................................ 810 1,746
Other income................................................ 480 661
------- -------
Net Operating Income.................................... $32,898 $49,037
======= =======
The following summarizes the percentage of leased GLA (excluding non-owned
GLA) as of:
June 30, December 31,
2001 2000
-------- ------------
Retail Properties (35 in 2001 and 41 in 2000):
Community Centers.................................... 92.1% 93.1%
Regional Malls....................................... 93.6 90.9
Single Tenants....................................... 100.0 100.0
Aggregate Portfolio.................................. 92.7 93.3
Funds from Operations
The Company considers funds from operations ("FFO") to be an alternative
measure of the performance of an equity REIT since such measure does not
recognize depreciation and amortization expenses as operating expenses. FFO is
defined, as outlined in the October 1999 White Paper, by the National
Association of Real Estate Investment Trusts ("NAREIT") as net income plus
depreciation and amortization of real estate, less gains or losses on sales of
properties. Additionally, the definition also permits FFO to be adjusted for
significant non-recurring items. Funds from operations do not represent cash
flows from operations as defined by generally accepted accounting principles
and should not be considered as an alternative to those indicators in
evaluating the Company's operating performance or liquidity. Further, the
methodology for computing FFO utilized by the Company may differ from that
utilized by other equity REITs and, accordingly may not be comparable to such
other REITs.
8
The Company computes FFO on both a basic and diluted basis. The diluted
basis assumes the conversion of the convertible and exchangeable debentures
into shares of common stock. The following table summarizes the Company's
computation of FFO and provides certain additional disclosures (dollars in
thousands):
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -----------------
2001 2000 2001 2000
--------- --------- ------- --------
FUNDS FROM OPERATIONS
Net (loss) income.................... $ (5,744) $ 10,092 $(4,923) $ 12,812
Adjustments to reconcile net income
to funds from operations:
Depreciation and Amortization:
Buildings and improvements....... 3,212 4,327 6,444 8,663
Tenant improvements and
allowances...................... 1,138 1,271 2,234 2,700
Leasing costs.................... 605 653 1,313 1,299
Minority Interests................... (377) 571 (496) 630
Extraordinary loss--early
extinguishment of debt.............. 566 -- 1,385 1,864
Loss (Gain) on Sale of Assets........ 3,279 (9,149) 2,379 (11,724)
Reorganization Costs................. 2,613 -- 2,613 --
Other................................ 377 354 538 817
--------- --------- ------- --------
Funds from operations, basic and
diluted............................. $ 5,669 $ 8,119 $11,487 $ 17,061
========= ========= ======= ========
Funds from operations, on a basic basis, decreased to $5.7 million for the
three months ended June 30, 2001, as compared to $8.1 million for the same
period in 2000. Funds from operations decreased to $11.5 million for the six
months ended June 30, 2001, as compared to $17.1 million for the same period
in 2000. The three and six month decreases in funds from operations are
principally a result of the reasons stated above under Results of Operations,
adjusted for the items outlined in the above table.
Liquidity Sources and Requirements
The primary focus of the Company during the first half of 2001 was to repay
the 7 1/2% Convertible Subordinated Debentures and to continue to strengthen
its financial stability and flexibility. Through a series of asset sales and
debt refinancing transactions, as well as a modification of the Company's
Credit Facility, the Company was able to successfully repay it 7 1/2%
Convertible Debentures which matured on January 15, 2001. Further, with the
sale of the three community shopping centers and a single tenant facility in
2001, the Company reduced its outstanding balance on its Secured Credit
Facility to a level below 70% loan to value, which reduced the interest rate
paid on the outstanding balance to 250 basis points over LIBOR by March 31,
2000. Asset sales during the second quarter have further enabled the Company
to reduce its outstanding balance by $8.3 million. This combined with the
reduction of the dividend, discussed below, provides the Company with the
anticipated cash and financial flexibility required to meet its capital
requirements in the near future.
During 2001, the maximum availability under the Credit Facility was reduced
from $193 million to $170 million as a result of the sale of assets which were
previously included as collateral within the pool of assets securing the
Credit Facility. The Company currently has availability of approximately $7
million as of June 30, 2001.
The Company announced that it will pay a quarterly dividend of $0.04 per
share for both the first and second quarters of 2001, which equates to an
annual dividend rate of $0.16 per share and approximates the Company's minimum
required distribution to maintain its REIT status. This compares to the annual
dividend of $0.84 paid
9
in the year 2000. The dividend reduction was necessitated by the contraction
in the Company's asset base as a result of the sale of over $290 million in
assets of the last twelve months. The dividend reduction will allow the
Company to maximize its retention of capital, reduce its leverage level, and
provide financial flexibility to appropriately evaluate value-added
redevelopment opportunities within its portfolio, while maintaining its REIT
status.
During the 2nd quarter of 2001, the Company sold one community shopping
center and one single tenant facility. The assets sold were K-Mart Rocklin, a
86,000 single tenant facility located in Rocklin, California and Marshalls'
Plaza, a 79,000 square foot shopping center located in Modesto, California.
After repayment of debt of $1.4 million, net proceeds of $8.3 million were
used to reduce the outstanding balance on the Company's Credit Facility.
During the first quarter of 2001, the Company sold three community shopping
centers and one single tenant facility for a combined sales price of $38.4
million. The assets sold included Westgate North Shopping Center, a 104,000
square foot shopping center located in Tacoma, Washington, Center of El
Centro, a 179,000 square foot shopping center located in El Centro,
California, Madera Marketplace a 169,000 square foot shopping center located
in Madera, California, and K-Mart Madera, a 86,000 square foot single tenant
facility, located in Madera, California. The total net proceeds from the sales
were $17 million, after repayment of debt of approximately $16.9 million that
reduced the outstanding balance on the Company's Credit Facility.
Subsequent to June 30, 2001, the Company refinanced an existing mortgage on
North Mountain Village, located in Phoenix, Arizona. The $7.1 million mortgage
bears interest at 7.68% and matures in 2011. The Company has no other debt
maturities in 2001.
Debt maturities of $193.4 million in 2002, as well as significant amounts
due from 2003 to 2015, will require refinancing. Loans maturing in 2002
include the amount outstanding on the Company's Secured Credit Facility of
$151 million, which is due on March 31, 2002. The Secured Credit Facility has
a 1-year extension available subject to certain covenant compliance. The
Company expects to extend the maturity of the Secured Credit Facility. The
Company believes, based on the collateral available within the Properties,
that it will be able to effect such refinancings.
Cash Flows
Net cash provided by operating activity increased by $2.3 million from $5.4
million for the six months ended June 30, 2000 to $7.6 million for the same
period of 2001. The increase resulted primarily from lower working capital
requirements in the period ended June 30, 2001 compared to the same period of
June 30, 2000 partially offset by the sale of assets previously discussed.
Net cash from investment activities was $40.6 million for the six months
ended June 30, 2001 as compared to $28.3 million for the six months ended June
30, 2000. The increase was the result of proceeds received from the sale of
four community shopping centers and two single tenant facilities in 2001
compared to the sale of one single tenant facility and a freestanding theatre
in 2000. Financing activities used cash of $48.4 million for the six months
ended June 30, 2001 as compared to $32.9 million for the six months ended June
30, 2000. The decrease was primarily the result of the repayment of the 7 %
Convertible Subordinated Debentures in January 2001 partially offset by lower
pay-down of the Company's Secured Credit Facility in 2001 compared to 2000.
Inflation
Center Trust's long term leases contain provisions designed to mitigate the
adverse impact of inflation on its results from operations. Such provisions
include clauses enabling Center Trust to receive percentage rents based upon
tenants' gross sales, which generally increase as prices rise, and/or, in
certain cases, escalation clauses are often related to increases in the CPI or
similar inflation indices. In addition, many of Center Trust's leases are for
terms of less than ten years, which permits Center Trust to seek to increase
rents upon re-rental at market rates if rents are below then existing market
rates. Many of Center Trust's leases require the tenants to
10
pay a pro rata share of operating expenses, including common area maintenance,
real estate taxes, insurance and utilities, thereby reducing Center Trust's
exposure to increases in costs and operating expenses from inflation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk primarily due to fluctuations in
interest rates. Specifically, the risk resulting from increasing LIBOR-based
interest rates as interest on the Company's Credit Facility of $158.1 million
as well as mortgage notes of $108.5 million are tied to various LIBOR interest
rates. The Credit Facility matures March 31, 2002. The Company is also subject
to market risk resulting from fluctuations in the general level of U.S.
interest rates as $112.0 million of the Company's debt is based on a weighted
average fixed rate of 8.8%. As a result, the Company will be obligated to pay
contractually agreed upon rates on interest on it fixed rate debt, unless
management refinances its existing fixed rate debt and potentially incurs
substantial prepayment penalties. The $36 million of tax-exempt certificates
of participation are ties to a general index of AAWA-rated tax-free municipal
bonds.
The following table provides information about the Company's interest rate
sensivtive financial instruments, including, amounts due at maturity,
principal amortization, weighted average interest rates and fair market values
as of June 30, 2001 (dollars in thousands):
Fair
Market
As of June 30, 2001 2001 2002 2003 2004 2005 Thereafter Total Value
------------------- ------ -------- ------- ----- ----- ---------- -------- --------
Interest Rate Sensitive
Liabilities:
Credit Facility........ $151,365 $151,365 $151,365
Interest Rate........ LIBOR LIBOR
+ 2.50% + 2.50%
Variable Rate Debt..... $ 33,253 $75,185 $108,438 $108,438
Interest Rate........ LIBOR LIBOR LIBOR
+2.50% + 2.366% +2.407%
Fixed Rate Debt........ $8,105 $ 9,020 $15,052 $77,620 $109,797 $112,667
Weighted Average
Interest Rate......... 8.25% 10.45% 10.375% 8.343% 8.787%
Tax Exempt Certificates. $36,000 $ 36,000 $ 36,000
Weighted Average
Interest Rate......... 5.28% 5.28%
11
PART II--OTHER INFORMATION
Item 1: Legal Proceedings
None
Item 2: Changes in Securities
None
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
None
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On May 2, 2001, the Company filed a report on Form 8-K to make available
additional financial and operational information concerning the Company and
properties owned as of March 31, 2001.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CENTER TRUST RETAIL PROPERTIES, INC.
/s/ EDWARD A. STOKX
By: __________________________________________
Edward A. Stokx
Senior Vice President of Finance
(Principal Financial Officer)
/s/ SIDNEY M. SHIBATA
By: __________________________________________
Sidney M. Shibata
Controller
Dated: August 14, 2001