RPT Realty - Quarter Report: 2009 March (Form 10-Q)
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-Q
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 |
|
For the quarterly period ended March 31, 2009 | ||
or
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934 |
|
For the transition period from to |
Commission file number 1-10093
RAMCO-GERSHENSON PROPERTIES
TRUST
(Exact name of registrant as
specified in its charter)
MARYLAND | 13-6908486 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer Identification Number) |
|
31500 Northwestern Highway
Farmington Hills, Michigan |
48334 (Zip code) |
|
(Address of principal executive
offices)
|
248-350-9900
(Registrants telephone
number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange Act) Yes
o No þ
Number of common shares of beneficial interest ($0.01 par
value) of the registrant outstanding as of May 5, 2009:
18,698,476
INDEX
2
Table of Contents
PART I
FINANCIAL INFORMATION
Item 1. | Financial Statements |
RAMCO-GERSHENSON
PROPERTIES TRUST
March 31, |
December 31, |
|||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
(In thousands, except |
||||||||
per share amounts) | ||||||||
ASSETS
|
||||||||
Investment in real estate, net
|
$ | 829,006 | $ | 830,392 | ||||
Cash and cash equivalents
|
7,946 | 5,295 | ||||||
Restricted cash
|
5,071 | 4,891 | ||||||
Accounts receivable, net
|
33,288 | 40,736 | ||||||
Equity investments in and advances to unconsolidated entities
|
103,580 | 95,867 | ||||||
Other assets, net
|
35,893 | 37,345 | ||||||
Total Assets
|
$ | 1,014,784 | $ | 1,014,526 | ||||
LIABILITIES | ||||||||
Mortgages and notes payable
|
$ | 665,735 | $ | 662,601 | ||||
Accounts payable and accrued expenses
|
25,960 | 26,751 | ||||||
Distributions payable
|
4,951 | 4,945 | ||||||
Capital lease obligation
|
7,126 | 7,191 | ||||||
Total Liabilities
|
703,772 | 701,488 | ||||||
SHAREHOLDERS EQUITY | ||||||||
Ramco-Gershenson Properties Trust (RGPT)
shareholders equity:
|
||||||||
Common Shares of Beneficial Interest, par value $0.01,
45,000 shares authorized; 18,698 and 18,583 issued and
outstanding as of March 31, 2009 and December 31,
2008, respectively
|
185 | 185 | ||||||
Additional paid-in capital
|
389,730 | 389,528 | ||||||
Accumulated other comprehensive loss
|
(3,693 | ) | (3,851 | ) | ||||
Cumulative distributions in excess of net income
|
(114,746 | ) | (112,671 | ) | ||||
Total RGPT Shareholders Equity
|
271,476 | 273,191 | ||||||
Noncontrolling interest in subsidiaries
|
39,536 | 39,847 | ||||||
Total Shareholders Equity
|
311,012 | 313,038 | ||||||
Total Liabilities and Shareholders Equity
|
$ | 1,014,784 | $ | 1,014,526 | ||||
See notes to consolidated financial statements.
3
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Three Months |
||||||||
Ended March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) |
||||||||
(In thousands, except per share amounts) | ||||||||
REVENUES:
|
||||||||
Minimum rents
|
$ | 21,379 | $ | 23,020 | ||||
Percentage rents
|
253 | 364 | ||||||
Recoveries from tenants
|
10,647 | 11,083 | ||||||
Fees and management income
|
1,129 | 1,422 | ||||||
Other income
|
353 | 485 | ||||||
Total revenues
|
33,761 | 36,374 | ||||||
EXPENSES:
|
||||||||
Real estate taxes
|
4,710 | 4,847 | ||||||
Recoverable operating expenses
|
6,043 | 6,582 | ||||||
Depreciation and amortization
|
7,793 | 7,955 | ||||||
Other operating
|
1,264 | 1,048 | ||||||
General and administrative
|
4,085 | 3,805 | ||||||
Interest expense
|
8,104 | 9,779 | ||||||
Total expenses
|
31,999 | 34,016 | ||||||
Income from continuing operations before gain on sale of real
estate assets and earnings from unconsolidated entities
|
1,762 | 2,358 | ||||||
Gain on sale of real estate assets
|
348 | 10,184 | ||||||
Earnings from unconsolidated entities
|
520 | 897 | ||||||
Income from continuing operations
|
2,630 | 13,439 | ||||||
Discontinued operations:
|
||||||||
Income from operations
|
| 97 | ||||||
Income from discontinued operations
|
| 97 | ||||||
Net Income
|
2,630 | 13,536 | ||||||
Less: Net income attributable to the noncontrolling interest in
subsidiaries
|
(380 | ) | (2,091 | ) | ||||
Net income attributable to RGPT common shareholders
|
$ | 2,250 | $ | 11,445 | ||||
Basic earnings per RGPT common share:
|
||||||||
Income from continuing operations attributable to RGPT common
shareholders
|
$ | 0.12 | $ | 0.61 | ||||
Income from discontinued operations attributable to RGPT common
shareholders
|
| 0.01 | ||||||
Net income attributable to RGPT common shareholders
|
$ | 0.12 | $ | 0.62 | ||||
Diluted earnings per RGPT common share:
|
||||||||
Income from continuing operations attributable to RGPT common
shareholders
|
$ | 0.12 | $ | 0.61 | ||||
Income from discontinued operations attributable to RGPT common
shareholders
|
| 0.01 | ||||||
Net income attributable to RGPT common shareholders
|
$ | 0.12 | $ | 0.62 | ||||
Basic weighted average common shares outstanding
|
18,609 | 18,500 | ||||||
Diluted weighted average common shares outstanding
|
18,609 | 18,512 | ||||||
AMOUNTS ATTRIBUTABLE TO RGPT COMMON SHAREHOLDERS:
|
||||||||
Income from continuing operations
|
$ | 2,250 | $ | 11,361 | ||||
Income from discontinued operations
|
| 84 | ||||||
Net income
|
$ | 2,250 | $ | 11,445 | ||||
COMPREHENSIVE INCOME
|
||||||||
Net income
|
$ | 2,250 | $ | 11,445 | ||||
Other comprehensive loss:
|
||||||||
Unrealized loss on interest rate swaps
|
(158 | ) | (1,804 | ) | ||||
Comprehensive income
|
2,092 | 9,641 | ||||||
Comprehensive loss attributable to the noncontrolling interest
in subsidiaries
|
(21 | ) | (246 | ) | ||||
Comprehensive income attributable to RGPT
|
$ | 2,071 | $ | 9,395 | ||||
See notes to consolidated financial statements.
4
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
For the Three Months |
||||||||
Ended March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) |
||||||||
(In thousands) | ||||||||
Cash Flows from Operating Activities:
|
||||||||
Net income attributable to RGPT common shareholders
|
$ | 2,250 | $ | 11,445 | ||||
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||
Depreciation and amortization
|
7,793 | 7,955 | ||||||
Amortization of deferred financing costs
|
168 | 224 | ||||||
Gain on sale of real estate assets
|
(348 | ) | (10,184 | ) | ||||
Earnings from unconsolidated entities
|
(520 | ) | (897 | ) | ||||
Discontinued operations
|
| (97 | ) | |||||
Noncontrolling interest in subsidiaries
|
380 | 2,091 | ||||||
Distributions received from unconsolidated entities
|
903 | 1,647 | ||||||
Changes in operating assets and liabilities that (used) provided
cash:
|
||||||||
Accounts receivable
|
668 | (2,673 | ) | |||||
Other assets
|
73 | 166 | ||||||
Accounts payable and accrued expenses
|
(167 | ) | (7,432 | ) | ||||
Net Cash Provided by Continuing Operating Activities
|
11,200 | 2,245 | ||||||
Operating Cash from Discontinued Operations
|
| 198 | ||||||
Net Cash Provided by Operating Activities
|
11,200 | 2,443 | ||||||
Cash Flows from Investing Activities:
|
||||||||
Real estate developed or acquired, net of liabilities assumed
|
(5,648 | ) | (18,915 | ) | ||||
Investment in and advances to unconsolidated entities, net
|
(1,584 | ) | (844 | ) | ||||
Proceeds from sales of real estate assets
|
870 | 5,104 | ||||||
Decrease in restricted cash
|
(180 | ) | (760 | ) | ||||
Repayment of note receivable from joint venture
|
| 23,249 | ||||||
Net Cash (Used in) Provided by Investing Activities
|
(6,542 | ) | 7,834 | |||||
Cash Flows from Financing Activities:
|
||||||||
Cash distributions to shareholders
|
(4,270 | ) | (8,537 | ) | ||||
Cash distributions to operating partnership unit holders
|
(675 | ) | (2,010 | ) | ||||
Cash dividends paid on restricted shares
|
(49 | ) | | |||||
Paydown of mortgages and notes payable
|
(2,765 | ) | (28,375 | ) | ||||
Payment of deferred financing costs
|
(67 | ) | (50 | ) | ||||
Distributions to noncontrolling partners
|
(16 | ) | (28 | ) | ||||
Borrowings on mortgages and notes payable
|
5,900 | 28,850 | ||||||
Reduction of capital lease obligation
|
(65 | ) | (61 | ) | ||||
Net Cash Used in Financing Activities
|
(2,007 | ) | (10,211 | ) | ||||
Net Increase in Cash and Cash Equivalents
|
2,651 | 66 | ||||||
Cash and Cash Equivalents, Beginning of Period
|
5,295 | 14,977 | ||||||
Cash and Cash Equivalents, End of Period
|
$ | 7,946 | $ | 15,043 | ||||
Supplemental Cash Flow Disclosure, including Non-Cash
Activities:
|
||||||||
Cash paid for interest during the period
|
$ | 6,753 | $ | 9,547 | ||||
Cash paid for federal income taxes
|
199 | 4,679 | ||||||
Capitalized interest
|
313 | 754 | ||||||
Decrease in fair value of interest rate swaps
|
(158 | ) | (1,804 | ) | ||||
Reclassification of note receivable from joint venture
|
6,780 | | ||||||
Decrease in deferred gain on sale of property
|
| 11,678 |
See notes to consolidated financial statements.
5
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
(Dollars
in thousands)
1. | Organization and Basis of Presentation |
Ramco-Gershenson Properties Trust, together with its
subsidiaries (the Company), is a real estate
investment trust (REIT) engaged in the business of
owning, developing, acquiring, managing and leasing community
shopping centers, regional malls and single tenant retail
properties. At March 31, 2009, the Company owned and
managed a portfolio of 89 shopping centers, with approximately
19.8 million square feet of gross leaseable area
(GLA), located in the Midwestern, Southeastern and
Mid-Atlantic regions of the United States. The Companys
centers are usually anchored by discount department stores or
supermarkets and the tenant base consists primarily of national
and regional retail chains and local retailers. The
Companys credit risk, therefore, is concentrated in the
retail industry.
The economic performance and value of the Companys real
estate assets are subject to all the risks associated with
owning and operating real estate, including risks related to
adverse changes in national, regional and local economic and
market conditions. The economic condition of each of the
Companys markets may be dependent on one or more
industries. An economic downturn in one of these industries may
result in a business downturn for the Companys tenants,
and as a result, these tenants may fail to make rental payments,
decline to extend leases upon expiration, delay lease
commencements or declare bankruptcy.
The accompanying consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in
audited financial statements prepared in accordance with
accounting principles generally accepted in the United States
have been condensed or omitted. These consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements and related notes included in
the Companys Annual Report on
Form 10-K
for the year ended December 31, 2008 filed with the
Securities and Exchange Commission. These consolidated financial
statements, in the opinion of management, include all
adjustments necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods
and dates presented. Interim operating results are not
necessarily indicative of operating results for the full year.
Principles
of Consolidation
The consolidated financial statements include the accounts of
the Company and its majority owned subsidiary, the Operating
Partnership, Ramco-Gershenson Properties, L.P. (86.5% and 86.4%
owned by the Company at March 31, 2009 and
December 31, 2008, respectively), and all wholly owned
subsidiaries, including bankruptcy remote single purpose
entities and all majority owned joint ventures over which the
Company has control. The Operating Partnership owns 100% of the
non-voting and voting common stock of Ramco-Gershenson, Inc.
(Ramco), and therefore it is included in the
consolidated financial statements. Ramco has elected to be a
taxable REIT subsidiary for federal income tax purposes. Ramco
provides property management services to the Company and to
other entities. Investments in real estate joint ventures for
which the Company has the ability to exercise significant
influence over, but for which the Company does not have
financial or operating control, are accounted for using the
equity method of accounting. Accordingly, the Companys
share of the earnings from these joint ventures is included in
consolidated net income. All intercompany accounts and
transactions have been eliminated in consolidation.
New
Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board
(FASB) issued Statement No. 160
Noncontrolling Interests in Consolidated Financial
Statements (SFAS 160). SFAS 160
establishes accounting and reporting standards for the
noncontrolling interest in a subsidiary, previously referred to
as a minority interest. This statement requires noncontrolling
interests to be treated as a separate component of equity, not
as a liability or other item outside of permanent equity.
Consolidated net income and comprehensive income is required to
include the
6
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
noncontrolling interests share. The calculation of
earnings per share will continue to be based on income amounts
attributable to the parent. The Company adopted the provisions
of SFAS 160 in the first quarter of 2009. Certain
presentation requirements of the standard were applied
retrospectively.
In March 2008, the FASB issued Statement No. 161,
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133 (SFAS 161). SFAS 161
requires entities that utilize derivative instruments to provide
qualitative disclosures about their objectives and strategies
for using such instruments, as well as any details of
credit-risk-related contingent features contained within
derivatives. SFAS 161 also requires entities to disclose
additional information about the amounts and location of
derivatives included within the financial statements, how the
provisions of SFAS 133 have been applied, and the impact
that hedges have on an entitys financial position,
financial performance, and cash flows. SFAS 161 is
effective for fiscal years and interim periods beginning after
November 15, 2008. The Company implemented the provisions
of SFAS 161 in the first quarter of 2009. The application
of SFAS 161 did not have a material effect on the
Companys results of operations or financial position
because it only required new disclosure requirements. Refer to
Note 8 for further information.
In June 2008, the FASB issued FASB Staff Position
No. EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based
Payment Transactions are Participating Securities,
(FSP
EITF 03-6-1).
FSP
EITF 03-6-1
clarifies that unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents are
considered participating securities and should be included in
the calculation of basic earnings per share using the two-class
method prescribed by SFAS No. 128, Earnings Per
Share. FSP
EITF 03-6-1
is effective for financial statements issued for fiscal years
and interim periods beginning after December 15, 2008. All
prior period earnings per share amounts presented are required
to be adjusted retrospectively. Accordingly, the Company adopted
the provisions of FSP
EITF 03-6-1
in the first quarter of 2009. The adoption of the provisions of
FSP
EITF 03-6-1
did not have a material effect on the Companys
consolidated financial condition, results of operations, or cash
flows. Refer to Note 9 for the calculation of earnings per
share.
In April 2009, the FASB issued FASB Staff Position
No. 157-4,
Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly. This
Staff Position clarifies the application of FASB Statement
No. 157, Fair Value Measurements, when the volume
and level of activity for the asset or liability have
significantly decreased. This FSP also includes guidance on
identifying circumstances that indicate a transaction is not
orderly. Additionally, FASB Staff Position
No. 157-4
emphasizes that even if there has been a significant decrease in
the volume and level of activity for the asset or liability and
regardless of the valuation technique(s) used, the objective of
a fair value measurement remains the same. Fair value is the
price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction (that is, not a
forced liquidation or distressed sale) between market
participants at the measurement date under current market
conditions. The guidance in this Staff Position is effective for
interim and annual reporting periods ending after June 15,
2009, and must be applied prospectively. The Company is
currently evaluating the application of Staff Position
No. 157-4,
but does not expect the standard to have a material impact on
the Companys consolidated financial position, results of
operations, or cash flows.
2. | Accounts Receivable, Net |
Accounts receivable includes $17,580 and $17,605 of unbilled
straight-line rent receivables at March 31, 2009 and
December 31, 2008, respectively.
Accounts receivable at March 31, 2009 and December 31,
2008 includes $2,373 and $2,258, respectively, due from Atlantic
Realty Trust (Atlantic) for reimbursement of tax
deficiencies, interest and other miscellaneous expenses related
to the Internal Revenue Service (IRS) examination of
the Companys taxable years ended December 31, 1991
through 1995. Under terms of the tax agreement the Company
entered into with Atlantic (Tax Agreement), Atlantic
assumed all of the Companys liability for tax and interest
arising out of that IRS examination. Effective June 30,
2006, Atlantic was merged into (acquired by) Kimco SI 1339, Inc.
(formerly
7
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
known as SI 1339, Inc.), a wholly owned subsidiary of Kimco
Realty Corporation (Kimco), with Kimco SI 1339, Inc.
continuing as the surviving corporation. By way of the merger,
Kimco SI 1339, Inc. acquired Atlantics assets, subject to
its liabilities, including its obligations to the Company under
the Tax Agreement.
The Company provides for bad debt expense based upon the
allowance method of accounting. The Company monitors the
collectability of its accounts receivable (billed and unbilled,
including straight-line) from specific tenants, and analyzes
historical bad debts, customer credit worthiness, current
economic trends and changes in tenant payment terms when
evaluating the adequacy of the allowance for doubtful accounts.
When tenants are in bankruptcy, the Company makes estimates of
the expected recovery of pre-petition and post-petition claims.
The ultimate resolution of these claims can be delayed for one
year or longer. Accounts receivable in the accompanying balance
sheets is shown net of an allowance for doubtful accounts of
$4,402 and $4,287 at March 31, 2009 and December 31,
2008, respectively.
3. Investment
in Real Estate, Net
Investment in real estate consisted of the following:
March 31, |
December 31, |
|||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
Land
|
$ | 144,370 | $ | 144,422 | ||||
Buildings and improvements
|
832,214 | 813,705 | ||||||
Construction in progress
|
32,877 | 46,982 | ||||||
1,009,461 | 1,005,109 | |||||||
Less: accumulated depreciation
|
(180,455 | ) | (174,717 | ) | ||||
Investment in real estate, net
|
$ | 829,006 | $ | 830,392 | ||||
4. | Equity Investments in and Advances to Unconsolidated Entities |
As of March 31, 2009, the Company had investments in the
following unconsolidated entities:
Total Assets |
Total Assets |
|||||||||||
Ownership as of |
as of |
as of |
||||||||||
Entity Name
|
March 31, 2009 | March 31, 2009 | December 31, 2008 | |||||||||
(Unaudited) | ||||||||||||
S-12
Associates
|
50 | % | $ | 661 | $ | 661 | ||||||
Ramco/West Acres LLC
|
40 | % | 9,790 | 9,877 | ||||||||
Ramco/Shenandoah LLC
|
40 | % | 15,663 | 15,592 | ||||||||
Ramco/Lion Venture LP
|
30 | % | 535,529 | 536,446 | ||||||||
Ramco 450 Venture LLC
|
20 | % | 364,851 | 362,885 | ||||||||
Ramco 191 LLC
|
20 | % | 23,614 | 23,240 | ||||||||
Ramco RM Hartland SC LLC
|
20 | % | 19,391 | 19,760 | ||||||||
Ramco HHF KL LLC
|
7 | % | 52,189 | 52,461 | ||||||||
Ramco HHF NP LLC
|
7 | % | 27,690 | 28,126 | ||||||||
Ramco Jacksonville North Industrial LLC
|
5 | % | 1,257 | 1,257 | ||||||||
$ | 1,050,635 | $ | 1,050,305 | |||||||||
8
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Debt
The Companys unconsolidated entities had the following
debt outstanding at March 31, 2009 (unaudited):
Balance |
Interest |
|||||||||||
Entity Name
|
Outstanding | Rate | Maturity Date | |||||||||
S-12
Associates
|
$ | 882 | 6.8% | May 2016 | (1 | ) | ||||||
Ramco/West Acres LLC
|
8,671 | 8.1% | April 2010 | (2 | ) | |||||||
Ramco/Shenandoah LLC
|
12,009 | 7.3% | February 2012 | |||||||||
Ramco/Lion Venture LP
|
271,980 | 4.6% - 8.3% | Various | (3 | ) | |||||||
Ramco 450 Venture LLC
|
221,374 | 4.8% - 6.0% | Various | (4 | ) | |||||||
Ramco 191 LLC
|
8,750 | 1.9% | June 2010 | |||||||||
Ramco RM Hartland SC LLC
|
8,505 | 3.4% | July 2009 | |||||||||
Ramco RM Hartland SC LLC
|
6,057 | 13.0% | October 2009 | |||||||||
Ramco Jacksonville North Industrial LLC
|
723 | 2.7% | September 2009 | |||||||||
$ | 538,951 | |||||||||||
(1) | Interest rate resets annually per formula. | |
(2) | Under terms of the note, the anticipated payment date is April 2010. | |
(3) | Interest rates range from 4.6% to 8.3% with maturities ranging from November 2009 to June 2020. | |
(4) | Interest rates range from 4.8% to 6.0% with maturities ranging from February 2010 to January 2018. |
Fees
and Management Income from Transactions with Joint
Ventures
Under the terms of agreements with certain joint ventures, Ramco
is the manager of the joint ventures and their properties,
earning fees for acquisitions, development, management, leasing,
and financing. The fees earned by the Company, which are
reported in the consolidated statements of income as fees and
management income, are summarized as follows:
Three Months Ended |
||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
Management fees
|
$ | 729 | $ | 697 | ||||
Leasing fees
|
110 | 137 | ||||||
Acquisition fees
|
121 | 70 | ||||||
Financing fees
|
10 | 22 | ||||||
Total
|
$ | 970 | $ | 926 | ||||
9
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Combined
Condensed Financial Information
Combined condensed financial information for the Companys
unconsolidated entities is summarized as follows:
March 31, |
December 31, |
|||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
ASSETS
|
||||||||
Investment in real estate, net
|
$ | 1,009,808 | $ | 1,012,752 | ||||
Other assets
|
40,827 | 37,553 | ||||||
Total Assets
|
$ | 1,050,635 | $ | 1,050,305 | ||||
LIABILITIES AND OWNERS EQUITY
|
||||||||
Mortgage notes payable
|
$ | 538,951 | $ | 540,766 | ||||
Other liabilities
|
24,313 | 25,641 | ||||||
Owners equity
|
487,371 | 483,898 | ||||||
Total Liabilities and Owners Equity
|
$ | 1,050,635 | $ | 1,050,305 | ||||
Companys equity investments in and advances to
unconsolidated entities
|
$ | 103,580 | $ | 95,867 | ||||
Three Months Ended |
||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
TOTAL REVENUES
|
$ | 25,485 | $ | 24,512 | ||||
TOTAL EXPENSES
|
23,359 | 20,691 | ||||||
Net Income
|
$ | 2,126 | $ | 3,821 | ||||
Companys share of earnings from unconsolidated entities
|
$ | 520 | $ | 897 | ||||
5. | Other Assets, Net |
Other assets consisted of the following:
March 31, |
December 31, |
|||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
Leasing costs
|
$ | 39,418 | $ | 38,980 | ||||
Intangible assets
|
5,836 | 5,836 | ||||||
Deferred financing costs
|
6,693 | 6,626 | ||||||
Other
|
5,963 | 5,904 | ||||||
57,910 | 57,346 | |||||||
Less: accumulated amortization
|
(35,775 | ) | (34,320 | ) | ||||
22,135 | 23,026 | |||||||
Prepaid expenses and other
|
12,408 | 12,967 | ||||||
Proposed development and acquisition costs
|
1,350 | 1,352 | ||||||
Other assets, net
|
$ | 35,893 | $ | 37,345 | ||||
10
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Intangible assets at March 31, 2009 include $4,526 of lease
origination costs and $1,228 of favorable leases related to the
allocation of the purchase price for acquisitions made since
2002. These assets are being amortized over the lives of the
applicable leases as reductions or additions to minimum rent
revenue, as appropriate, over the initial terms of the
respective leases.
At March 31, 2009 and 2008, $1,870 and $2,744,
respectively, of intangible assets, net of accumulated
amortization of $3,884 and $3,731, respectively, were included
in other assets in the consolidated balance sheets. Of this
amount, approximately $1,450 and $2,183, respectively, was
attributable to in-place leases, principally lease origination
costs and $420 and $561, respectively, was attributable to
above-market leases. Included in accounts payable and accrued
expenses at March 31, 2009 and 2008 were intangible
liabilities related to below-market leases of $662 and $991,
respectively, and an adjustment to increase debt to fair market
value in the amount of $510 and $803, respectively. The
lease-related intangible assets and liabilities are being
amortized over the terms of the acquired leases, which resulted
in additional expense of approximately $31 and $32,
respectively, and an increase in revenue of $43 and $61,
respectively, for the three months ended March 31, 2009 and
2008. The adjustment of debt decreased interest expense by $78
and $40 for the three months ended March 31, 2009 and 2008,
respectively.
The average amortization period for intangible assets
attributable to lease origination costs and for favorable leases
is 5.5 years and 4.5 years, respectively.
The Company recorded amortization of deferred financing costs of
$168 and $224, respectively, during the three months ended
March 31, 2009 and 2008. This amortization has been
recorded as interest expense in the Companys consolidated
statements of income.
The following table represents estimated future amortization
expense related to other assets as of March 31, 2009
(unaudited):
Year Ending December 31,
|
||||
2009 (April 1 - December 31)
|
$ | 4,739 | ||
2010
|
4,475 | |||
2011
|
3,564 | |||
2012
|
2,728 | |||
2013
|
2,057 | |||
Thereafter
|
4,572 | |||
Total
|
$ | 22,135 | ||
11
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
6. | Mortgages and Notes Payable |
Mortgages and notes payable consisted of the following:
March 31, |
December 31, |
|||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
Fixed rate mortgages with interest rates ranging from 4.8% to
8.1%, due at various dates from December 2009 through May 2018
|
$ | 353,270 | $ | 354,253 | ||||
Floating rate mortgages with interest rates ranging from 2.0% to
3.3%, due at various dates from June 2009 through November 2009
|
14,840 | 15,023 | ||||||
Secured Revolving Credit Facility, with an interest rate at
LIBOR plus 325 basis points due December 2009. The
effective rate at March 31, 2009 and December 31, 2008
was 3.8% and 4.3%, respectively
|
40,000 | 40,000 | ||||||
Junior subordinated notes, unsecured, due January 2038, with an
interest rate fixed until January 2013 when the notes are
redeemable or the interest rate becomes LIBOR plus
330 basis points. The effective rate at March 31, 2009
and December 31, 2008 was 7.9%
|
28,125 | 28,125 | ||||||
Unsecured Term Loan Credit Facility, with an interest rate at
LIBOR plus 130 to 165 basis points, due December 2010,
maximum borrowings $100,000. The effective rate at
March 31, 2009 and December 31, 2008 was 4.6% and
5.7%, respectively
|
100,000 | 100,000 | ||||||
Unsecured Revolving Credit Facility, with an interest rate at
LIBOR plus 115 to 150 basis points, due December 2009,
maximum borrowings $150,000. The effective rate at
March 31, 2009 and December 31, 2008 was 1.9% and
3.0%, respectively
|
129,500 | 125,200 | ||||||
$ | 665,735 | $ | 662,601 | |||||
The mortgage notes, both fixed rate and floating rate, are
secured by mortgages on properties that have an approximate net
book value of $444,069 as of March 31, 2009.
The Company has a $250,000 unsecured credit facility (the
Credit Facility) consisting of a $100,000 unsecured
term loan credit facility and a $150,000 unsecured revolving
credit facility. The Credit Facility provides that the unsecured
revolving credit facility may be increased by up to $100,000 at
the Companys request, dependent on there being one or more
lenders willing to acquire the additional commitment, for a
total unsecured revolving credit facility commitment of
$250,000. The unsecured term loan credit facility matures in
December 2010 and bears interest at a rate equal to LIBOR plus
130 to 165 basis points, depending on certain debt ratios.
The Company retains the option to extend the maturity date of
the unsecured revolving credit facility to December 2010. It is
anticipated that funds borrowed under the Credit Facility will
be used for general corporate purposes, including working
capital, capital expenditures, the repayment of indebtedness or
other corporate activities.
At March 31, 2009, outstanding letters of credit issued
under the Credit Facility, not reflected in the accompanying
consolidated balance sheets, totaled approximately $1,776. These
letters of credit reduce the availability under the Credit
Facility.
The Credit Facility and the secured term loan contain financial
covenants relating to total leverage, fixed charge coverage
ratio, loan to asset value, tangible net worth and various other
calculations. As of March 31, 2009, the Company was in
compliance with the covenant terms.
The mortgage loans encumbering the Companys properties,
including properties held by its unconsolidated joint ventures,
are generally non-recourse, subject to certain exceptions for
which the Company would be liable for any resulting losses
incurred by the lender. These exceptions vary from loan to loan
but generally include fraud or a material misrepresentation,
misstatement or omission by the borrower, intentional or grossly
negligent conduct by
12
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the borrower that harms the property or results in a loss to the
lender, filing of a bankruptcy petition by the borrower, either
directly or indirectly, and certain environmental liabilities.
In addition, upon the occurrence of certain events, such as
fraud or filing of a bankruptcy petition by the borrower, the
Company would be liable for the entire outstanding balance of
the loan, all interest accrued thereon and certain other costs,
including penalties and expenses.
We have entered into mortgage loans which are secured by
multiple properties and contain cross-collateralization and
cross-default provisions. Cross-collateralization provisions
allow a lender to foreclose on multiple properties in the event
that we default under the loan. Cross-default provisions allow a
lender to foreclose on the related property in the event a
default is declared under another loan.
Under terms of various debt agreements, the Company may be
required to maintain interest rate swap agreements to reduce the
impact of changes in interest rates on its floating rate debt.
The Company has interest rate swap agreements with an aggregate
notional amount of $100,000 at March 31, 2009. Based on
rates in effect at March 31, 2009, the agreements provide
for fixed rates ranging from 4.4% to 4.7% and expire December
2010.
The following table presents scheduled principal payments on
mortgages and notes payable as of March 31, 2009
(unaudited):
Year Ending December 31,
|
||||
2009 (April 1 - December 31)
|
$ | 210,839 | ||
2010
|
126,580 | |||
2011
|
27,932 | |||
2012
|
34,011 | |||
2013
|
33,485 | |||
Thereafter
|
232,888 | |||
Total
|
$ | 665,735 | ||
With respect to the various fixed rate mortgages, floating rate
mortgages, the Secured Revolving Credit Facility, and the
Unsecured Revolving Credit Facility due in 2009 or extended
under existing agreements, it is the Companys intent to
refinance these mortgages and notes payable. However, there can
be no assurance that the Company will be able to refinance its
debt on commercially reasonable or any other terms.
7. | Fair Value |
The Company utilizes fair value measurements to record fair
value adjustments to certain assets and liabilities and to
determine fair value disclosures. Derivative instruments
(interest rate swaps) are recorded at fair value on a recurring
basis. Additionally, the Company, from time to time, may be
required to record certain assets, such as impaired real estate
assets, at fair value on a nonrecurring basis.
Fair
Value Hierarchy
As required under SFAS 157, the Company groups assets and
liabilities at fair value in three levels, based on the markets
in which the assets and liabilities are traded and the
reliability of the assumptions used to determine fair value.
13
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
These levels are:
Level 1
|
Valuation is based upon quoted prices for identical instruments traded in active markets. | |
Level 2
|
Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. | |
Level 3
|
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. |
The following is a description of valuation methodologies used
for the Companys assets and liabilities recorded at fair
value.
Derivative
Assets and Liabilities
All derivative instruments held by the Company are interest rate
swaps for which quoted market prices are not readily available.
For those derivatives, the Company measures fair value on a
recurring basis using valuation models that use primarily market
observable inputs, such as yield curves. The Company classifies
derivatives instruments as recurring Level 2.
Real
Estate Assets
Real estate assets are subject to impairment testing on a
nonrecurring basis. The Company records investments in real
estate at cost, less accumulated depreciation. When the fair
value of a real estate asset is lower than the cost, the asset
is considered impaired and is written down to fair value. The
Company utilizes cash flow analyses by applying appropriate
discount rates, and other valuation techniques, including
managements analysis of comparable properties in the
existing portfolio and observable market prices to determine the
fair value of its shopping centers. As such, the Company
classifies impaired real estate assets as nonrecurring
Level 3.
Assets
and Liabilities Recorded at Fair Value on a Recurring
Basis
The table below presents the recorded amount of liabilities
measured at fair value on a recurring basis as of March 31,
2009 (in thousands). The Company did not have any material
assets that were required to be measured at fair value on a
recurring basis at March 31, 2009.
Total |
||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Liabilities
|
||||||||||||||||
Derivative liabilities (1)
|
$ | (3,693 | ) | $ | | $ | (3,693 | ) | $ | | ||||||
(1) | Interest rate swaps |
Assets
and Liabilities Recorded at Fair Value on a Nonrecurring
Basis
The table below presents the recorded amount of assets measured
at fair value on a nonrecurring basis as of March 31, 2009
(in thousands). The Company did not have any material
liabilities that were required to be measured at fair value on a
nonrecurring basis at March 31, 2009.
Total |
||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets
|
||||||||||||||||
Investments in real estate, net (1)
|
$ | 3,000 | $ | | $ | | $ | 3,000 | ||||||||
(1) | Impaired real estate assets |
14
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
8. | Derivative Financial Instruments |
As of March 31, 2009, the Company had $100,000 of interest
rate swap agreements. Under the terms of certain debt
agreements, the Company is required to maintain interest rate
swap agreements in an amount necessary to ensure that the
Companys variable rate debt does not exceed 25% of its
assets, as computed under the agreements, to reduce the impact
of changes in interest rates on its variable rate debt. Based on
rates in effect at March 31, 2009, the agreements provide
for fixed rates ranging from 4.4% to 4.7% on a portion of the
Companys unsecured credit facility and expire December
2010.
On the date the Company enters into an interest rate swap for
risk management purposes, the derivative is designated as a
hedge against the variability of cash flows that are to be paid
in connection with a recognized liability. Subsequent changes in
the fair value of a derivative designated as a cash flow hedge
that is determined to be highly effective are recorded in other
comprehensive income (OCI) until earnings are
affected by the variability of cash flows of the hedged
transaction. The differential between fixed and variable rates
to be paid or received is accrued, as interest rates change, and
recognized currently as interest expense in the consolidated
statement of income.
The following table summarizes the notional values and fair
values of the Companys derivative financial instruments as
of March 31, 2009:
Hedge |
Notional |
Fixed |
Fair |
Expiration |
||||||||||||||||
Underlying Debt
|
Type | Value | Rate | Value | Date | |||||||||||||||
Credit Facility
|
Cash Flow | $ | 20,000 | 4.4 | % | $ | (679 | ) | 12/2010 | |||||||||||
Credit Facility
|
Cash Flow | 10,000 | 4.6 | % | (371 | ) | 12/2010 | |||||||||||||
Credit Facility
|
Cash Flow | 10,000 | 4.6 | % | (371 | ) | 12/2010 | |||||||||||||
Credit Facility
|
Cash Flow | 10,000 | 4.6 | % | (360 | ) | 12/2010 | |||||||||||||
Credit Facility
|
Cash Flow | 10,000 | 4.6 | % | (360 | ) | 12/2010 | |||||||||||||
Credit Facility
|
Cash Flow | 20,000 | 4.7 | % | (776 | ) | 12/2010 | |||||||||||||
Credit Facility
|
Cash Flow | 20,000 | 4.7 | % | (776 | ) | 12/2010 | |||||||||||||
$ | 100,000 | $ | (3,693 | ) | ||||||||||||||||
The following table presents the fair values of derivative
financial instruments in the Companys consolidated balance
sheets as of March 31, 2009 and December 31, 2008,
respectively:
Liability Derivatives | ||||||||||||
March 31, 2009 | December 31, 2008 | |||||||||||
Derivatives Designated as Hedging |
Balance Sheet |
Balance Sheet |
||||||||||
Instruments Under SFAS 133
|
Location | Fair Value | Location | Fair Value | ||||||||
(Unaudited) | ||||||||||||
Interest rate contracts
|
Accounts payable and accrued expenses |
$ | (3,693 | ) |
Accounts payable and accrued expenses |
$ | (3,851 | ) | ||||
Total
|
$ | (3,693 | ) | $ | (3,851 | ) | ||||||
15
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The effect of derivative financial instruments on the
Companys consolidated statements of income sheets for the
three months ended March 31, 2009 and 2008, is summarized
as follows:
Amount of Gain (Loss) |
||||||||||||||||||||
Location of |
Reclassified from |
|||||||||||||||||||
Amount of Gain (Loss) |
Gain (Loss) |
Accumlated OCI into |
||||||||||||||||||
Recognized in OCI on Derivative |
Reclassified from |
Income |
||||||||||||||||||
Derivatives in SFAS 133 |
(Effective Portion) |
Accumulated OCI |
(Effective Portion) | |||||||||||||||||
Cash Flow Hedging |
Three Months Ended March 31, |
into Income |
Three Months Ended March 31, | |||||||||||||||||
Relationship
|
2009 | 2008 | (Effective Portion) | 2009 | 2008 | |||||||||||||||
Interest rate contracts
|
$ | (158 | ) | $ | (1,804 | ) | Interest Expense | $ | (712 | ) | $ | (110 | ) | |||||||
Total
|
$ | (158 | ) | $ | (1,804 | ) | $ | (712 | ) | $ | (110 | ) | ||||||||
9. | Earnings Per Common Share |
The following table sets forth the computation of basic and
diluted earnings per common share (EPS) (in
thousands, except per share data):
Three Months Ended |
||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
Numerator:
|
||||||||
Income from continuing operations before noncontrolling interest
|
$ | 2,630 | $ | 13,439 | ||||
Noncontrolling interest in subsidiaries from continuing
operations
|
(380 | ) | (2,078 | ) | ||||
Earnings allocated to unvested shares
|
(21 | ) | | |||||
Income from continuing operations available to RGPT common
shareholders
|
2,229 | 11,361 | ||||||
Discontinued operations, net of noncontrolling interest in
subsidiaries:
|
||||||||
Income from operations
|
| 84 | ||||||
Net income available to RGPT common shareholders
|
$ | 2,229 | $ | 11,445 | ||||
Denominator:
|
||||||||
Weighted-average common shares for basic EPS
|
18,609 | 18,500 | ||||||
Effect of dilutive securities:
|
||||||||
Options outstanding
|
| 12 | ||||||
Weighted-average common shares for diluted EPS
|
18,609 | 18,512 | ||||||
Basic EPS:
|
||||||||
Income from continuing operations attributable to RGPT common
shareholders
|
$ | 0.12 | $ | 0.61 | ||||
Income from discontinued operations attributable to RGPT common
shareholders
|
| 0.01 | ||||||
Net income attributable to RGPT common shareholders
|
$ | 0.12 | $ | 0.62 | ||||
Diluted EPS:
|
||||||||
Income from continuing operations attributable to RGPT common
shareholders
|
$ | 0.12 | $ | 0.61 | ||||
Income from discontinued operations attributable to RGPT common
shareholders
|
| 0.01 | ||||||
Net income attributable to RGPT common shareholders
|
$ | 0.12 | $ | 0.62 | ||||
16
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
10. | Shareholder Rights Plan |
Our Board of Trustees has the authority to issue Preferred
Shares and to determine the price, rights (including conversion
rights), preferences and privileges of those shares without any
further vote or action by the shareholders. Consistent with this
authority, in March 2009, our Board of Trustees adopted for a
one-year term a Shareholder Rights Plan (the Rights
Plan) in which one purchase right was distributed as a
dividend on each share of common share held of record as of the
close of business on April 10, 2009 (the
Rights). If exercisable, each Right will entitle its
holder to purchase from the Company one one-thousandth of a
share of a newly created Series A Junior Participating
Preferred Shares of beneficial interest, par value $0.01 per
share, of the Company for $30.00 (the Purchase
Price). The Rights will become exercisable if any person
or any of its affiliates or associates, directly or indirectly,
becomes the beneficial owner of 15% or more of the
Companys common shares or has commenced a tender or
exchange offer which, if consummated, would result in any person
or any of its affiliates or associates becoming the beneficial
owner of 15% or more of the Companys common shares. If any
person or any of its affiliates or associates becomes the
beneficial owner of 15% or more of the Companys common
shares, each right will entitle its holder, other than the
acquiring person, to purchase a number of shares of the
Companys or the acquirors common share having a
value of twice the Purchase Price. The Rights are deemed
attached to the certificates representing outstanding common
shares of beneficial interest.
11. | Leases |
Approximate future minimum revenues from rentals under
noncancelable operating leases in effect at March 31, 2009,
assuming no new or renegotiated leases or option extensions on
lease agreements, are as follows (unaudited):
Year Ending December 31,
|
||||
2009 (April 1 - December 31)
|
$ | 61,879 | ||
2010
|
79,478 | |||
2011
|
71,768 | |||
2012
|
61,912 | |||
2013
|
53,090 | |||
Thereafter
|
247,985 | |||
Total
|
$ | 576,112 | ||
The Company has an operating lease for its corporate office
space for a term expiring in 2014. The Company also has
operating leases for office space in Florida and land at one of
its shopping centers. In addition, the Company has a capitalized
ground lease. Total amounts expensed relating to these leases
were $393 and $367 for the three months ended March 31,
2009 and 2008, respectively.
17
Table of Contents
RAMCO-GERSHENSON
PROPERTIES TRUST
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Approximate future minimum rental payments under the
Companys noncancelable office leases and land, assuming no
options extensions, and a capital ground lease at one of its
shopping centers, are as follows (unaudited):
Office |
Capital |
|||||||
Year Ending December 31,
|
Leases | Lease | ||||||
2009 (April 1 - December 31)
|
$ | 674 | $ | 508 | ||||
2010
|
909 | 677 | ||||||
2011
|
916 | 677 | ||||||
2012
|
938 | 677 | ||||||
2013
|
960 | 677 | ||||||
Thereafter
|
1,517 | 5,956 | ||||||
Total minimum lease payments
|
5,914 | 9,172 | ||||||
Less: amounts representing interest
|
| (2,046 | ) | |||||
Total
|
$ | 5,914 | $ | 7,126 | ||||
12. | Commitments and Contingencies |
Construction
Costs
In connection with the development and expansion of various
shopping centers, as of March 31, 2009 we have entered into
agreements for construction costs of approximately $26,577,
including approximately $9,009 for costs related to the
development of Hartland Towne Square in Hartland, Michigan and
$14,555 for The Towne Center at Aquia in Stafford, Virginia.
Litigation
We are currently involved in certain litigation arising in the
ordinary course of business. The Company believes that this
litigation will not have a material adverse effect on our
consolidated financial statements.
Repurchase
of Common Shares of Beneficial Interest
In December 2005, the Board of Trustees authorized the
repurchase, at managements discretion, of up to $15,000 of
the Companys common shares of beneficial interest. The
program allows the Company to repurchase its common shares of
beneficial interest from time to time in the open market or in
privately negotiated transactions. As of March 31, 2009,
the Company had purchased and retired 287,900 shares of the
Companys common shares of beneficial interest under this
program at an average cost of $27.11 per share. No common shares
were repurchased during the first quarter of 2009.
18
Table of Contents
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis of the financial condition
and results of operations should be read in conjunction with the
consolidated financial statements, including the respective
notes thereto, which are included in this
Form 10-Q.
Overview
We are a fully integrated, self-administered, publicly-traded
REIT which owns, develops, acquires, manages and leases
community shopping centers (including power centers and
single-tenant retail properties) and one enclosed regional mall
in the Midwestern, Southeastern and Mid-Atlantic regions of the
United States. At March 31, 2009, we owned interests in 89
shopping centers, comprised of 88 community centers and one
enclosed regional mall, totaling approximately 19.8 million
square feet of GLA. We and our joint venture partners own
approximately 15.7 million square feet of such GLA, with
the remaining portion owned by various anchor stores.
Our corporate strategy is to maximize total return for our
shareholders by improving operating income and enhancing asset
value. We pursue our goal through:
| Aggressively leasing vacant spaces and entering into new leases for occupied spaces when leases are about to expire; | |
| A proactive approach to redeveloping, renovating and expanding our shopping centers; and | |
| The development of new shopping centers in metropolitan markets where we believe demand for a center exists. |
We have followed a disciplined approach to managing our
operations by focusing primarily on enhancing the value of our
existing portfolio through strategic sales and successful
leasing efforts. We continue to selectively pursue new
development, redevelopment and acquisition opportunities.
Leasing
During the first quarter 2009, we opened 19 new stores, at an
average base rent of $14.53 per square foot, an increase of
34.3% over the portfolio average rents. The Company signed 26
new leases during the first quarter 2009, at an increase of
49.2% above portfolio average rents, compared to 24 new leases
signed in the first quarter 2008. Additionally, we renewed 67
non-anchor leases, at an average base rent of $15.98 per square
foot, achieving an increase of 7.3% over prior rental rates. The
Company also renewed 12 anchor leases, at an average base rent
of $8.10 per square foot, an increase of 5.6% over prior rental
rates. Overall portfolio average base rents for non-anchor
tenants increased to $16.54 per square foot in the first quarter
of 2009 from $16.43 for the same period in 2008.
The Companys operating portfolio was 93.9% occupied at
March 31, 2009, compared to 94.2% for the same period in
the prior year. Overall portfolio occupancy was 90.9% at
March 31, 2009, compared to 91.5% at March 31, 2008.
Redevelopment
We and our joint ventures have eight redevelopments currently in
process. We estimate the total project costs of the eight
redevelopment projects in process to be $47.3 million. Four
of the redevelopments involve core operating properties included
in our balance sheet and are expected to cost approximately
$18.7 million of which $6.1 million has been spent as
of March 31, 2009. For the four redevelopment projects at
properties held by joint ventures, we estimate off-balance sheet
project costs of approximately $28.6 million (our share is
estimated to be $8.1 million) of which $10.5 million
has been spent as of March 31, 2009 (our share is
$3.1 million).
In 2009, the Company plans to focus on completing those
redevelopment projects presently in process that have
commitments for the expansion or addition of an anchor tenant.
While we anticipate redevelopments will be accretive upon
completion, a majority of the projects has required taking some
retail space off-line to accommodate the new/expanded tenancies.
These measures have resulted in the loss of minimum rents and
recoveries from
19
Table of Contents
tenants for those spaces removed from our pool of leasable
space. Based on the sheer number of value-added redevelopments
that are in process in 2009, the revenue loss has created a
short-term negative impact on net operating income and FFO. The
majority of the projects are expected to stabilize by the first
half of 2010.
Development
As previously announced, the Company is taking a conservative
approach to the development of new shopping centers. At
March 31, 2009, the Company had two projects under
construction and three projects in the pre-development phase
with an estimated total project cost of $311.2 million. As
of March 31, 2009, we and one of our joint ventures have
spent $109.6 million on such developments. We intend to
wholly own the Northpointe Town Center and therefore anticipate
that $34.7 million of the total project costs will be on
our balance sheet upon completion of such projects. We own 20%
of the joint venture that is developing Hartland Towne Square,
and our share of the estimated $22.9 million of project
costs is $4.6 million. We anticipate spending an additional
$164.5 million for developing The Town Center at Aquia,
Gateway Commons, and Parkway Shops which we expect to be
developed through joint ventures, and therefore be accounted as
off-balance sheet assets, although we do not have joint venture
partners to date and no assurance can be given that we will have
joint venture partners on such projects.
Acquisitions/Dispositions
As a result of the challenging acquisition market and the global
liquidity crisis, the Company chose to de-emphasize its
acquisition program as a significant driver of growth. As such,
there was no significant acquisition activity in the first
quarter of 2009. Future acquisitions are planned to be
opportunistic in nature and more selective as market conditions
allow. Additionally, there was no significant disposition
activity in the first quarter of 2009.
Critical
Accounting Policies and Estimates
Managements Discussion and Analysis of Financial Condition
and Results of Operations is based upon our consolidated
financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United
States of America (GAAP). The preparation of these
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. Management bases its
estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances, the results of which forms the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Senior
management has discussed the development, selection and
disclosure of these estimates with the audit committee of our
board of trustees. Actual results could differ from these
estimates under different assumptions or conditions.
Critical accounting policies are those that are both significant
to the overall presentation of our financial condition and
results of operations and require management to make difficult,
complex or subjective judgments. For example, significant
estimates and assumptions have been made with respect to useful
lives of assets, capitalization of development and leasing
costs, recoverable amounts of receivables and initial valuations
and related amortization periods of deferred costs and
intangibles, particularly with respect to property acquisitions.
Our critical accounting policies as discussed in our Annual
Report on
Form 10-K
for the year ended December 31, 2008 have not materially
changed during the first three months of 2009.
Comparison
of Three Months Ended March 31, 2009 to Three Months Ended
March 31, 2008
For purposes of comparison between the three months ended
March 31, 2009 and 2008, Same Center refers to
the shopping center properties owned by consolidated entities as
of January 1, 2008 and March 31, 2009.
In August 2008, we sold the Plaza at Delray shopping center to a
joint venture with an investor advised by Heitman LLC. This sale
to our joint venture in which we have an ownership interest is
referred to as the Disposition in the following
discussion.
20
Table of Contents
Revenues
Total revenues decreased $2.6 million, or 7.2%, to
$33.8 million for the three months ended March 31,
2009, as compared to $36.4 million in 2008. The decrease in
total revenues was primarily the result of a $1.6 million
decrease in minimum rents and a $0.4 million decrease in
recoveries from tenants.
Minimum rents decreased $1.6 million, or 7.1%, to
$21.4 million for the three months ended March 31,
2009 as follows:
Increase (Decrease) | ||||||||
Amount | Percentage | |||||||
(In millions) | ||||||||
Same Center
|
$ | (0.4 | ) | (1.7 | )% | |||
Disposition
|
(1.2 | ) | (5.4 | )% | ||||
$ | (1.6 | ) | (7.1 | )% | ||||
The decrease in Same Center minimum rents was primarily
attributable to the impact of the bankruptcy of two national
retailers in the second half of 2008, and the effect of
redevelopment activity at certain of our shopping centers in
2008.
Recoveries from tenants decreased $0.4 million, or 3.9%, to
$10.6 million for the three months ended March 31,
2009. Substantially all of the decrease was due to the
Disposition.
The overall property operating expense recovery ratio was 99.0%
for the three months ended March 31, 2009, as compared to
97.0% for the same period in the prior year. The increase was
primarily due to recoverable billing adjustments in the first
quarter of 2009 related to accruals made in 2008. We expect our
recovery ratio to be between 97% and 98% for the full year of
2009.
Recoverable operating expenses, which includes real estate tax
expense, are a component of our recovery ratio. These expenses
decreased $0.7 million, or 5.9%, to $10.8 million for
the first three months ended March 31, 2009 as follows:
Increase (Decrease) | ||||||||
Amount | Percentage | |||||||
(In millions) | ||||||||
Same Center
|
$ | (0.1 | ) | (1.2 | )% | |||
Disposition
|
(0.6 | ) | (4.7 | )% | ||||
$ | (0.7 | ) | (5.9 | )% | ||||
The decrease in Same Center recoverable operating expenses is
mainly attributable to lower contracted operating services at
certain of our shopping centers in the first quarter of 2009, as
compared to the same period in the prior year.
Fees and management income decreased approximately $293,000 to
$1.1 million for the three months ended March 31, 2009
as compared to $1.4 million for the three months ended
March 31, 2008. The decrease was mainly attributable to net
decreases in development related fees of approximately $321,000,
partially offset by an increase in management fees of
approximately $39,000. The decrease in development fees was
mainly due to fees earned in the first quarter of 2008 relating
to the development of the Hartland Towne Square center by our
Ramco RM Hartland SC LLC joint venture, with no similar income
earned in 2009. The increase in management fees is primarily
attributable to an increase in the portfolio of our joint
venture partners.
Other income decreased approximately $132,000 to $353,000 for
the three months ended March 31, 2009, compared to $485,000
for the same period in the prior year. The decrease was
primarily due to a $101,000 decrease in lease termination fees
and a $59,000 decrease in temporary income, partially offset by
a $30,000 increase in interest income for the three months ended
March 31, 2009. The decrease in lease termination income
was mostly attributable to income earned in the first three
months of 2008 on a higher volume of lease terminations. The
21
Table of Contents
decrease in temporary income was primarily due to licensing fee
income earned in the first quarter of 2008 with no similar
income earned in 2009.
Expenses
Total expenses decreased $2.0 million, or 5.9%, to
$32.0 million for the three months ended March 31,
2009 as compared to $34.0 million for the three months
ended March 31, 2008. The decrease was primarily due to
decreases in interest expense of $1.7 million, depreciation
and amortization of $0.2 million, and recoverable operating
expenses of $0.7 million, partially offset by a
$0.3 million increase in general and administrative
expenses.
Depreciation and amortization expense decreased
$0.2 million, or 2.0%, for the three months ended
March 31, 2009 as follows:
Increase (Decrease) | ||||||||
Amount | Percentage | |||||||
(In millions) | ||||||||
Same Center
|
$ | 0.2 | 3.0 | % | ||||
Disposition
|
(0.4 | ) | (5.0 | )% | ||||
$ | (0.2 | ) | (2.0 | )% | ||||
Same Centers contributed $0.2 million to the increase in
depreciation and amortization expense. The increase was mostly
attributable to the completed construction of a building at one
of the Companys shopping centers in the first quarter of
2009.
General and administrative expenses was $4.1 million for
the three months ended March 31, 2009, as compared to
$3.8 million for the same period in 2008, an increase of
$0.3 million, or 7.4%. The increase in general and
administrative expenses was primarily due to employee-related
restructuring charges, including severance and employee
benefits, incurred in the first quarter of 2009.
Interest expense decreased $1.7 million, or 17.1%, to
$8.1 million for the three months ended March 31, 2009
as compared to $9.8 million in 2008. The summary below
identifies the components of the net decrease:
Three Months Ended |
||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
Average total loan balance
|
$ | 665,305 | $ | 690,234 | ||||
Average rate
|
5.0 | % | 5.8 | % | ||||
Total interest on debt
|
$ | 8,236 | $ | 10,055 | ||||
Amortization of loan fees
|
168 | 224 | ||||||
Interest on capital lease obligation
|
104 | 108 | ||||||
Capitalized interest and other
|
(404 | ) | (608 | ) | ||||
$ | 8,104 | $ | 9,779 | |||||
Other
Gain on sale of real estate assets decreased $9.8 million
during the first quarter of 2009 to $0.4 million as
compared to $10.2 million in the first quarter of 2008. The
decrease is due primarily to the recognition of the gain on the
sale of the Mission Bay Plaza shopping center to our Ramco/Lion
Venture LP joint venture in the first quarter of 2008.
Earnings from unconsolidated entities represents our
proportionate share of the earnings of various joint ventures in
which we have an ownership interest. Earnings from
unconsolidated entities decreased approximately $377,000 from
approximately $897,000 for the three months ended March 31,
2008 to approximately $520,000 for the three months ended
March 31, 2009. During the three months ended March 31,
2009, earnings from unconsolidated entities decreased
approximately $225,000 from the Ramco/Lion Venture LP joint
venture and
22
Table of Contents
$167,000 from the Ramco 450 Venture LLC joint venture primarily
the result of the bankruptcy of two national retailers that
closed stores in the second half of 2008 at five of the joint
venture properties in which the Company holds an ownership
interest.
Noncontrolling interest in subsidiaries represents the equity in
income attributable to the portion of the Operating Partnership
not owned by us. Noncontrolling interest for the first quarter
of 2009 decreased $1.7 million to $0.4 million, as
compared to $2.1 million for the first quarter of 2008. The
decrease is primarily attributable to the noncontrolling
interests proportionate share of the lower gain on the
sale of real estate assets in 2009 when compared to the same
period in 2008.
Liquidity
and Capital Resources
The principal uses of our liquidity and capital resources are
for operations, development, redevelopment, including expansion
and renovation programs, acquisitions, and debt repayment, as
well as dividend payments in accordance with REIT requirements
and repurchases of our common shares. We anticipate that the
combination of cash on hand, the availability under our Credit
Facility, additional financings, and the sale of existing
properties will satisfy our expected working capital
requirements though at least the next 12 months and allow
us to achieve continued growth. Although we believe that the
combination of factors discussed above will provide sufficient
liquidity, no such assurance can be given.
As part of our business plan to improve our capital structure
and reduce debt, we will continue to pursue the strategy of
selling fully-valued properties and to dispose of shopping
centers that no longer meet the criteria established for our
portfolio. Our ability to obtain acceptable selling prices and
satisfactory terms will impact the timing of future sales. Net
proceeds from the sale of properties are expected to reduce
outstanding debt and to fund any future cash requirements.
The following is a summary of our cash flow activities (dollars
in thousands):
Three Months Ended |
||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
Cash provided from operations
|
$ | 11,200 | $ | 2,443 | ||||
Cash (used in) provided by investing activities
|
(6,542 | ) | 7,834 | |||||
Cash used in financing activities
|
(2,007 | ) | (10,211 | ) |
For the three months ended March 31, 2009, we generated
$11.2 million in cash flows from operating activities, as
compared to $2.4 million for the same period in 2008. Cash
flows from operating activities were higher during the three
months ended 2009 mainly due to lower gains on sale of real
estate assets during the period, as well as higher net cash
inflows related to accounts receivable and lower cash outflows
for accounts payable and accrued expenses. For the three months
ended March 31, 2009, investing activities used
$6.5 million of cash flows, as compared to
$7.8 million provided by investing activities for the three
months ended 2008. Cash flows from investing activities were
lower in the first quarter 2009, due to lower investments in
real estate and lower cash received from sales of shopping
centers to our joint ventures, offset by slightly higher
investments in and advances to our joint ventures. Additionally,
no cash was received in the first quarter 2009 from the
repayment of a note receivable from a joint venture, as occurred
in first quarter 2008. During the three months ended
March 31, 2009, cash flows used in financing activities
were $2.0 million, as compared to $10.2 million during
the three months ended March 31, 2008. In the first three
months of 2009, the Company had significantly lower borrowings
and paydowns on mortgages and notes payable, and lower
distributions to shareholders and operating partnership unit
holders, as compared to the three months ended March 31,
2008.
The Company has a $250,000 unsecured credit facility (the
Credit Facility) consisting of a $100,000 unsecured
term loan credit facility and a $150,000 unsecured revolving
credit facility. The Credit Facility provides that the unsecured
revolving credit facility may be increased by up to $100,000 at
the Companys request, for a total unsecured revolving
credit facility commitment of $250,000. The unsecured term loan
credit facility matures in December 2010 and bears interest at a
rate equal to LIBOR plus 130 to 165 basis points, depending
on certain debt ratios. The unsecured revolving credit facility
matures in December 2009 and bears interest at a rate equal to
LIBOR
23
Table of Contents
plus 115 to 150 basis points, depending on certain debt
ratios. The Company retains the option to extend the maturity
date of the unsecured revolving credit facility to December
2010. It is anticipated that funds borrowed under the Credit
Facility will be used for general corporate purposes, including
working capital, capital expenditures, the repayment of
indebtedness or other corporate activities.
Under terms of various debt agreements, we may be required to
maintain interest rate swap agreements to reduce the impact of
changes in interest rates on our floating rate debt. We have
interest rate swap agreements with an aggregate notional amount
of $100.0 million at March 31, 2009. Based on rates in
effect at March 31, 2009, the agreements provide for fixed
rates ranging from 4.4% to 4.7% and expire December 2010.
After taking into account the impact of converting our variable
rate debt into fixed rate debt by use of the interest rate swap
agreements, at March 31, 2009 our variable rate debt
accounted for approximately $184.3 million of outstanding
debt with a weighted average interest rate of 2.4%. Variable
rate debt accounted for approximately 27.7% of our total debt
and 22.9% of our total capitalization.
We have $408.1 million of mortgage loans encumbering our
consolidated properties, and $539.0 million of mortgage
loans on properties held by our unconsolidated joint ventures
(of which our pro rata share is $139.3 million). Such
mortgage loans are generally non-recourse, subject to certain
exceptions for which we would be liable for any resulting losses
incurred by the lender. These exceptions vary from loan to loan
but generally include fraud or a material misrepresentation,
misstatement or omission by the borrower, intentional or grossly
negligent conduct by the borrower that harms the property or
results in a loss to the lender, filing of a bankruptcy petition
by the borrower, either directly or indirectly, and certain
environmental liabilities. In addition, upon the occurrence of
certain of such events, such as fraud or filing of a bankruptcy
petition by the borrower, we would be liable for the entire
outstanding balance of the loan, all interest accrued thereon
and certain other costs, penalties and expenses.
The unconsolidated joint ventures in which our Operating
Partnership owns an interest and which are accounted for by the
equity method of accounting are subject to mortgage
indebtedness, which in most instances is non-recourse. At
March 31, 2009, mortgage debt for the unconsolidated joint
ventures was $539.0 million, of which our pro rata share
was $139.3 million, with a weighted average interest rate
of 6.4%. Fixed rate debt for the unconsolidated joint ventures
was $506.0 million at March 31, 2009. Our pro rata
share of fixed rate debt for the unconsolidated joint ventures
amounted to $132.8 million, or 95.3% of our total pro rata
share of such debt. The mortgage debt of $15.0 million at
Peachtree Hill, a shopping center owned by our Ramco 450 Venture
LLC, is recourse debt. The loan is secured by unconditional
guarantees of payment and performance by Ramco 450 Venture LLC,
the Company, and its majority owned subsidiary, Ramco-Gershenson
Properties, L.P, the Operating Partnership.
Planned
Capital Spending
During the three months ended March 31, 2009, we spent
approximately $1.8 million on revenue-generating capital
expenditures including tenant allowances, leasing commissions
paid to third-party brokers, legal costs related to lease
documents, and capitalized leasing and construction costs. These
types of costs generate a return through rents from tenants over
the term of their leases. Revenue-enhancing capital
expenditures, including expansions, renovations or
repositionings, were approximately $4.6 million. Revenue
neutral capital expenditures, such as roof and parking lot
repairs which are anticipated to be recovered from tenants,
amounted to approximately $0.2 million.
For the remainder of 2009, we anticipate spending approximately
$27.6 million for revenue-generating, revenue-enhancing and
revenue neutral capital expenditures, including approximately
$12.7 million for approved redevelopment projects.
We are also working on four additional redevelopments that are
in the final planning stages that are not included in such
amounts. Further, we anticipate spending approximately
$1.1 million in the remainder of 2009 for ongoing
development projects.
In addition, as a result of the challenging acquisition market
and the global liquidity crisis, the Company chose to
de-emphasize its acquisition program as a significant driver of
growth. As such, there was no significant acquisition activity
in the first quarter of 2009. Future acquisitions are planned to
be opportunistic in nature and more selective as market
conditions allow.
24
Table of Contents
Capitalization
At March 31, 2009, our market capitalization amounted to
$805.2 million. Market capitalization consisted of
$665.7 million of debt (including property-specific
mortgages, an Unsecured Credit Facility consisting of a Term
Loan Credit Facility and a Revolving Credit Facility, a Secured
Term Loan, and a Junior Subordinated Note), and
$139.4 million of common shares (based on the closing price
of $6.45 per share at March 31, 2009) and Operating
Partnership Units at market value. Our debt to total market
capitalization was 82.7% at March 31, 2009, as compared to
83.3% at December 31, 2008. After taking into account the
impact of converting our variable rate debt into fixed rate debt
by use of interest rate swap agreements, our outstanding debt at
March 31, 2009 had a weighted average interest rate of
4.8%, and consisted of $481.4 million of fixed rate debt
and $184.3 million of variable rate debt. Outstanding
letters of credit issued under the Credit Facility totaled
approximately $1.8 million at March 31, 2009.
At March 31, 2009, the noncontrolling interest in the
Operating Partnership represented a 13.5% ownership in the
Operating Partnership. The OP Units may, under certain
circumstances, be exchanged for our common shares of beneficial
interest on a one-for-one basis. We, as sole general partner of
the Operating Partnership, have the option, but not the
obligation, to settle exchanged OP Units held by others in
cash based on the current trading price of our common shares of
beneficial interest. Assuming the exchange of all OP Units,
there would have been 21,617,050 of our common shares of
beneficial interest outstanding at March 31, 2009, with a
market value of approximately $139.4 million.
Inflation
Inflation has been relatively low in recent years and has not
had a significant detrimental impact on the results of our
operations. Should inflation rates increase in the future,
substantially all of our tenant leases contain provisions
designed to partially mitigate the negative impact of inflation
in the near term. Such lease provisions include clauses that
require our tenants to reimburse us for real estate taxes and
many of the operating expenses we incur. Also, many of our
leases provide for periodic increases in base rent which are
either of a fixed amount or based on changes in the consumer
price index
and/or
percentage rents (where the tenant pays us rent based on a
percentage of its sales). Significant inflation rate increases
over a prolonged period of time may have a material adverse
impact on our business.
Funds
from Operations
We consider funds from operations, also known as
FFO, an appropriate supplemental measure of the
financial performance of an equity REIT. Under the National
Association of Real Estate Investment Trusts (NAREIT)
definition, FFO represents net income, excluding extraordinary
items (as defined under GAAP) and gains (losses) on sales of
depreciable property, plus real estate related depreciation and
amortization (excluding amortization of financing costs), and
after adjustments for unconsolidated partnerships and joint
ventures. FFO is intended to exclude GAAP historical cost
depreciation and amortization of real estate investments, which
assumes that the value of real estate assets diminishes ratably
over time. Historically, however, real estate values have risen
or fallen with market conditions and many companies utilize
different depreciable lives and methods. Because FFO adds back
depreciation and amortization unique to real estate, and
excludes gains and losses from depreciable property dispositions
and extraordinary items, it provides a performance measure that,
when compared year over year, reflects the impact on operations
from trends in occupancy rates, rental rates, operating costs,
acquisition and development activities and interest costs, which
provides a perspective of our financial performance not
immediately apparent from net income determined in accordance
with GAAP. In addition, FFO does not include the cost of capital
improvements, including capitalized interest.
For the reasons described above we believe that FFO provides us
and our investors with an important indicator of our operating
performance. This measure of performance is used by us for
several business purposes and for REITs it provides a recognized
measure of performance other than GAAP net income, which may
include non-cash items. Other real estate companies may
calculate FFO in a different manner.
We recognize FFOs limitations when compared to GAAP net
income. FFO does not represent amounts available for needed
capital replacement or expansion, debt service obligations, or
other commitments and uncertainties. In addition, FFO does not
represent cash generated from operating activities in accordance
with
25
Table of Contents
GAAP and is not necessarily indicative of cash available to fund
cash needs, including the payment of dividends. FFO should not
be considered as an alternative to net income (computed in
accordance with GAAP) or as an alternative to cash flow as a
measure of liquidity. FFO is simply used as an additional
indicator of our operating performance.
The following table illustrates the calculation of FFO (in
thousands, except per share data):
Three Months Ended |
||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
(Unaudited) | ||||||||
Net Income
|
$ | 2,250 | $ | 11,445 | ||||
Add:
|
||||||||
Depreciation and amortization expense
|
9,283 | 9,415 | ||||||
Noncontrolling interest in partnership
|
380 | 2,090 | ||||||
Less:
|
||||||||
Gain on sale of depreciable real estate(1)
|
| (9,761 | ) | |||||
Funds from operations available to common shareholders, assuming
conversion of OP units
|
$ | 11,913 | $ | 13,189 | ||||
Weighted average equivalent shares outstanding, diluted
|
21,398 | 21,419 | ||||||
Funds from operations available to RGPT common shareholders, per
diluted share
|
$ | 0.56 | $ | 0.62 | ||||
Net income per diluted share to FFO per diluted share
reconciliation:
|
||||||||
Net income per diluted share
|
$ | 0.12 | $ | 0.62 | ||||
Add:
|
||||||||
Depreciation and amortization expense
|
0.43 | 0.44 | ||||||
Noncontrolling interest in partnership
|
0.02 | 0.10 | ||||||
Less:
|
||||||||
Gain on sale of depreciable real estate(1)
|
| (0.46 | ) | |||||
Assuming conversion of OP units
|
(0.01 | ) | (0.08 | ) | ||||
Funds from operations available to common shareholders per
diluted share, assuming conversion of OP units
|
$ | 0.56 | $ | 0.62 | ||||
(1) Excludes gain on sale of undepreciated land
|
$ | 348 | $ | 423 | ||||
Forward
Looking Statements
This document contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements represent our
expectations, plans or beliefs concerning future events and may
be identified by terminology such as may,
will, should, believe,
expect, estimate,
anticipate, continue,
predict or similar terms. Although the
forward-looking statements made in this document are based on
our good faith beliefs, reasonable assumptions and our best
judgment based upon current information, certain factors could
cause actual results to differ materially from those in the
forward-looking statements, including: our success or failure in
implementing our business strategy; economic conditions
generally and in the commercial real estate and finance markets
specifically; our cost of capital, which depends in part on our
asset quality, our relationships with lenders and other capital
providers; our business prospects and outlook; changes in
governmental regulations, tax rates and similar matters; our
continuing to qualify as a REIT; and other factors discussed
elsewhere in this document and our other filings with the
Securities and Exchange Commission (SEC), including
our Annual Report on
Form 10-K
for the year ended December 31, 2008. Given these
uncertainties, you should not place undue reliance on any
forward-looking statements. Except as required by law, we assume
no obligation to update these forward-looking statements, even
if new information becomes available in the future.
26
Table of Contents
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
We have exposure to interest rate risk on our variable rate debt
obligations. We are not subject to any foreign currency exchange
rate risk or commodity price risk, or other material rate or
price risks. Based on our debt and interest rates and the
interest rate swap agreements in effect at March 31, 2009,
a 100 basis point change in interest rates would affect our
annual earnings and cash flows by between approximately
$1.8 million and $2.3 million.
Under the terms of various debt agreements, we may be required
to maintain interest rate swap agreements to reduce the impact
of changes in interest rate on our floating rate debt. We have
interest rate swap agreements with an aggregate notional amount
of $100.0 million at March 31, 2009. Based on rates in
effect at March 31, 2009, the agreements provide for fixed
rates ranging from 4.4% to 4.7% and expire December 2010.
The following table presents information as of March 31,
2009 concerning our long-term debt obligations, including
principal cash flows by scheduled maturity, weighted average
interest rates of maturing amounts and fair market value
(dollars in thousands).
Estimated |
||||||||||||||||||||||||||||||||
2009 | 2010 | 2011 | 2012 | 2013 | Thereafter | Total | Fair Value | |||||||||||||||||||||||||
Fixed-rate debt
|
$ | 26,499 | $ | 126,580 | $ | 27,932 | $ | 34,011 | $ | 33,485 | $ | 232,888 | $ | 481,395 | $ | 459,918 | ||||||||||||||||
Average interest rate
|
7.0% | 5.2% | 7.4% | 6.8% | 5.5% | 5.7% | 5.8% | 6.9% | ||||||||||||||||||||||||
Variable-rate debt
|
$ | 184,340 | $ | | $ | | $ | | $ | | $ | | $ | 184,340 | $ | 184,340 | ||||||||||||||||
Average interest rate
|
2.4% | | | | | | 2.4% | 2.4% |
We estimated the fair value of fixed rate mortgages using a
discounted cash flow analysis, based on our incremental
borrowing rates for similar types of borrowing arrangements with
the same remaining maturity. Considerable judgment is required
to develop estimated fair values of financial instruments. The
table incorporates only those exposures that exist at
March 31, 2009 and does not consider those exposures or
positions which could arise after that date or firm commitments
as of such date. Therefore, the information presented therein
has limited predictive value. Our actual interest rate
fluctuations will depend on the exposures that arise during the
period and interest rates.
Item 4. | Controls and Procedures |
Disclosure
Controls and Procedures
We maintain disclosure controls and procedures designed to
ensure that information required to be disclosed in our reports
under the Securities Exchange Act of 1934, as amended
(Exchange Act), such as this report on
Form 10-Q,
is recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the
disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the
design control objectives, and therefore management is required
to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
We carried out an assessment as of March 31, 2009 of the
effectiveness of the design and operation of our disclosure
controls and procedures. This assessment was done under the
supervision and with the participation of management, including
our Chief Executive Officer and Chief Financial Officer. Based
on such evaluation, our management, including our Chief
Executive Officer and Chief Financial Officer, concluded that
such disclosure controls and procedures were effective as of
March 31, 2009.
Changes
in Internal Control Over Financial Reporting
During the quarter ended March 31, 2009, there were no
changes in our internal control over financial reporting that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
27
Table of Contents
PART II
OTHER INFORMATION
Item 1. | Legal Proceedings |
There are no material pending legal or governmental proceedings,
other than the IRS Examination, against or involving us or our
properties. For a description of the IRS Examination, see our
Annual Report on
Form 10-K
for the year ended December 31, 2008 (Note 20 to the
consolidated financial statements).
Item 1A. | Risk Factors |
You should review our Annual Report on
Form 10-K
for the year ended December 31, 2008, which contains a
detailed description of risk factors that may materially affect
our business, financial condition or results of operations.
There are no material changes to the disclosure on these matters
set forth in such
Form 10-K.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
In December 2005, the Board of Trustees authorized the
repurchase, at managements discretion, of up to
$15 million of our common shares of beneficial interest.
The program allows us to repurchase our common shares of
beneficial interest from time to time in the open market or in
privately negotiated transactions. This authorization does not
have an expiration date.
No common shares were repurchased during the three months ended
March 31, 2009. As of March 31, 2009, we had purchased
and retired 287,900 shares of our common stock under this
program at an average cost of $27.11 per share.
Item 6. | Exhibits |
Exhibit No.
|
Description
|
|||
10 | .1 | Rights Agreement, dated as of March 25, 2009 between Ramco-Gershenson Properties Trust and American Stock Transfer & Trust Company, LLC which includes as Exhibits thereto the Articles Supplementary, Form of Rights Certificate and the Summary of Terms attached thereto as Exhibits A, B and C, respectively, incorporated by reference to Exhibit 3.1 and 4.1 to Registrants Form 8-K filed on April 1, 2009. | ||
31 | .1* | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31 | .2* | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32 | .1* | Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | ||
32 | .2* | Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | ||
99 | .1* | Composite Agreement of Limited Partnership, as amended, of Ramco-Gershenson Properties, L.P. | ||
99 | .2* | Junior Subordinated Indenture, dated November 15, 2007, between Ramco-Gershenson Properties, L.P. and the Bank of New York & Trust Company, National Association, as Trustee. |
* | filed herewith |
28
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
RAMCO-GERSHENSON PROPERTIES TRUST
By: |
/s/ Dennis
Gershenson
|
Dennis Gershenson
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: May 8, 2009
By: |
/s/ Richard
J. Smith
|
Richard J. Smith
Chief Financial Officer
(Principal Financial and Accounting Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 8, 2009
29