UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended December 31, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _________ to ____________ Commission file number 1-10899 Kimco Realty Corporation (Exact name of registrant as specified in its charter) Maryland 13-2744380 (State of incorporation) (I.R.S. Employer Identification No.) 3333 New Hyde Park Road, New Hyde Park, NY 11042-0020 (Address of principal executive offices) Zip Code Registrant's telephone number, including area code (516)869-9000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, par value $.01 per share New York Stock Exchange Depositary Shares, each representing one-tenth of a share of 7-3/4% Class A Cumulative Redeemable Preferred Stock, par value $1.00 per share. New York Stock Exchange Depositary Shares, each representing one-tenth of a share of 8-1/2% Class B Cumulative Redeemable Preferred Stock, par value $1.00 per share. New York Stock Exchange Depositary Shares, each representing one-tenth of a share of 8-3/8% Class C Cumulative Redeemable Preferred Stock, par value $1.00 per share. New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of class) 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 [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by nonaffiliates of the registrant was approximately $1.14 billion based upon the closing price on the New York Stock Exchange for such stock on February 27, 1998. (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 40,416,795 shares as of February 27, 1998. 1 of 135
DOCUMENTS INCORPORATED BY REFERENCE Part II incorporates certain information by reference to the following exhibits to this annual report on Form 10-K: Exhibit 3.4, Articles Supplementary relating to the Registrant's 8-3/8% Class C Cumulative Redeemable Preferred Stock; Exhibit 3.3, Articles Supplementary relating to the Registrant's 8 1/2% Class B Cumulative Redeemable Preferred Stock; Exhibit 4.4, Certificate of Designations relating to the Registrant's 7 3/4% Class A Cumulative Redeemable Preferred Stock; Exhibits 4.5, 4.6 and 4.7, Indenture, First Supplemental Indenture and Second Supplemental Indenture, respectively, each relating to the Registrant's public bond issues, and Exhibit 10.4, Credit Agreement relating to the Registrant's revolving credit facility. Part III incorporates certain information by reference to the Registrant's definitive proxy statement to be filed with respect to the Annual Meeting of Stockholders expected to be held on May 28, 1998. Index to Exhibits begins on page 34. 2
TABLE OF CONTENTS Form 10-K Report Item No. Page - -------- ---- PART I 1. Business ........................................................... 4 2. Properties ......................................................... 13 3. Legal Proceedings .................................................. 15 4. Submission of Matters to a Vote of Security Holders ................ 15 Executive Officers of the Registrant ............................... 24 PART II 5. Market for the Registrant's Common Equity and Related Shareholder Matters .................................. 25 6. Selected Financial Data ............................................ 26 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .............................. 28 8. Financial Statements and Supplementary Data ........................ 31 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .............................. 31 PART III 10. Directors and Executive Officers of the Registrant ................. 32 11. Executive Compensation ............................................. 32 12. Security Ownership of Certain Beneficial Owners and Management ....................................................... 32 13. Certain Relationships and Related Transactions ..................... 32 PART IV 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K ......................................................... 33 3
PART I Item 1. Business General Kimco Realty Corporation (the "Company") is one of the nation's largest owners and operators of neighborhood and community shopping centers. As of February 1, 1998, the Company's portfolio was comprised of 339 property interests including 273 neighborhood and community shopping center properties, two regional malls, 62 retail store leases, one leased parcel of undeveloped land and one distribution center comprising a total of approximately 41.7 million square feet of leasable space located in 37 states. The Company believes its portfolio of neighborhood and community shopping center properties is the largest (measured by gross leasable area, "GLA") currently held by any publicly-traded real estate investment trust ("REIT"). The Company is a self-administered REIT and manages its properties through present management, which has owned and operated neighborhood and community shopping centers for more than 30 years. The Company has not engaged, nor does it expect to retain, any REIT advisors in connection with the operation of its properties. The Company's executive offices are located at 3333 New Hyde Park Road, New Hyde Park, New York 11042-0020 and its telephone number is (516)869-9000. Unless the context indicates otherwise, the term the "Company" as used herein is intended to include subsidiaries of the Company. History The Company began operations through its predecessor, The Kimco Corporation, which was organized in 1966 upon the contribution of several shopping center properties owned by its principal stockholders. In 1973, these principals formed the Company as a Delaware corporation, and in 1985, the operations of The Kimco Corporation were merged into the Company. The Company completed its initial public stock offering (the "IPO") in November 1991, and reorganized as a Maryland corporation during 1994. The Company's growth through its first fifteen years resulted primarily from the ground-up development and construction of its shopping centers. By 1981, the Company had assembled a portfolio of 77 properties that provided an established source of income and positioned the Company for an expansion of its asset base. At that time, the Company revised its strategy to focus on the acquisition of existing shopping centers because it believed generally that available financial returns did not justify the risks of continued ground-up development of properties. Furthermore, the Company's management believed that existing properties with below market-rate leases were available in the market at attractive prices. The Company considers such properties to offer greater leasing flexibility in the event space becomes available or should there be an overcapacity of space in the local economy. The Company also believes that opportunities exist to create value through the redevelopment and re-tenanting of existing shopping centers. As a result of this change in strategy, the Company has developed only two of the 262 property interests added to its portfolio since 1981, as compared with 68 of the 77 properties owned prior to that time. Investment and Operating Strategy The Company's investment objective has been to increase cash flow, current income and consequently the value of its existing portfolio of properties, and to seek continued growth through (i) the strategic re-tenanting, renovation and expansion of its existing centers, and (ii) the selective acquisition of established income-producing real estate properties, and properties requiring significant re-tenanting and redevelopment, primarily in neighborhood and community shopping centers in geographic regions in which the Company presently operates. The Company intends to consider investments in other real estate sectors and in geographic markets where it does not presently operate should suitable opportunities arise. The Company's neighborhood and community shopping center properties are designed to attract local area customers and typically are anchored by a supermarket, discount department store or drugstore tenant offering day-to-day 4
necessities rather than high-priced luxury items. The Company may either purchase or lease income-producing properties in the future, and may also participate with other entities in property ownership through partnerships, joint ventures or similar types of co-ownership. Equity investments may be subject to existing mortgage financing and other indebtedness or such financing or indebtedness may be incurred in connection with acquiring such investments. Any such financing or indebtedness will have priority over the Company's equity interest in such property. The Company may make loans to joint ventures in which it may or may not participate in the future. While the Company has historically held its properties for long-term investment, and accordingly has placed strong emphasis on its ongoing program of regular maintenance, periodic renovation and capital improvement, it is possible that properties in the portfolio may be sold, in whole or in part, as circumstances warrant, subject to REIT qualification rules. The Company emphasizes equity real estate investments, but may, in its discretion, invest in mortgages, other real estate interests and other investments. The mortgages in which the Company may invest may be either first mortgages, junior mortgages or other mortgage-related securities. The Company may legally invest in the securities of other issuers, for the purpose, among others, of exercising control over such entities, subject to the gross income and asset tests necessary for REIT qualification. The Company may acquire all or substantially all of these securities or assets of other REITs or similar entities where such investments would be consistent with the Company's investment policies. In any event, the Company does not intend that its investments in securities will require it to register as an "investment company" under the Investment Company Act of 1940. The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties and a large tenant base. At December 31, 1997, the Company's single largest neighborhood and community shopping center accounted for only approximately 1.9% of the Company's annualized base rental revenues and only 1% of the Company's total shopping center GLA. At December 31, 1997, the Company's five largest tenants include Venture, Kmart Corporation, Kohl's, Walmart and TJX Companies, which represent approximately 11.7%, 4.1%, 3.4%, 2.7% and 2.2%, respectively, of the Company's annualized base rental revenues. The Company intends to maintain a conservative debt capitalization with a ratio of debt to total market capitalization of approximately 50% or less. As of December 31, 1997, the Company had a debt to total market capitalization ratio of approximately 24%. The Company has authority to offer shares of capital stock or other senior securities in exchange for property and to repurchase or otherwise reacquire its common stock or any other securities and may engage in such activities in the future. At all times, the Company intends to make investments in such a manner as to be consistent with the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), to qualify as a REIT unless, because of circumstances or changes in the Code (or in Treasury Regulations), the Board of Directors determines that it is no longer in the best interests of the Company to qualify as a REIT. The Company's policies with respect to the aforementioned activities may be reviewed and modified from time to time by the Company's Board of Directors without the vote of the stockholders. Competition As one of the original participants in the growth of the shopping center industry and one of the nation's largest owners and operators of neighborhood and community shopping centers, the Company has established close relationships with a large number of major national and regional retailers and maintains a broad network of industry contacts. Management is associated with and/or actively participates in many shopping center and REIT industry organizations. Notwithstanding these relationships, there are numerous commercial developers and real estate companies that compete with the Company in seeking properties for acquisition and tenants who will lease space in 5
these properties. Capital Resources Completion of the Company's IPO, which resulted in net cash proceeds of approximately $116 million, permitted the Company to significantly deleverage its real estate portfolio and has made available the public debt and equity markets as the Company's principal source of capital for the future. A $100 million, unsecured revolving credit facility established in June 1994, which is scheduled to expire in June 2000 and an additional $150 million interim unsecured revolving credit facility, established in March 1998, scheduled to expire in June 1998, have made available funds to both finance the purchase of properties and meet any short-term working capital requirements. It is the Company's intention to extend the term of the $150 million interim revolving credit facility and establish it as a continuing part of the Company's total unsecured revolving credit availability. The Company has also implemented a $150 million medium-term notes program (the "MTN program") pursuant to which it may from time to time offer for sale its senior unsecured debt for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions and redevelopment costs, and (ii) better managing the Company's debt maturities. (See Note 7 of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.) Since the IPO, the Company has completed additional offerings of its public unsecured debt and equity raising in the aggregate over $1.15 billion for the purposes of repaying indebtedness, acquiring interests in neighborhood and community shopping centers and for expanding and improving properties in the portfolio. It is management's intention that the Company continually have access to the capital resources necessary to expand and develop its business. Accordingly, the Company may seek to obtain funds through additional equity offerings or debt financings, including an increase in the Company's unsecured revolving credit facility, in a manner consistent with its intention to operate with a conservative debt capitalization policy. The Company anticipates that cash flows from operations will continue to provide adequate capital to fund its operating and administrative expenses, regular debt service obligations and all dividend payments in accordance with REIT requirements in both the short-term and long-term. In addition, the Company anticipates that cash on hand, borrowings under its revolving credit facilities, issuance of equity and public debt, as well as other debt and equity alternatives, will provide the necessary capital required by the Company. Inflation and Other Business Issues Many of the Company's leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive payment of additional rent calculated as a percentage of tenants' gross sales above predetermined thresholds ("Percentage Rents"), which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses include increases in the consumer price index or similar inflation indices. In addition, many of the Company's leases are for terms of less than 10 years, which permits the Company to seek to increase rents upon renewal to market rates. Most of the Company's leases require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. The Company periodically evaluates its exposure to short-term interest rates and will, from time to time, enter into interest rate protection agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate loans. As an owner of real estate, the Company is subject to risks arising in connection with the underlying real estate, including defaults or nonrenewal of tenant leases, environmental matters, financing availability and changes in real estate and zoning laws. The success of the Company also depends upon trends in the economy, including interest rates, income tax laws, governmental 6
regulations and legislation and population trends. Operating Practices Nearly all operating functions, including leasing, legal, construction, data processing, maintenance, finance and accounting, are administered by the Company from its executive offices in New Hyde Park, New York. The Company believes it is critical to have a management presence in its principal areas of operation; accordingly, the Company also maintains regional offices in Boca Raton and Orlando, Florida; Philadelphia, Pennsylvania; and Dayton and Cleveland, Ohio. A total of 107 persons are employed at the Company's executive and regional offices. The Company's regional offices are generally staffed by a manager and the support personnel necessary to both function as local representatives for leasing and promotional purposes and to complement the corporate office efforts to ensure that property inspection and maintenance objectives are achieved. The regional offices are important in reducing the time necessary to respond to the needs of the Company's tenants. Leasing and maintenance personnel from the corporate office also conduct regular inspections of each shopping center. The Company also employs a total of 61 persons at several of its larger properties in order to more effectively administer its maintenance and security responsibilities. Management Information Systems Virtually all operating activities are supported by a sophisticated computer software system designed to provide management with operating data necessary to make informed business decisions on a timely basis. These proprietary systems are continually expanded and enhanced by the Company and reflect a commitment to quality management and tenant relations. The Company has integrated an advanced mid-range computer with personal computer technology, creating a management information system that facilitates the development of property cash flow budgets, forecasts and related management information. Qualification as a REIT The Company has elected, commencing with its taxable year which began January 1, 1992, to qualify as a REIT under Sections 856 through 860 of the Code. If, as the Company believes, it is organized and operates in such a manner so as to qualify and remain qualified as a REIT under the Code, the Company generally will not be subject to Federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under the Code. Recent Developments Shopping Center Acquisitions - In January 1997, the Company purchased the Target Shopping Center located on Sagamore Parkway North in Lafayette, IN. This 177,000 square foot center is anchored by Target Stores and was acquired for approximately $4.1 million. In April 1997, the Company acquired the Carrollwood Commons shopping center located at Ehrlich Road and North Dale Mabry Highway, in Tampa, FL for approximately $14.1 million. This shopping center has 110,000 square feet of GLA and is anchored by Staples and Ross Stores. In June 1997, the Company purchased Shady Oaks Shopping Center, Woodforest Shopping Center and Hammond Aire Plaza located in Ocala, FL, Houston, TX, and Baton Rouge, LA, respectively. These properties were acquired in separate transactions for an aggregate purchase price of approximately $34.6 million. Shady Oaks Shopping Center, located at the intersection of S.R. 200 and Shady Oaks Road comprises 251,000 square feet of GLA and is anchored by Kmart Corporation, Service Merchandise and Kash N' Karry. Woodforest Shopping Center, which comprises 113,000 square feet of GLA at the intersection of Wood Forest Boulevard and Uvalde Road, is anchored by HEB Pantry Food and Palais Royal. Tenants at Hammond Aire Plaza, which comprises 264,000 square feet of GLA at the intersection of Old Hammond Highway and Airline Highway, include Marshalls, Steinmart and Taylor Office Supply. 7
In September 1997, the Company acquired the Crossroads Center located on Frontage Road in Florence, SC for approximately $7.3 million. This 114,000 square foot shopping center is anchored by Staples and Hamricks. In October 1997, the Company purchased Mountainside Plaza and Maplewood Plaza located in Phoenix, AZ and Coral Springs, FL, respectively. These properties were acquired in separate transactions for an aggregate purchase price of approximately $20.5 million, including the assumption of approximately $8.1 million of mortgage debt encumbering the Mountainside Plaza property. Mountainside, which comprises 124,000 square feet of GLA at the intersection of Chandler Boulevard and 40th Street, is anchored by Safeway and Walgreens. Tenants at Maplewood Plaza, which comprises 86,000 square feet of GLA at the intersection of Ramblewood Drive and University Drive, include TJ Maxx and Blockbuster Video. In November 1997, the Company acquired the Festival at Manassas and Acadiana Square shopping centers located in Manassas, VA and Lafeyette, LA, respectively, in separate transactions for an aggregate purchase price of approximately $19.5 million. The Festival at Manassas is a 118,000 square foot center located at the intersection of Sudley Road and Portsmouth Drive and is anchored by Super Fresh Grocery and Blockbuster Video. Acadiana Square shopping center is a 148,000 square foot center located at the intersection of U.S. Highway 167 and Ambassador Caffery Parkway and is anchored by SteinMart, TJ Maxx and Office Max. In December 1997, the Company acquired The Gallery Shopping Center, Tri-Cities Square Shopping Center, Greenridge Shopping Center and North Rivers Market located in Greenville, SC, Mount Dora, FL, Staten Island, NY and North Charleston, SC, respectively. These properties were acquired in separate transactions for an aggregate purchase price of approximately $41.6 million, including the assumption of approximately $5.9 million of mortgage debt encumbering the Greenridge Shopping Center property. The Gallery Shopping Center, which comprises 91,000 square feet of GLA on Haywood Road, is anchored by Baby Superstore. Tri-Cities Square Shopping Center, located on Eurora Road and US Highway 441, comprises 111,000 square feet of GLA and is anchored by Kmart. The Greenridge Shopping Center, which comprises 101,000 square feet of GLA at the intersection of Arthur Kill Road and Richmond Avenue, is anchored by Waldbaums Supermarket and CVS Drug Stores. North Rivers Market, which comprises 196,000 square feet of GLA at the intersection of Rivers Avenue and Northbrook Boulevard, is anchored by TJ Maxx, Marshalls and Phar-Mor. Retail Properties Acquisition - In August 1997, certain subsidiaries of the Company acquired certain real estate assets from Venture Stores, Inc. ("Venture") consisting of interests in 49 fee and leasehold properties totaling approximately 5.9 million square feet of leasable area located in Illinois, Missouri, Texas, Oklahoma, Kansas, Indiana and Iowa (collectively, the "Venture Properties Acquisition"). The aggregate price was approximately $130 million, consisting of $70.5 million in cash and the assumption of approximately $59.5 million of existing mortgage debt on certain of these properties. The mortgage debt bears interest at 10.54% per annum and cannot be repaid without penalty, until its maturity on July 1, 2000. In addition, the Company was granted (i)an option to acquire two other properties for $4.5 million, (ii) an option to acquire up to 11 additional properties should certain conditions be satisfied and (iii) rights of first refusal, for a period of five years, to acquire 31 additional properties containing 4.2 million square feet of leasable area. The transaction also included approximately 573,000 square feet of retail space substantially occupied by other retailers and approximately 165,000 square feet of available non-Venture retail space. Simultaneously with this transaction, the Company entered into a long-term unitary net lease with Venture covering all premises occupied by Venture on these properties. As a result of this transaction, Venture was the primary or sole tenant at 60 of the Company's locations representing approximately 11.7% of the Company's annualized base rental revenues as of December 31, 1997. In January 1998, Venture filed for protection under Chapter 11 of the 8
United States Bankruptcy Code. The Company has not received notice that Venture will be delinquent in the payment of any rents due. There can be, however, no assurance that Venture will continue to pay rents as they become due or that the trustee in bankruptcy will not reject the leases under which Venture is bound. Irrespective of Venture's current financial status, management believes that the Venture Properties Acquisition represents a unique strategic opportunity for the Company, based on the significant intrinsic value in the underlying real estate assets as a result of (i) attractive geographic locations, (ii) current below market-rate leases and (iii)the opportunity to lease-up the remaining 165,000 square feet of vacant non-Venture retail space. In addition to its intrinsic real estate value, the Venture Properties Acquisition also provides the Company with (i) strong initial yields, (ii) increased geographic diversification and (iii) options to acquire additional properties. Accordingly, the Company believes that it could replace any defaulted or discharged leases with leases that are on no less favorable terms than the leases currently in place. The Company, as a regular part of its business operations, will continue to actively seek properties for acquisition which have below market-rate leases or other cash flow growth potential. Property Redevelopments - The Company has an ongoing program to reformat and re-tenant its properties to maintain or enhance its competitive position in the marketplace. During 1997, the Company substantially completed the redevelopment of 7 shopping centers in its portfolio, including properties located in Plainview, NY; Lexington, KY; Charles Town, WV; Norriton, PA; Westmont, NJ; Coral Springs, FL and Dayton, OH at a total cost of approximately $26.3 million. The Company is currently involved in redeveloping several other shopping centers, most notably its properties in N. Miami, FL, Richboro, PA, Winston-Salem, NC, and Grove Gate, FL. Approximately $3.7 million was expended during 1997 related to these ongoing projects. Each redevelopment represents an opportunity for the Company to capitalize on its leasing, site planning, design and construction expertise. The Company anticipates its capital commitment toward these and other redevelopments during 1998 will be approximately $30 million. These projects, which are currently proceeding on schedule and in line with the Company's budgeted costs, are expected to contribute to growth in the Company's funds from operations in the future. Property Disposition - During June 1997, the Company disposed of a property in Troy, OH. Proceeds from the disposition totaling approximately $1.6 million, together with an additional $8.3 million cash investment, were used to acquire an exchange shopping center property located in Ocala, FL. Kimco Select Investments - Kimco Select Investments, a New York general partnership ("Kimco Select"), was formed in 1997 to provide the Company, through its 90% ownership interest, the opportunity to make investments outside of its core neighborhood and community shopping center business. Although potential investments may be largely retail-focused, Kimco Select may invest in other asset categories. Kimco Select will focus on investments where the intrinsic value in the underlying assets may provide potentially superior returns relative to the inherent risk. These investments may be in the form of direct ownership of real estate, mortgage loans, public and private debt and equity securities that Kimco Select believes are undervalued, unoccupied properties, properties leased to weak or bankrupt tenants and other assets. Kimco Select is managed by David M. Samber, formerly President and Chief Operating Officer of the Company, who owns the remaining 10% ownership interest in Kimco Select. The Company has made an initial commitment of $35 million towards investments by Kimco Select and may increase its commitment as management deems appropriate. 9
During 1997, Kimco Select through a joint venture investment, acquired an interest in a multi-story building in Eastwick, PA. This 39,000 square foot property, and a 53,000 square foot property in Upper Darby, PA previously acquired, have been redeveloped as ambulatory care facilities, anchored by Mercy Health Corporation, a leading regional health care system and contain complementary retail space. The acquisition and redevelopment costs related to these two properties totaled approximately $10 million. Kimco Select also acquired (i) various first mortgage loan participations, (ii) certain public bonds, and (iii) a joint venture interest in an entity which owns an office building in Miami, FL. The aggregate acquisition cost related to these investments was approximately $4.6 million. Financings - Debt. During 1997, the Company issued an aggregate principal amount of $100 million of unsecured notes under its MTN program. These unsecured notes are comprised of (i) a $30 million ten-year note bearing interest at 7.46% and maturing in May 2007, (ii) a $20 million twelve-year note bearing interest at 7.56% and maturing in May 2009, (iii) a $20 million ten-year note bearing interest at 6.96% and maturing in July 2007 and (iv) a $30 million twelve-year note bearing interest at 7.06% and maturing in July 2009. (See Note 7 of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.) In June 1997, the Company amended its $100 million, unsecured revolving credit facility with a group of banks to provide, for a reduction (i) by .25% (25 basis points) in the spread above the LIBOR rate or money-market rate, whichever is applicable, paid on borrowings under the facility and (ii) by .02% (2 basis points) in the annual fee payable on a certain portion of the facility which remains unused from time to time. In addition, certain administrative and extension fees were also reduced. The facility term was also extended one year and is now scheduled to expire on June 30, 2000. Equity. During September 1997, the Company completed a primary public stock offering of 4,000,000 shares of common stock at $35.50 per share. The net proceeds from this sale of common stock, totaling approximately $134.5 million (after related transaction costs of approximately $7.5 million) have been used primarily for the acquisition of neighborhood and community shopping centers. (See Note 11 of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.) Subsequent Events Property Acquisitions / Disposition - In January 1998, the Company acquired seven neighborhood and community shopping center properties comprising approximately 632,000 square feet of GLA in the Denver, CO market for approximately $43.6 million, including the assumption of $4.2 million of mortgage debt. These properties are primarily anchored by supermarket or drugstore tenants, including Safeway, Cub Foods and Phar-Mor. In addition, the Company, through its affiliate Kimco Select, acquired interests in three retail properties in the Chicago, IL market comprising approximately 516,000 square feet of GLA for an aggregate purchase price of approximately $23.7 million. These properties include approximately 70,000 square feet of showroom space and adjoining warehouses of approximately 100,000 square feet at each location. Simultaneous with this transaction, the Company leased to Heilig-Meyers, the country's largest furniture retailer, the showroom portion of each property under individual long-term leases. The Company is currently planning the redevelopment of the warehouse portion of each property. The Company disposed of a property in Pinellas Park, FL during January 1998. Cash proceeds from the disposition totaling $2.3 million will be used to acquire an exchange shopping center property. 10
Price REIT Merger - On January 13, 1998, the Company and The Price REIT, Inc., a Maryland corporation ("Price REIT") signed a definitive agreement to merge, (the "Merger"). Pursuant to the terms of the Agreement and Plan of Merger dated January 13, 1998, as amended March 5, 1998 (the "Merger Agreement"), Price REIT will be merged into a newly formed wholly-owned subsidiary of the Company. The transaction is intended, for financial accounting purposes, to be accounted for as a purchase. Under the terms of the Merger Agreement each share of Price REIT common stock will be exchanged for a combination of the Company's common stock and Kimco depositary shares (the "Class D Depositary Shares"), each depositary share representing a 1/10 of a share interest in a new issue of Kimco 7.5% Class D Cumulative Convertible Preferred Stock (the "Class D Convertible Preferred Stock") having an aggregate value of at least $45 based on the "Kimco Average Price" (as defined herein) and the liquidation preference of the Class D Depositary Shares (collectively, the "Merger Consideration"). The Merger, which is expected to be completed in mid-1998, is subject to customary closing conditions, including certain regulatory approvals and the approval of the issuance of the Merger Consideration by the stockholders of the Company and the approval of the Merger by the Stockholders of Price REIT. The Merger Agreement provides for a pre-closing adjustment to the number of shares of the Company's common stock and Class D Depositary Shares issuable per share of Price REIT common stock in order to ensure that Price REIT stockholders will receive at least, and possibly more than, $45 in the Company's securities per Price REIT share. Specifically, in the event that the average closing price of the Company's common stock (the "Kimco Average Price" as defined herein) ending on and including the seventh trading day immediately preceding the date of the Company's 1998 annual meeting of stockholders plus $10 is less than $45, the amount of Class D Depositary Shares will be increased up to a maximum of $11.25 of Class D Depositary Shares (based on a liquidation preference of $25 per Class D Depositary Share) to arrive at a value of $45. To the extent that the issuance of $11.25 of Class D Depositary Shares would still result in less than $45 of combined value, the number of shares of the Company's common stock issuable per Price REIT share will be increased in order to arrive at a total of $45 delivered in the Company's securities. However, the Company may elect to terminate the Merger Agreement in the event its Average Price (the "Average Price", as defined herein) during a specified calculation period or the closing price on the scheduled closing date or on either of the two days prior to the scheduled closing date is less than $32. In the event that the "Kimco Average Price" (as defined herein) plus $10 is greater than $45, each share of Price REIT common stock would continue to be converted into one share of the Company's common stock and the amount of Class D Depositary Shares will be decreased by 50% of the amount by which the Kimco Average Price referred to above plus $10 exceeds $45. However, Price REIT stockholders will never receive less than $9 of Class D Depositary Shares. Thus, as a result of the merger, Price REIT stockholders will obtain the benefit of 50% of the increase in value of the Company's common stock as reflected in the Kimco Average Price between $35 and $37, and 100% of any increase above $37. As used herein, the "Kimco Average Price" shall be the average of Average Prices (as defined herein) of the Company's common stock for fifteen (15) randomly selected trading days within the thirty (30) consecutive trading days ending on and including the seventh trading day immediately preceding the date of the Company's 1998 annual meeting of stockholders. As used herein, the "Average Price" for any date means the average of the daily high and low prices of the Company's common stock on the New York Stock Exchange (the "NYSE") as reported in The Wall Street Journal, or if not reported thereby, by another authoritative source. The random selection of trading days shall be made under the joint supervision of the financial advisors retained by the Company and Price REIT in connection with the transactions contemplated hereby. The dividend rate on the Class D Depositary Shares will be 7.5 % per annum, or, if greater, the dividend on the shares of the Company's common stock into which a Class D Depositary Share is convertible plus $0.0275 quarterly. The Class D Depositary Shares will be convertible into the Company's common stock 11
at a conversion price of $40.25 per share at any time by the holder and may be redeemed by the Company at the conversion price in shares of the Company's common stock at any time after the third anniversary of the Merger if for any 20 trading days during a rolling 30 day consecutive trading-day period the Company's common stock closing price exceeds $48.30, subject to certain adjustments. The Class D Depositary Shares are expected to be listed on the NYSE. The Merger Agreement also provides that each party will be entitled to a Break-Up Fee in the amount of $12,500,000 or reimbursement of expenses up to $2,000,000 in the event the agreement is terminated under various circumstances. The Company has also agreed that if it elects to terminate the Merger Agreement because its common stock price closes below $32, Price REIT will be entitled to receive $6,250,000. Financings - In March 1998, the Company obtained an additional $150 million interim unsecured revolving credit facility to both finance the purchase of properties and meet any short-term working capital requirements. This facility is scheduled to expire in June 1998, however, it is the Company's intention to extend the term of this facility and establish it as a continuing part of the Company's total unsecured revolving credit availability. KC Holdings, Inc. To facilitate the Company's November 1991 IPO, forty-six shopping center properties and certain other assets, together with indebtedness related thereto, were transferred to subsidiaries of KC Holdings, Inc. ("KC Holdings") a newly formed corporation that is owned by the stockholders of the Company prior to the IPO. The Company, although having no ownership interest in KC Holdings or its subsidiary companies, was granted ten-year, fixed-price options to reacquire the real estate assets owned by KC Holdings' subsidiaries, subject to any liabilities outstanding with respect to such assets at the time of an option exercise. As of February 27, 1998, KC Holdings' subsidiaries had conveyed fourteen shopping center properties back to the Company and had disposed of ten additional centers in transactions with third parties. The members of the Company's Board of Directors who are not also shareholders of KC Holdings unanimously approved the purchase of each of the fourteen shopping centers that have been reacquired by the Company from KC Holdings. (See Notes 9 and 13 of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.) The Company manages 18 of KC Holdings' 22 shopping center properties pursuant to a management agreement. KC Holdings' other four shopping center properties are managed by unaffiliated joint venture partners. Acquisition Option - The Company holds 10-year acquisition options which expire in November 2001 to reacquire interests in the 22 shopping center properties owned by KC Holdings' subsidiaries. The option exercise prices are fixed and payable in shares of the Company's common stock or, in the event payment in the form of common stock could jeopardize the Company's status as a REIT, an equivalent value in cash. If the Company exercises its options to acquire all the remaining shopping center properties, the maximum aggregate amount payable to KC Holdings would be approximately $11.1 million, or approximately 316,000 shares of the Company's common stock (assuming shares valued at the closing price on the NYSE of $35.13 per share as of February 27, 1998). The Company would acquire the properties subject to any existing mortgage indebtedness and other liabilities on the properties. The acquisition options enable the Company to obtain any appreciation in the value of these properties over the option exercise prices, while eliminating the Company's interim exposure to leverage and operating risks. The option exercise prices for the shopping center properties are generally equal to 10% of KC Holdings' share of the mortgage debt which was outstanding 12
on the properties at the date of the IPO. If, however, the market value of the Company's common stock at the time an option is exercised is less than $13.33 per share (the IPO price), then the option exercise price will decline proportionately (subject to maximum reduction of 50%). The 22 shopping center properties subject to the acquisition options are held in 8 subsidiaries of KC Holdings. Thirteen of these properties are subject to a single lease and/or a single cross-collateralized mortgage and are therefore held by a single subsidiary. Four of the properties, which are owned in two separate joint ventures and managed by unaffiliated joint venture partners, are held by two additional subsidiaries, and the remaining five shopping center properties are each held by separate subsidiaries. The Company may exercise its acquisition options separately with respect to each subsidiary. The acquisition options may be exercised by either (i) a majority of the Company's directors who are not also stockholders of KC Holdings, provided that the pro forma annualized net cash flows of the properties to be acquired exceed the dividend yield on the shares issued to exercise each option, or (ii) a majority of the Company's stockholders who are not also stockholders of KC Holdings. KC Holdings' subsidiaries may sell any of the properties subject to the acquisition options to any third party unaffiliated with KC Holdings or its stockholders, provided that KC Holdings provides the Company with a 30-day right of first refusal notice with regard to such sale. KC Holdings may cause such a selling subsidiary to distribute any sale proceeds to KC Holdings or its stockholders, provided that the option exercise price with respect to such subsidiary is reduced by the amount that is distributed, and further provided that no amount may be distributed so as to cause the option exercise price for any subsidiary to be reduced to less than $1. Each of KC Holdings' subsidiaries may pay dividends to KC Holdings to the extent of net operating cash flow. In addition, any KC Holdings subsidiary may make distributions to KC Holdings in excess of net operating cash flow, provided that the option exercise price with respect to such subsidiary is reduced by the amount of such distribution, and further provided that no amount may be distributed so as to cause the option exercise price for any subsidiary to be reduced to less than $1. KC Holdings may increase the indebtedness in its subsidiaries for the purpose of improving, maintaining, refinancing or operating the related shopping center properties. Such indebtedness may include borrowings from the stockholders of KC Holdings. In the event of a complete casualty or a condemnation of a property held by any of KC Holdings' subsidiaries, the acquisition option will terminate with respect to such property and the option shall continue to be effective with respect to any other properties held by such subsidiary. Each of KC Holdings' subsidiaries has agreed with the Company that it will engage in no activities other than in connection with the ownership, maintenance and improvement of the properties that it owns and only to the extent that the Company could engage in such activities without receiving or earning non-qualifying income (in excess of certain limits) under the REIT provisions of the Code or without otherwise impairing the Company's status as a REIT. In addition, KC Holdings has covenanted not to engage in any other real estate activity. The Company has agreed not to make loans to KC Holdings or its subsidiaries. Exchange Listings The Company's common stock, Class A Depositary Shares, Class B Depositary Shares and Class C Depositary Shares are traded on the NYSE under the trading symbols "KIM", "KIMprA", "KIMprB" and "KIMprC", respectively. Item 2. Properties Real Estate Portfolio As of February 1, 1998 the Company's shopping center portfolio was comprised of approximately 35.8 million square feet of GLA in 273 neighborhood and community shopping center properties and two regional malls, located in 30 states. Neighborhood and community shopping centers 13
comprise the primary focus of the Company's current portfolio, representing approximately 97% of the Company's total shopping center GLA. As of February 1, 1998 approximately 90% of the Company's neighborhood and community shopping center space was leased, and the average annualized base rent per leased square foot was $6.37. The Company's neighborhood and community shopping center properties, generally owned and operated through subsidiaries or joint ventures, had an average size of approximately 126,000 square feet as of February 1, 1998. The Company retains its shopping centers for long-term investment and consequently pursues a program of regular physical maintenance together with major renovations and refurbishing to preserve and increase the value of its properties. These projects usually include renovating existing facades, installing uniform signage, resurfacing parking lots and enhancing parking lot lighting. During 1997, the Company capitalized approximately $3.7 million in connection with these property improvements. The Company's neighborhood and community shopping centers are usually "anchored" by a national or regional discount department store, supermarket or drugstore. As one of the original participants in the growth of the shopping center industry and one of the nation's largest owners and operators of shopping centers, the Company has established close relationships with a large number of major national and regional retailers. National and regional companies that are tenants in the Company's shopping center properties include Venture, Kmart Corporation, Kohl's, WalMart, TJX Companies, Toys/Kids `R Us and Schottenstein Stores. A substantial portion of the Company's income consists of rent received under long-term leases. Most of the leases provide for the payment of fixed base rentals monthly in advance and for the payment by tenants of an allocable share of the real estate taxes, insurance, utilities and common area maintenance expenses incurred in operating the shopping centers. Although a majority of the leases require the Company to make roof and structural repairs as needed, a number of tenant leases place that responsibility on the tenant, and the Company's standard small store lease provides for roof repairs to be reimbursed by the tenant as part of common area maintenance. The Company's management places a strong emphasis on sound construction and safety at its properties. Approximately 1,100 of the Company's 2,680 leases also contain provisions requiring the payment of additional rent calculated as a percentage of tenants' gross sales above predetermined thresholds. Percentage rents accounted for approximately 2% of the Company's revenues from rental property for the year ended December 31, 1997. Minimum base rental revenues and operating expense reimbursements accounted for approximately 98% of the Company's total revenues from rental property for the year ended December 31, 1997. The Company's management believes that the average base rent per square foot for the Company's existing leases is generally lower than the prevailing market rate base rents in the geographic regions where the Company operates, reflecting the potential for future growth. The Company has been able to capitalize on the below market-rate leases in its existing shopping center portfolio to obtain increases in rental revenues through the renewal of leases or strategic re-tenanting of space. From January 1, 1997 to December 31, 1997, excluding the effect of 1997 acquisitions, the Company increased the average base rent per leased square foot on its portfolio of neighborhood and community shopping centers from $6.21 to $6.50, an increase of $.29 per square foot, or approximately 5%, which was attributable to leasing activity within the existing portfolio. The effect of 1997 acquisitions reduced the overall rent per leased square foot by $.19, thus bringing the average rent per leased square foot to $6.31 as of December 31, 1997. The average annual base rent per leased square foot for new leases executed in 1997 was $9.07. The Company seeks to reduce its operating and leasing risks through geographic and tenant diversity. No single neighborhood and community shopping center 14
accounted for more than 1.0% of the Company's total shopping center GLA or more than 1.9% of total annualized base rental revenues as of December 31, 1997. The five largest tenants of the Company include Venture, Kmart Corporation, Kohl's, WalMart and TJX Companies, which represent approximately 11.7%, 4.1%, 3.4%, 2.7% and 2.2%, respectively, of the annualized base rental revenues at December 31, 1997. The Company maintains an active leasing and capital improvement program that, combined with the high quality of the locations, has made, in management's opinion, the Company's properties attractive to tenants. The Company's management believes its experience in the industry and its relationships with numerous national and regional tenants gives it an advantage in an industry where ownership is fragmented among a large number of property owners. Retail Store Leases In addition to its neighborhood and community shopping center portfolio and two regional malls, the Company holds interests in various retail store leases relating to approximately 5.6 million square feet of anchor store premises in 62 neighborhood and community shopping centers located in 24 states. As of February 1, 1998 approximately 98% of these premises had been sublet to retailers which lease the stores pursuant to net lease agreements providing for average annualized base rental payments to the Company of $3.73 per square foot. The Company's average annualized base rental obligation pursuant to its retail store leases with the fee owners of such subleased premises is approximately $2.74 per square foot. The average remaining primary term of the Company's retail store leases (and similarly the remaining primary terms of its sublease agreements with the tenants currently leasing such space) is approximately 4.8 years, excluding options to renew such leases for terms which generally range from 5-25 years. Ground-Leased Properties The Company has 45 shopping center properties that are subject to long-term ground leases where a third party owns and has leased the underlying land to the Company (or an affiliated joint venture) to construct and/or operate a shopping center. The Company or the joint venture pays rent for the use of the land and generally is responsible for all costs and expenses associated with the building and improvements. At the end of these long-term leases, unless extended, the land together with all improvements revert to the land owner. Undeveloped Land Although the Company does not own any unimproved land tracts that it intends to develop as new shopping centers, the Company does own parcels of land adjacent to certain of its existing shopping centers that are held for possible expansion and a parcel of undeveloped land leased to a retailer. At times, should circumstances warrant, the Company may develop or dispose of these parcels. The table on pages 16 to 23 sets forth more specific information with respect to each of the Company's shopping center properties as of December 31, 1997. Item 3. Legal Proceedings The Company is not presently involved in any litigation nor to its knowledge is any litigation threatened against the Company or its subsidiaries that, in management's opinion, would result in any material adverse effect on the Company's ownership, management or operation of its properties, or which is not covered by the Company's liability insurance. Item 4. Submission of Matters to a Vote of Security Holders None 15
PROPERTY CHART <TABLE> <CAPTION> YEAR OWNERSHIP LEASABLE PERCENT DEVELOPED INTEREST/ LAND AREA AREA LEASED OR ACQUIRED (EXPIRATION)(2) (ACRES) (SQ.FT.) (1) ----------- --------------- ------- -------- ------- <S> <C> <C> <C> <C> <C> ARIZONA PHOENIX 1997 FEE 17.50 124,054 99 PHOENIX 1996 FEE/JOINT VENTURE 13.09 186,575 93 CALIFORNIA ANAHEIM 1995 FEE 1.04 15,306 100 CONNECTICUT HAMDEN 1997 FEE/JOINT VENTURE 7.42 341,502 97 WATERBURY 1993 FEE 13.10 136,153 100 DELAWARE ELSMERE 1979 GROUND LEASE(2076) 17.14 111,600 100 FLORIDA MELBOURNE 1994 FEE 13.84 131,851 77 MELBOURNE 1968 GROUND LEASE(2071) 11.53 168,797 58 CORAL SPRINGS 1994 FEE 5.90 46,497 100 CORAL SPRINGS 1997 FEE 9.80 83,500 100 LAUDERDALE LAKES 1968 FEE/JOINT VENTURE 10.04 112,476 92 LAUDERHILL 1974 FEE 15.50 180,026 88 MARGATE 1993 FEE 34.07 256,030 91 PLANTATION 1974 FEE/JOINT VENTURE 4.59 60,414 100 POMPANO BEACH 1968 FEE/JOINT VENTURE 6.55 63,838 98 HOMESTEAD 1972 FEE/JOINT VENTURE 21.00 160,819 87 MIAMI (3) 1968 FEE 8.23 104,968 33 MIAMI (3) 1985 FEE 15.92 93,643 88 MIAMI 1986 FEE 7.78 81,780 97 SOUTH MIAMI 1995 FEE 5.44 60,804 96 TAMPA 1997 FEE 16.34 109,408 100 LEESBURG 1969 GROUND LEASE(2017) 1.25 13,468 89 MOUNT DORA 1997 FEE 12.44 118,150 97 BRADENTON 1968 FEE/JOINT VENTURE 6.20 24,700 100 OCALA 1997 FEE 27.17 250,620 95 STUART 1994 FEE 20.67 170,291 98 EAST ORLANDO 1971 FEE 11.63 124,798 100 LAKE BARTON 1968 FEE 4.79 2,800 100 ORLANDO 1994 FEE 28.00 230,704 100 ORLANDO (3) 1996 FEE 11.70 129,036 61 ORLANDO 1968 GROUND LEASE(2047)/JOINT VENTURE 7.75 103,480 100 ORLANDO 1968 FEE/JOINT VENTURE 10.00 114,434 100 ALTAMONTE SPRINGS 1995 FEE 5.58 94,193 100 KISSIMMEE 1996 FEE 18.42 130,983 100 BOCA RATON 1967 FEE 9.85 73,549 92 RIVIERA BEACH 1968 GROUND LEASE(2066)/JOINT VENTURE 5.06 46,390 44 WEST PALM BEACH 1995 FEE 7.93 80,845 99 WEST PALM BEACH 1967 FEE/JOINT VENTURE 7.57 74,326 100 NEW PORT RICHEY 1972 FEE 0.99 9,000 LARGO 1968 FEE 11.98 149,472 100 LARGO 1992 FEE 29.44 215,916 95 LARGO 1993 FEE 6.62 56,630 86 PINELLAS PARK (5) 1970 FEE 13.70 119,355 2 <CAPTION> MAJOR LEASES (LEASE EXPIRATION/ OPTION EXPIRATION) ------------------ <S> <C> ARIZONA PHOENIX SAFEWAY(2009), WALGREENS(2029) PHOENIX HOME DEPOT(1998/2018) CALIFORNIA ANAHEIM CONNECTICUT HAMDEN BRADLEES(2004/2014), STEINBACH INC(2002/2012), BOB'S(2016/2036) WATERBURY BRADLEES(2002/2007), STOP & SHOP(2013/2043) DELAWARE ELSMERE SCHOTTENSTEIN(2008/2038) FLORIDA MELBOURNE WINN DIXIE(2002/2027) MELBOURNE FABRI CENTER(2006/2016), WALGREENS(2045) CORAL SPRINGS LINENS 'N THINGS(2012/2027), PIER 1 IMPORTS(2001/2011) CORAL SPRINGS TJ MAXX(2001), BLOCKBUSTER(2006) LAUDERDALE LAKES FAMILY DOLLAR(2002/2017) LAUDERHILL BABY SUPERSTORE(2004/2014), PARTY CITY(2007/2017) MARGATE PUBLIX(2008/2028), OFFICE DEPOT(2000/2020) PLANTATION WHOLE FOODS(2009/2019) POMPANO BEACH BIG LOTS(2001/2011) HOMESTEAD PUBLIX(2014/2034), OFFICE MAX(2013/2028), ECKERD(2002/2012) MIAMI (3) WALGREENS (1999) MIAMI (3) PUBLIX(2018/2038), WALGREENS(2058) MIAMI PUBLIX(2009/2029), WALGREENS(2018) SOUTH MIAMI KIDS R US (2016/2021), PARTY CITY(2007/2017) TAMPA STAPLES(2003/2018), ROSS STORES(2002/2022) LEESBURG DISCOUNT AUTO PARTS (1999/2004) MOUNT DORA KMART(2013/2063), PET SUPERMARKET(2003/2013) BRADENTON DISCOUNT VIDEO (2002/2007) OCALA KMART(2001/2021), SERVICE MERCHANDISE(2007/2032) STUART SERVICE MERCHANDISE(2010/2070), MARSHALLS (1999/2019) EAST ORLANDO SPORTS AUTHORITY(2000/2020), OFFICE DEPOT (2005/2025) LAKE BARTON ORLANDO COSTCO (2006/2026), SPORTS AUTHORITY(2011/2031) ORLANDO (3) ROSS STORES(2003/2023), BIG LOTS(1999/2009) ORLANDO DORIN DISTRIBUTORS (2002/2007), ECONOMY RESTAURANT (1998/2003) ORLANDO BALLYS HEALTH(2008/2018), HSN REALTY(2000/2009) ALTAMONTE SPRINGS ROOMS TO GO(2001), THOMASVILLE HOME(2001/2006) KISSIMMEE KASH N KARRY(2006/2036), OFFICE MAX (2012/2027) BOCA RATON WINN DIXIE (2008/2033) RIVIERA BEACH BOATHOUSE DISCOUNT(2002/2007) WEST PALM BEACH BABY SUPERSTORE(2006/2021) WEST PALM BEACH WINN DIXIE (2010/2030), FAMILY DOLLAR(2009/2024) NEW PORT RICHEY LARGO WALMART (2007/2027) LARGO PUBLIX (2009/2029), OFFICE DEPOT(1999/2019) LARGO PINELLAS PARK (5) </TABLE> 16
PROPERTY CHART <TABLE> <CAPTION> YEAR OWNERSHIP LEASABLE PERCENT DEVELOPED INTEREST/ LAND AREA AREA LEASED OR ACQUIRED (EXPIRATION)(2) (ACRES) (SQ.FT.) (1) ----------- --------------- ------- -------- ------- <S> <C> <C> <C> <C> <C> ST. PETERSBURG 1968 GROUND LEASE(2084)/JOINT VENTURE 9.01 119,179 90 WINTER HAVEN 1973 FEE/JOINT VENTURE 13.90 88,400 60 PALATKA 1970 FEE 8.90 72,216 93 SARASOTA 1970 FEE 10.00 103,085 97 SARASOTA 1989 FEE 11.98 109,273 97 FERN PARK 1968 FEE 12.00 131,894 99 SANFORD 1989 FEE 40.90 301,801 91 FT. PIERCE 1970 FEE/JOINT VENTURE 14.83 210,460 88 GEORGIA MACON 1969 FEE 12.30 127,260 78 SAVANNAH 1993 FEE 22.22 187,302 88 SAVANNAH 1995 FEE 9.50 88,480 100 FOREST PARK 1969 FEE 14.21 100,452 90 ATLANTA 1988 FEE 19.48 165,314 100 GAINESVILLE 1970 FEE/JOINT VENTURE 12.60 142,288 99 AUGUSTA 1995 FEE 11.32 119,930 99 IOWA WATERLOO 1996 FEE 8.97 96,000 100 DUBUQUE 1997 GROUND LEASE(2019) 8.37 83,705 100 CLIVE 1996 FEE 8.80 90,000 100 DES MOINES 1996 FEE 9.56 96,400 100 DAVENPORT 1997 GROUND LEASE(2004) 9.10 91,035 100 ILLINOIS CALUMET CITY 1997 FEE 16.98 197,386 95 CHICAGO 1997 GROUND LEASE(2020) 10.94 109,441 100 CHICAGO 1997 GROUND LEASE(2040) 17.48 104,263 100 CHICAGO 1997 FEE 6.04 87,563 100 COUNTRYSIDE 1997 GROUND LEASE(2053) 27.67 117,456 100 CRESTWOOD 1997 GROUND LEASE(2051) 36.75 79,903 100 FOREST PARK 1997 GROUND LEASE(2021) 9.83 98,371 100 MATTESON 1997 FEE 17.01 165,623 98 MT.PROSPECT 1997 FEE 16.80 165,603 87 NILES 1997 GROUND LEASE(2022) 10.18 101,775 100 NORRIDGE 1997 GROUND LEASE(2042) 11.69 116,914 100 OAK LAWN 1997 FEE 15.43 165,623 94 OAKBROOK TERRACE 1997 FEE 16.90 169,034 100 SCHAUMBURG 1997 GROUND LEASE(2015) 10.49 104,910 100 SKOKIE 1997 GROUND LEASE(2003) 10.66 106,600 100 ADDISON 1968 GROUND LEASE(2066) 7.99 93,289 100 DOWNERS GROVE 1997 FEE 12.04 144,559 100 NAPERVILLE 1997 FEE 9.00 102,615 100 CARBONDALE 1997 GROUND LEASE(2052) 8.05 80,535 100 BRADLEY 1996 FEE 5.35 80,300 100 ELGIN 1972 FEE 18.69 178,539 89 GENEVA 1996 FEE 8.18 104,000 100 OTTAWA 1970 FEE 9.00 60,000 100 BLOOMINGTON 1972 FEE 16.09 175,530 100 PEORIA 1997 GROUND LEASE(2055) 20.45 158,407 83 CRESTHILL 1997 GROUND LEASE(2039) 9.03 90,313 100 <CAPTION> MAJOR LEASES (LEASE EXPIRATION/ OPTION EXPIRATION) ------------------ <S> <C> ST. PETERSBURG KASH N KARRY(2017/2037), TJ MAXX(2001/2011) WINTER HAVEN BIG LOTS(2000/2010), FABRI CENTER(2006/2016) PALATKA SAVE A LOT(2003/2013), BIG LOTS(1999/2009) SARASOTA TJ MAXX(2001/2016), OFFICE MAX(2009/2024), FRANKS NURSERY(2012/2032) SARASOTA WINN DIXIE(1998/2023) FERN PARK BED BATH AND BEYOND(2002/2012), BOOKS-A-MILLION(2006/2016), OFFICE MAX (2008/2023) SANFORD WALMART(2005/2035), ROSS STORES(2005/2025), PUBLIX (2005/2025) FT. PIERCE KMART (2001/2016), WINN DIXIE (2002/2027), FABRI CENTER (2000/2010) GEORGIA MACON HEILIG-MEYERS(2007/2017) SAVANNAH PHAR-MOR (1999/2004), TJ MAXX (2005/2015), MARSHALLS (2007/2022) SAVANNAH MEDIA PLAY (2006/2021), PIGGLY WIGGLY(1999/2004), REVCO (2000) FOREST PARK ATLANTA GEORGIA SHOW(2000) GAINESVILLE CONSOLIDATED STORES(2002), OFFICE DEPOT(2004/2020) AUGUSTA PHAR-MOR(1997/2007), TJ MAXX(2004/2014), GOLDS GYM(2004/2009) IOWA WATERLOO KMART(2021/2051) DUBUQUE VENTURE(2022/2052) CLIVE KMART(2021/2051) DES MOINES VENTURE(2021/2051) DAVENPORT VENTURE(2022/2052) ILLINOIS CALUMET CITY VENTURE(2022/2052), MARSHALLS(2003), BEST BUY (2012) CHICAGO VENTURE(2022/2052) CHICAGO VENTURE(2022/2052) CHICAGO VENTURE(2022/2052) COUNTRYSIDE VENTURE(2022/2052) CRESTWOOD VENTURE(2022/2052) FOREST PARK VENTURE(2022/2052) MATTESON VENTURE(2022/2052), MARSHALLS(2000/2010) MT.PROSPECT VENTURE(2022/2052), PAYLESS (2000/2005) NILES VENTURE(2022/2052), PAYLESS (1999) NORRIDGE VENTURE(2022/2052) OAK LAWN VENTURE(2022/2052), CHUCK E CHEESE(2002/2007), FASHION BUG (1998/2008) OAKBROOK TERRACE VENTURE(2022/2052), LINENS N THINGS(2006) SCHAUMBURG VENTURE(2022/2052) SKOKIE VENTURE(2022/2052) ADDISON SCHOTTENSTEIN STORES(2001/2016) DOWNERS GROVE VENTURE(2022/2052), BEST BUY (2012/2032) NAPERVILLE VENTURE(2022/2052) CARBONDALE VENTURE(2022/2052) BRADLEY VENTURE(2021/2051) ELGIN MENARD(2001/2006), EAGLE FOOD (1998/2023) GENEVA VENTURE(2021/2051) OTTAWA SCHOTTENSTEIN STORES(2001/2011) BLOOMINGTON SCHNUCK MARKETS(2004/2024), TOYS R US(2015/2045), BARNES & NOBLE(2005/2015) PEORIA VENTURE(2022/2052) CRESTHILL VENTURE(2022/2052) </TABLE> 17
PROPERTY CHART <TABLE> <CAPTION> YEAR OWNERSHIP LEASABLE PERCENT DEVELOPED INTEREST/ LAND AREA AREA LEASED OR ACQUIRED (EXPIRATION)(2) (ACRES) (SQ.FT.) (1) ----------- --------------- ------- -------- ------- <S> <C> <C> <C> <C> <C> INDIANA GRIFFITH 1997 GROUND LEASE(2054) 10.57 114,870 100 MERRILLVILLE 1997 GROUND LEASE(2015) 10.19 101,887 100 E. WASHINGTON 1997 FEE 9.56 89,042 100 EAGLEDALE 1967 FEE 11.92 75,000 7 FELBRAM 1970 FEE 4.13 27,400 91 GREENWOOD 1970 FEE 25.68 157,160 100 INDIANAPOLIS 1986 FEE 20.60 178,610 82 LAFAYETTE 1997 FEE 24.34 176,940 94 LAFAYETTE 1971 FEE 12.37 90,500 100 EVANSVILLE 1986 FEE 14.20 193,007 98 EVANSVILLE 1986 FEE 11.50 147,775 98 KANSAS ROELAND PARK 1997 GROUND LEASE(2024) 12.70 127,401 100 WICHITA 1996 FEE 6.50 96,100 100 WICHITA 1996 FEE 8.06 97,000 100 KENTUCKY BELLEVUE 1976 FEE 6.04 53,695 100 LEXINGTON 1993 FEE 35.82 259,928 100 LOUISIANA LAFEYETTE 1997 FEE 21.94 150,936 98 BATON ROUGE 1997 FEE 18.58 257,856 89 BATON ROUGE 1983 FEE/JOINT VENTURE 7.00 190,000 100 MASSACHUSETTS GREAT BARRINGTON 1994 FEE 14.14 135,435 85 LEOMINSTER 1975 FEE 57.00 596,286 92 MARYLAND LAUREL 1964 FEE 18.00 75,882 95 LAUREL 1972 FEE 8.06 81,550 100 HAGERSTOWN 1973 FEE 10.48 115,718 100 MICHIGAN WALKER 1993 FEE 41.78 284,143 91 MUSKEGON 1985 FEE 12.20 71,235 88 CLARKSTON 1996 FEE 20.00 156,864 100 CLAWSON 1993 FEE 13.47 177,797 100 FARMINGTON 1993 FEE 2.78 97,038 98 GRAND HAVEN 1976 FEE 7.55 87,430 100 LIVONIA 1968 FEE 4.53 44,185 97 TAYLOR 1993 FEE 13.00 121,364 100 MISSOURI SPRINGFIELD 1994 FEE 41.50 271,552 93 CAPE GIRARDEAU 1997 FEE 6.99 79,960 100 ST. LOUIS 1972 FEE 13.11 163,821 82 KANSAS CITY 1997 FEE 15.64 147,989 100 <CAPTION> MAJOR LEASES (LEASE EXPIRATION/ OPTION EXPIRATION) ------------------ <S> <C> INDIANA GRIFFITH VENTURE(2022/2052) MERRILLVILLE VENTURE(2022/2052) E. WASHINGTON VENTURE(2022/2052) EAGLEDALE FELBRAM SAVE A LOT(2001/2016), BLOCKBUSTER(1999/2009) GREENWOOD BABY SUPERSTORE(2006/2021), TJ MAXX(2004/2010) INDIANAPOLIS TARGET(1999/2029), FABRI CENTER(1998) LAFAYETTE TARGET(1999/2024), FABRI CENTER(1999) LAFAYETTE MENARD (TJX) (2001/2006) EVANSVILLE VENTURE(2012/2032), OFFICE MAX(2012/2027), MICHAELS(2004/2019) EVANSVILLE VENTURE(2012/2032), BUEHLER FOODS(2003/2013) KANSAS ROELAND PARK VENTURE(2022/2052), PRICE CHOPPER(1999/2009) WICHITA VENTURE(2021/2051) WICHITA VENTURE(2021/2051) KENTUCKY BELLEVUE KROGER(2005/2035) LEXINGTON BEST BUY(2009/2024), BED BATH & BEYOND(2013/2038), TOYS R US(2013/2038) LOUISIANA LAFEYETTE STEIN MART(2005), TJ MAXX(2003), OFFICE MAX(2012) BATON ROUGE STEIN MART(2006/2016), TAYLOR OFFICE SUPPLY(1997/2005), MARSHALLS(2001/2016) BATON ROUGE MERCANTILE STORES(2011/2031) MASSACHUSETTS GREAT BARRINGTON KMART(2001/2016), PRICE CHOPPER(2016/2036) LEOMINSTER SEARS(2003/2033), JC PENNEY(2009/2034), BRADLEES(2009/2024) MARYLAND LAUREL FOOD A RAMA(1999/2009), FACTORY CARD OUTLET(2005/2015), OLD COUNTRY BUFFET(2009/2019) LAUREL AMES(2007/2017) HAGERSTOWN AMES(2007/2017) MICHIGAN WALKER KMART(2016/2051), KOHLS(2012/2032), OFFICE MAX(2011) MUSKEGON PLUMB(2002/2022), FABRI CENTER(2002/2012) CLARKSTON A&P(2015/2045), FRANKS NURSERY(2011/2031) CLAWSON A&P(2006/2016), FRANKS NURSERY(1998), STAPLES(2011/2026) FARMINGTON A&P(2001), DAMMAN HARDWARE(2002/2012) GRAND HAVEN FAMILY FARE(2006/2026), QUALITY MATTRESS(2008) LIVONIA DAMMAN HARDWARE(2004/2014) TAYLOR KOHLS(2011/2031), DRUG EMPORIUM(2000/2020) MISSOURI SPRINGFIELD BEST BUY(2011/2026), JC PENNEY(2005/2015), TJ MAXX(2006/2021) CAPE GIRARDEAU VENTURE(2022/2052) ST. LOUIS KMART(1999/2019), WALGREENS(2006) KANSAS CITY VENTURE(2022/2052), PRICE CHOPPER(2001/2006) </TABLE> 18
PROPERTY CHART <TABLE> <CAPTION> YEAR OWNERSHIP LEASABLE PERCENT DEVELOPED INTEREST/ LAND AREA AREA LEASED OR ACQUIRED (EXPIRATION)(2) (ACRES) (SQ.FT.) (1) ----------- --------------- ------- -------- ------- <S> <C> <C> <C> <C> <C> KANSAS CITY 1997 FEE 17.84 157,938 93 O'FALLON 1997 FEE 18.25 50,000 100 ST.PETERS 1997 FEE 14.77 167,397 97 BRIDGETON 1997 GROUND LEASE(2040) 10.24 102,420 100 ELLISVILLE 1970 FEE 18.37 118,080 100 HAZELWOOD 1970 FEE 15.00 130,780 88 JENNINGS 1971 FEE 8.20 155,095 18 LEMAY 1974 FEE 3.09 73,281 95 ST.LOUIS 1997 FEE 16.58 165,809 80 ST.LOUIS 1997 GROUND LEASE(2025) 19.66 162,901 93 ST.LOUIS 1997 GROUND LEASE(2035) 37.71 164,191 98 ST.LOUIS 1997 GROUND LEASE(2040) 16.33 116,222 100 NORTH CAROLINA DURHAM 1996 FEE 13.24 116,195 84 WINSTON-SALEM (3) 1969 FEE 13.15 137,929 74 GASTONIA 1989 FEE 24.85 235,607 97 CHARLOTTE 1968 FEE 13.50 110,300 95 CHARLOTTE 1993 FEE 13.96 135,257 95 CHARLOTTE 1986 GROUND LEASE(2048) 18.47 227,883 94 RALEIGH 1993 FEE 35.94 374,395 99 NEW HAMPSHIRE SALEM 1994 FEE 39.80 332,951 93 NEW JERSEY RIDGEWOOD 1994 FEE 2.71 24,280 100 CINNAMINSON (3) 1996 FEE 13.67 121,084 14 BLACKWOOD (5) 1996 GROUND LEASE(2032) 9.80 123,970 CHERRY HILL 1996 GROUND LEASE(2035) 15.20 129,809 100 CHERRY HILL 1985 FEE/JOINT VENTURE 18.58 121,673 79 WESTMONT (3) 1994 FEE 17.39 195,824 69 NORTH BRUNSWICK 1994 FEE 38.12 437,433 94 NEW YORK POUGHKEEPSIE 1972 FEE 20.03 180,150 89 HENRIETTA 1988 FEE 14.90 123,000 15 IRONDEQUOIT 1988 FEE 12.80 105,000 WEST GATES 1993 FEE 18.55 185,153 39 CARLE PLACE 1993 FEE 8.34 132,318 91 PLAINVIEW 1969 FEE 6.98 88,329 92 SYOSSET 1967 FEE 2.49 32,124 64 STATEN ISLAND 1989 FEE 16.70 210,990 98 STATEN ISLAND 1997 FEE 7.00 101,391 98 NANUET 1984 FEE 6.00 70,829 71 BRIDGEHAMPTON 1973 FEE 30.20 281,632 100 CENTEREACH 1993 FEE/JOINT VENTURE 40.68 371,028 90 HAMPTON BAYS 1989 FEE 8.17 70,990 100 YONKERS 1995 FEE 4.13 43,560 100 <CAPTION> MAJOR LEASES (LEASE EXPIRATION/ OPTION EXPIRATION) ------------------ <S> <C> KANSAS CITY VENTURE(2022/2052) O'FALLON VENTURE(2022/2052) ST.PETERS VENTURE(2022/2052), OFFICE DEPOT(2004) BRIDGETON VENTURE(2022/2052) ELLISVILLE SHOP N SAVE(2005/2015) HAZELWOOD KMART(2000/2020), WALGREENS(2006) JENNINGS WALGREENS(2056) LEMAY SHOP N SAVE(1998/2008), ODD LOTS(1999) ST.LOUIS VENTURE(2022/2052), COLONEL DAY'S L(2001) ST.LOUIS VENTURE(2022/2052) ST.LOUIS VENTURE(2022/2052), OFFICE DEPOT(1999) ST.LOUIS VENTURE(2022/2052) NORTH CAROLINA DURHAM TJ MAXX(2003/2013), DURHAM SPORTING(2002/2012) WINSTON-SALEM (3) KROGER(2016/2041) GASTONIA SERVICE MERCHANDISE(2003), TOYS R US(2015/2045), WINN DIXIE(2002) CHARLOTTE MEDIA PLAY(2004/2019), TJ MAXX(2001/2016) CHARLOTTE BI-LO(2009/2029), MICHAELS(2003/2013), PARTY CITY(2004/2014) CHARLOTTE TOYS R US(2012/2042), DRUG EMPORIUM(2005/2015), OFFICE MAX(2009/2024) RALEIGH BEST BUY(2005/2020), PHAR-MOR(2010/2025), GENERAL CINEMA(2009/2029) NEW HAMPSHIRE SALEM BRADLEES(2003/2013), SHAWS SUPERMARKET(2008/2038), BOB'S(2011/2021) NEW JERSEY RIDGEWOOD CINNAMINSON (3) BLACKWOOD (5) CHERRY HILL KOHLS(2016/2036), SEARS(2003/2013) CHERRY HILL GIANT FOOD(2016/2036) WESTMONT (3) A&P(2017/2081) NORTH BRUNSWICK WALMART(2018/2058), BURLINGTON COAT FACTORY(2008/2013), HOMEPLACE(2012/2027) NEW YORK POUGHKEEPSIE CALDOR(1999/2029), EDWARDS(2002/2012) HENRIETTA STAPLES(2010/2022) IRONDEQUOIT WEST GATES TOPS(2004/2024) CARLE PLACE HARROWS(2005/2015), STAPLES(2010/2025), SNEAKER STADIUM(2011/2026) PLAINVIEW WALDBAUMS(2017/2037) SYOSSET STATEN ISLAND KMART(2001/2011), PATHMARK(2001/2021) STATEN ISLAND WALDBAUMS(2001/2031), SUPER X DRUGS(2000/2015) NANUET RKO CENTURY THEATRES(2000/2010) BRIDGEHAMPTON CALDOR(2009/2039), KING KULLEN(2015/2035), TJ MAXX(2007/2017) CENTEREACH WALMART(2015/2044), KING KULLEN(2003/2034), MODELL'S SPORTING GOODS(2009/2019) HAMPTON BAYS STERNS(2005/2025), GENOVESE(2001/2016) YONKERS BIG V SUPERMARKET(2008/2028) </TABLE> 19
PROPERTY CHART <TABLE> <CAPTION> YEAR OWNERSHIP LEASABLE PERCENT DEVELOPED INTEREST/ LAND AREA AREA LEASED OR ACQUIRED (EXPIRATION)(2) (ACRES) (SQ.FT.) (1) ----------- --------------- ------- -------- ------- <S> <C> <C> <C> <C> <C> OHIO LIMA 1986 FEE 18.13 194,130 99 SPRINGFIELD 1988 FEE 14.32 131,628 100 CLEVELAND 1975 GROUND LEASE(2035) 9.42 82,411 76 COLUMBUS 1988 FEE 12.40 191,789 100 COLUMBUS 1988 FEE 13.70 140,993 100 COLUMBUS 1988 FEE 17.90 129,008 100 COLUMBUS 1988 FEE 12.40 135,650 100 UPPER ARLINGTON 1969 FEE 13.28 149,412 86 WESTERVILLE 1988/93 FEE 25.40 240,224 99 WHITEHALL 1967 FEE 13.80 112,813 16 BEAVERCREEK 1986 FEE 18.19 126,137 69 CAMBRIDGE 1973 FEE 13.08 95,955 100 CINCINATTI 1988 FEE 11.60 139,985 67 CINCINNATI 1988 FEE 29.20 321,537 99 SHARONVILLE 1977 GROUND LEASE(2076)/JOINT VENTURE 14.99 130,715 100 MENTOR 1987 FEE 20.59 103,871 98 MENTOR 1988 FEE 25.00 271,914 100 WICKLIFFE 1995 FEE 10.00 128,180 100 ELYRIA 1988 FEE 8.30 103,400 100 BRUNSWICK 1975 FEE 20.00 171,223 96 CENTERVILLE 1988 FEE 15.20 115,378 65 DAYTON 1988 FEE 16.86 141,616 90 DAYTON 1984 FEE 32.01 215,891 86 DAYTON 1969 GROUND LEASE(2043) 22.82 163,131 66 KETTERING 1988 FEE 11.21 123,148 88 SPRINGBORO PIKE 1985 FEE 12.96 99,007 100 CANTON 1993 FEE 7.88 63,712 70 CANTON 1972 FEE 19.60 161,675 79 MASSILLON 1988 GROUND LEASE(2001) 13.09 102,632 100 AKRON 1975 FEE 6.91 56,975 78 BARBERTON 1972 FEE 9.97 119,975 100 OKLAHOMA OKLAHOMA CITY 1997 FEE 9.64 96,418 100 OKLAHOMA CITY 1997 GROUND LEASE(2019) 7.36 73,600 100 TULSA 1996 FEE 8.79 96,100 100 PENNSYLVANIA GETTYSBURG 1986 FEE 2.25 30,706 100 DUQUESNE 1993 FEE 8.77 69,733 100 PENN HILLS 1986 GROUND LEASE(2027) 31.06 110,517 100 WEST MIFFLIN 1974 FEE 24.62 194,776 95 WEST MIFFLIN 1986 FEE 8.33 84,279 100 FEASTERVILLE 1996 FEE 4.60 86,575 100 MORRISVILLE (3) 1996 FEE 14.38 117,511 24 RICHBORO (3) 1986 FEE 14.47 80,737 64 WARRINGTON (3) 1996 FEE 8.28 82,338 EXTON 1996 FEE 9.78 85,184 100 UPPER ALLEN 1986 FEE 6.00 59,470 97 HARRISBURG 1972 FEE/JOINT VENTURE 17.00 175,917 100 MIDDLETOWN 1973 FEE 21.86 140,481 57 <CAPTION> MAJOR LEASES (LEASE EXPIRATION/ OPTION EXPIRATION) ------------------ <S> <C> OHIO LIMA RAYS SUPERMARKET(2011/2026), THE PHARM(2004/2024) SPRINGFIELD KMART(2010/2029), KROGER(2001/2007) CLEVELAND ALDI'S(2003/2023) COLUMBUS KOHLS(2011/2031), KIDS R US(2015/2040) COLUMBUS KOHLS(2011/2031), STAPLES(2000/2010) COLUMBUS KOHLS(2011/2031) COLUMBUS KOHLS(2011/2031), CIRCUIT CITY(2018/2038) UPPER ARLINGTON TJ MAXX (2001/2006) WESTERVILLE KOHLS(2016/2036), OFFICE MAX(2002/2022), HOMEPLACE(2005/2020) WHITEHALL BEAVERCREEK KROGER(1996/2021) CAMBRIDGE QUALITY STORES (TJX)(2000/2018), KROGER(1999/2014) CINCINATTI CIRCUIT CITY(2008/2031), CONSOLIDATED STORES(1999/2009), OFFICE DEPOT(2004/2024) CINCINNATI HECHINGERS(2013/2033), SERVICE MERCHANDISE(2002/2012), TOYS R US(2016/2046) SHARONVILLE KMART(2004/2054), KROGER(1998/2028), CHARMING SHOPPES(2000/2010) MENTOR HILLS(2020/2045) MENTOR RINI SUPERMARKET(2019/2029), BURLINGTON COAT FACTORY(2014) WICKLIFFE GABRIEL BROTHERS(2008/2023), CONSOLIDATED STORES(2000), HANCOCK FABRICS(2000/2010) ELYRIA KMART(2010/2029) BRUNSWICK KMART(2000/2050), RINI SUPERMARKET(2001/2031) CENTERVILLE WACCAMAW(2006/2021), LASER QUEST(2007/2017), COMPLETE PETMART(2002/2007) DAYTON SCHOTTENSTEIN STORES(2000/2020), CIRCUIT CITY(2018/2038) DAYTON VICTORIA'S SECRET(2004/2019), JOANN FABRICS(2006/2016), KROGER(2012/2038) DAYTON BEST BUY(2004/2024), JUST FOR FEET(2005/2015), FABRI CENTER(2002/2012) KETTERING SCHOTTENSTEIN STORES(2000/2015) SPRINGBORO PIKE MEDIA PLAY(2007/2022), OFFICE MAX(2002/2022), HANCOCK FABRICS(2007/2017) CANTON CINEMARK(1998/2003) CANTON TOYS R US(2018/2043), TJ MAXX(2007/2017) MASSILLON HILLS(2001) AKRON DOLLAR GENERAL(1999/2002) BARBERTON OKLAHOMA OKLAHOMA CITY VENTURE(2022/2052) OKLAHOMA CITY VENTURE(2022/2052) TULSA KMART(2021/2051) PENNSYLVANIA GETTYSBURG GIANT FOOD(2000/2010) DUQUESNE PAT CATAN(2000/2005) PENN HILLS HILLS(2017/2026) WEST MIFFLIN HILLS(2004/2034), GIANT EAGLE(2014/2039) WEST MIFFLIN HILLS(2007/2032) FEASTERVILLE VALUE CITY(2011/2026) MORRISVILLE (3) RICHBORO (3) A&P(2002/2032), RITE AID(2007/2017) WARRINGTON (3) EXTON KOHLS(2016/2036) UPPER ALLEN GIANT FOOD(2010/2030) HARRISBURG HILLS(2002/2032), MEDIA PLAY(2011/2026), SUPERPETZ(2002/2022) MIDDLETOWN ELECTRONIC INSTITUTE(1999) </TABLE> 20
PROPERTY CHART <TABLE> <CAPTION> YEAR OWNERSHIP LEASABLE PERCENT DEVELOPED INTEREST/ LAND AREA AREA LEASED OR ACQUIRED (EXPIRATION)(2) (ACRES) (SQ.FT.) (1) ----------- --------------- ------- -------- ------- <S> <C> <C> <C> <C> <C> MIDDLETOWN 1986 FEE 4.66 35,747 62 HAVERTOWN 1996 FEE 9.01 80,938 100 SPRINGFIELD 1983 FEE 19.66 218,907 98 UPPER DARBY 1996 FEE/JOINT VENTURE 16.34 52,657 53 ERIE 1968 FEE 1.96 2,196 100 WHITEHALL 1996 GROUND LEASE(2081) 6.00 84,524 100 CENTER SQUARE 1996 FEE 17.72 116,055 100 E STROUDSBURG 1973 FEE 15.33 167,654 96 EAGLEVILLE 1973 FEE 15.20 165,385 100 LANDSDALE 1996 GROUND LEASE(2037) 1.39 71,760 100 NORRISTOWN 1984 FEE 12.52 134,960 87 PHILADELPHIA 1997 FEE 3.40 38,753 90 PHILADELPHIA 1996 FEE 6.30 82,345 100 PHILADELPHIA 1996 GROUND LEASE(2035) 13.33 133,309 100 PHILADELPHIA 1983 FEE/JOINT VENTURE 8.12 214,170 98 PHILADELPHIA 1995 FEE/JOINT VENTURE 22.55 275,033 98 NEW KENSINGTON 1986 FEE 12.53 106,624 100 YORK 1986 FEE 8.00 61,979 100 YORK 1986 FEE 13.65 53,011 100 YORK 1986 FEE 3.32 35,500 100 SOUTH CAROLINA AIKEN 1989 FEE 16.63 132,345 77 CHARLESTON 1978 FEE 17.60 168,803 76 NORTH CHARLESTON 1997 FEE 21.07 247,908 92 CHARLESTON 1995 FEE 17.15 188,161 100 FLORENCE 1997 FEE 21.00 113,922 100 GREENVILLE 1997 FEE 20.35 97,340 98 TENNESSEE CHATTANOOGA 1973 GROUND LEASE(2073) 7.63 44,288 66 MADISON 1978 GROUND LEASE(2039) 14.49 182,256 99 TEXAS PLANO 1996 FEE 9.03 96,700 100 DALLAS 1969 FEE/JOINT VENTURE 75.00 566,826 55 DUNCANVILLE 1996 FEE 6.80 96,500 100 GARLAND 1996 FEE 2.89 41,364 100 GARLAND 1996 FEE 8.83 103,600 100 MESQUITE 1974 FEE 9.03 79,550 100 BAYTOWN 1996 FEE 8.68 103,800 100 HOUSTON 1973 FEE 4.25 45,494 100 HOUSTON 1997 FEE 8.04 112,560 91 HOUSTON 1996 FEE 8.75 106,000 100 HOUSTON 1997 FEE 8.17 105,353 100 WEST OAKS 1996 FEE 8.18 96,500 100 AMARILLO 1997 GROUND LEASE(2061) 9.30 103,589 100 CORSICANA 1997 FEE 10.25 350,000 100 ALRINGTON 1996 FEE 8.04 97,000 100 ARLINGTON 1997 GROUND LEASE(2043) 8.00 96,127 100 FT. WORTH 1996 FEE 12.59 106,000 100 NORTH RICHLAND HILLS (6) 1997 FEE 9.17 <CAPTION> MAJOR LEASES (LEASE EXPIRATION/ OPTION EXPIRATION) ------------------ <S> <C> MIDDLETOWN US POSTAL SERVICE(2016/2026) HAVERTOWN KOHLS(2016/2036) SPRINGFIELD VALUE CITY(2013/2043), STAPLES(2008/2023), JO ANN FABRICS(2006/2016) UPPER DARBY MERCY HEALTH(2012/2022) ERIE BARRON OIL(2016) WHITEHALL KOHLS(2016/2036) CENTER SQUARE KOHLS(2016/2036), SEARS(2002/2007) E STROUDSBURG KMART(2002/2022), WEIS MARKETS(2002/2012) EAGLEVILLE KMART(1999/2019), GENUARDI SUPERMARKET(2011/2025) LANDSDALE KOHLS(2012) NORRISTOWN GIANT FOOD(2017/2037), STAPLES(2008/2023), FABRI CENTER(2002/2012) PHILADELPHIA MERCY HEALTH(2012/2022) PHILADELPHIA KOHLS(2016/2036) PHILADELPHIA KMART(2010/2035) PHILADELPHIA JC PENNEY(1999), TOYS R US(2002/2052) PHILADELPHIA PET FOOD GIANT(2006/2016), PEP BOYS(2004/2014) NEW KENSINGTON GIANT EAGLE(2006/2026) YORK SUPERPETZ(2004/2009), DISCOVERY ZONE(2005/2015) YORK GIANT FOOD(2006/2026) YORK GIANT FOOD(2002/2017), RITE AID(2002/2012) SOUTH CAROLINA AIKEN WALMART(2002/2032), CVS(1997/2007) CHARLESTON STEIN MART(2001/2016) NORTH CHARLESTON TOYS R US (REA)(1999), PHAR-MOR(2000/2010), TJ MAXX(2003/2013) CHARLESTON TJ MAXX(1999/2004), OFFICE DEPOT(2001/2016), MARSHALLS(1998/2001) FLORENCE HAMRICK'S(2001/2011), STAPLES(2010/2035), ATHLETE'S FOOT(2007/2017) GREENVILLE BABY SUPERSTORE(2002/2022), GATEWAY 2000(2002/2022) TENNESSEE CHATTANOOGA MADISON OLD TIME POTTERY(2001/2006), HOLLYWOOD ENTERTAINMENT(2008/2014) TEXAS PLANO VENTURE(2021/2051) DALLAS MONTGOMERY WARD(2000/2015) DUNCANVILLE KMART(2021/2051) GARLAND KROGER(2000/2025) GARLAND KMART(2021/2051) MESQUITE KROGER(2012/2037) BAYTOWN VENTURE(2021/2051) HOUSTON KROGER(2002/2012) HOUSTON HEB GROCERY(2007/2027), PALAIS ROYAL(2007/2022), CATO(2004/2009) HOUSTON KMART(2021/2051) HOUSTON VENTURE(2022/2052) WEST OAKS KMART(2021/2051) AMARILLO VENTURE(2022/2052) CORSICANA VENTURE(2022/2052) ALRINGTON KMART(2021/2051) ARLINGTON VENTURE(2022/2052) FT. WORTH KMART(2021/2051) NORTH RICHLAND HILLS (6) VENTURE(2022/2052) </TABLE> 21
PROPERTY CHART <TABLE> <CAPTION> YEAR OWNERSHIP LEASABLE PERCENT DEVELOPED INTEREST/ LAND AREA AREA LEASED OR ACQUIRED (EXPIRATION)(2) (ACRES) (SQ.FT.) (1) ----------- --------------- ------- -------- ------- <S> <C> <C> <C> <C> <C> UTAH OGDEN 1967 FEE 11.36 121,425 100 VIRGINIA RICHMOND 1995 FEE 11.47 121,550 100 WOODBRIDGE 1973 GROUND LEASE(2072)/JOINT VENTURE 19.63 186,142 59 MANASSAS 1997 FEE 13.50 117,525 88 WISCONSIN RACINE 1988 FEE 14.20 153,530 85 WEST VIRGINIA MARTINSBURG 1986 FEE 6.04 43,212 100 CHARLES TOWN 1985 FEE 22.00 201,313 83 ------- ---------- -- TOTAL 266 PROPERTY INTERESTS 3742.06 34,931,408 90 ------- ---------- -- ACQUISITIONS SUBSEQUENT TO DECEMBER 31, 1997 COLORADO AURORA 1998 FEE 14.56 145,626 91 AURORA 1998 FEE 4.43 44,270 99 AURORA 1998 FEE 13.90 152,181 97 COLORADO SPRINGS 1998 FEE 10.78 107,798 100 ENGLEWOOD 1998 FEE 6.48 80,330 99 DENVER 1998 FEE 1.45 18,405 100 LAKEWOOD 1998 FEE 7.55 83,304 98 FLORIDA CORAL WAY 1998 FEE/JOINT VENTURE 6.46 74,973 98 ILLINOIS DOWNERS'S GROVE (3) 1998 FEE 7.19 182,624 48 ORLANDO (3) 1998 FEE 7.76 166,000 49 SCHAUMBURG (3) 1998 FEE 7.30 167,690 51 INDIANA INDIANAPOLIS 1998 FEE/JOINT VENTURE 17.42 166,104 55 PENNSYLVANIA TREXLER TOWN (3) 1998 GROUND LEASE/JOINT VENTURE 1.18 50,000 60 <CAPTION> MAJOR LEASES (LEASE EXPIRATION/ OPTION EXPIRATION) ------------------ <S> <C> UTAH OGDEN KMART(2002) VIRGINIA RICHMOND BURLINGTON COAT FACTORY(2006/2035) WOODBRIDGE AMES(2000/2020) MANASSAS SUPERFRESH(2006), BLOCKBUSTER(1999) WISCONSIN RACINE PIGGLY WIGGLY(1999/2010), CONSOLIDATED STORES(2000/2005), HEILIG-MEYERS (2007/2017) WEST VIRGINIA MARTINSBURG GIANT FOOD(2010/2030), CVS(2003/2009) CHARLES TOWN WALMART(2017/2047) TOTAL 266 PROPERTY INTERESTS ACQUISITIONS SUBSEQUENT TO DECEMBER 31, 1997 COLORADO AURORA TJ MAXX(2003/2013), GRANTREE FURNITURE(1998), CLASSIC TREASURES(2000/2004) AURORA BLOCKBUSTER(1998/2003), JJ'S HALLMARK(2003/2013), BENVENUTO(2002/2007) AURORA ALBERTSON'S(2005/2050), COOMER'S(2001/2006), CROWN LIQUOR(1999) COLORADO SPRINGS CUB FOODS(2004/2034), SCHOOL DISTRICT(2000), EZ PAWN(2000/2010) ENGLEWOOD PHAR-MOR(2004/2019), OLD COUNTRY BUFFET(2001), JUNIOR LEAGUE(2009/2019) DENVER RITE AID(1998/2018) LAKEWOOD SAFEWAY(2002/2032), PERFORMANCE BIKE(2002), WMC CORP.(1999/2004) FLORIDA CORAL WAY BABY SUPERSTORE(2006/2021) ILLINOIS DOWNERS'S GROVE (3) HEILIG-MEYERS(2008/2018) ORLANDO (3) HEILIG-MEYERS(2008/2018) SCHAUMBURG (3) HEILIG-MEYERS(2008/2018) INDIANA INDIANAPOLIS KROGER(2000/2020), CVS(2004/2024) PENNSYLVANIA TREXLER TOWN (3) LEHIGH VALLEY HEALTH(2007/2022) </TABLE> 22
PROPERTY CHART <TABLE> <CAPTION> YEAR OWNERSHIP LEASABLE PERCENT DEVELOPED INTEREST/ LAND AREA AREA LEASED OR ACQUIRED (EXPIRATION)(2) (ACRES) (SQ.FT.) (1) ----------- --------------- ------- -------- ------- <S> <C> <C> <C> <C> <C> DISPOSITIONS SUBSEQUENT TO DECEMBER 31, 1997 FLORIDA PINELLAS PARK 1970 FEE (13.70) (119,355) NEW JERSEY BLACKWOOD 1996 GROUND LEASE(2032) (9.80) (123,970) -------- ---------- TOTAL 277 PROPERTY INTERESTS 3,825.02 36,127,388 ======== ========== RETAIL STORE LEASES(4) 1995/97 LEASEHOLD 5,597,143 98.00 ---------- GRAND TOTAL 339 PROPERTY INTERESTS 41,724,531 ========== <CAPTION> MAJOR LEASES (LEASE EXPIRATION/ OPTION EXPIRATION) ------------------ <S> <C> DISPOSITIONS SUBSEQUENT TO DECEMBER 31, 1997 FLORIDA PINELLAS PARK NEW JERSEY BLACKWOOD TOTAL 277 PROPERTY INTERESTS RETAIL STORE LEASES(4) VARIOUS GRAND TOTAL 339 PROPERTY INTERESTS </TABLE> (1) PERCENT LEASED INFORMATION AS OF DECEMBER 31, 1997 OR LATER DATE OF ACQUISITION. (2) THE TERM "JOINT VENTURE" INDICATES THAT THE COMPANY OWNS THE PROPERTY IN CONJUNCTION WITH ONE OR MORE JOINT VENTURE PARTNERS. THE DATE INDICATED IS THE EXPIRATION DATE OF ANY GROUND LEASE AFTER GIVING AFFECT TO ALL RENEWAL PERIODS. (3) DENOTES REDEVELOPMENT PROJECT (4) THE COMPANY HOLDS INTEREST IN VARIOUS RETAIL STORE LEASES RELATED TO THE ANCHOR STORE PREMISES IN NEIGHBORHOOD AND COMMUNITY SHOPPING CENTERS. (5) SOLD OR TERMINATED SUBSEQUENT TO DECEMBER 31,1997 (6) LEASED PARCEL OF UNDEVELOPED LAND 23
Executive Officers of the Registrant The following table sets forth information with respect to the six executive officers of the Company as of February 27, 1998. <TABLE> <CAPTION> Name Age Position Since ---- --- -------- ----- <S> <C> <C> <C> Milton Cooper 69 Chairman of the Board of 1991 Directors and Chief Executive Officer Michael J. Flynn 62 Vice Chairman of the 1996 Board of Directors. President and Chief 1997 Operating Officer Joseph V. Denis 46 Vice President - 1993 Construction Bruce M. Kauderer 51 Vice President - Legal 1995 General Counsel and 1997 Secretary Michael V. Pappagallo 39 Vice President - 1997 Chief Financial Officer Alex Weiss 40 Vice President - 1988 Management Information Systems </TABLE> Michael J. Flynn has been President and Chief Operating Officer since January 2, 1997, Vice Chairman of the Board of Directors since January 2, 1996 and a Director of the Company since December 1, 1991. Mr. Flynn was Chairman of the Board and President of Slattery Associates, Inc. for more than five years prior to joining the Company. Joseph V. Denis has been a Vice President of the Company since October 1993. Mr. Denis was President and Chief Operating Officer of Konover Construction Company, and previously held various positions with such company as a project and construction manager, for more than five years prior to joining the Company in June 1993. Bruce M. Kauderer has been a Vice President of the Company since June 1995 and since December 15, 1997, General Counsel and Secretary of the Company. Mr. Kauderer was a founder of and partner with Kauderer & Pack P.C. from 1992 to June 1995 and a Partner with Fink Weinberger, P.C. for more than five years prior to 1992. Michael V. Pappagallo has been a Vice President and Chief Financial Officer of the Company since May 27, 1997. Mr. Pappagallo was Chief Financial Officer of GE Capital's Commercial Real Estate Financial and Services business from September 1994 to May 1997 and held various other positions within GE Capital for more than five years prior to joining the Company. The executive officers of the Company serve in their respective capacities for approximate one-year terms and are subject to re-election by the Board of Directors, generally at the time of the Annual Meeting of the Board of Directors following the Annual Meeting of Stockholders. 24
PART II Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters Market Information The Company completed its IPO on November 22, 1991. Shares of the Company's common stock were sold for cash or exchanged for mortgage debt and equity interests in certain of the Company's shopping center properties based upon an initial public offering price of $13.33 per share. Additional primary public common stock offerings were completed in June 1992, April 1993, January 1995, February 1996 and September 1997, wherein shares of the Company's common stock were sold for cash or exchanged for equity interests in shopping center properties based upon $16.92, $22.83, $24.17, $26.50 and $35.50 per share offering prices, respectively. The table below sets forth, for the quarterly periods indicated, the high and low sales prices per share reported on the NYSE Composite Tape for the Company's common stock. The Company's common stock is traded under the trading symbol "KIM". Stock Price -------------- Period High Low ------ ---- --- 1996: First Quarter $28.00 $25.25 Second Quarter $28.50 $25.63 Third Quarter $30.25 $26.50 Fourth Quarter $34.88 $28.38 1997: First Quarter $34.63 $31.75 Second Quarter $33.38 $30.25 Third Quarter $36.19 $31.75 Fourth Quarter $35.50 $30.50 Holders The approximate number of holders of record of the Company's common stock, par value $.01 per share, was 572 as of February 27, 1998. Dividends Since the IPO, the Company has paid regular quarterly dividends to its stockholders. Quarterly dividends at the rate of $.39 per share were declared and paid on November 30, 1995 and January 16, 1996, March 15, 1996 and April 15, 1996, June 17, 1996 and July 15, 1996 and September 16, 1996 and October 15, 1996 respectively. Quarterly dividends at the increased rate of $.43 per share were declared and paid on December 2, 1996 and January 15, 1997, March 17, 1997 and April 15, 1997, June 16, 1997, and July 15, 1997, September 15, 1997 and October 15, 1997. On December 1, 1997 the Company declared its dividend payable during the first quarter of 1998 at the increased rate of $.48 per share payable January 15, 1998 to shareholders of record on January 2, 1998. This $.48 per share dividend, if annualized, would equal $1.92 per share, or an annual yield of approximately 5.5% based on the closing price of $35.13 of the Company's common stock on the NYSE as of February 27, 1998. The Company has determined that 100% of the dividends totaling $1.72 and $1.56 per share, paid during 1997 and 1996, respectively, represented ordinary dividend income to its stockholders. While the Company intends to continue paying regular quarterly dividends, future dividend declarations will be at the discretion of the Board of Directors and will depend on the actual cash flow of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the Board of Directors deems relevant. The actual cash flow available to pay dividends will be affected by a number of factors, including the revenues received from rental properties, the operating expenses of the Company, the interest expense on its borrowings, the ability of lessees to meet their obligations to the Company and any unanticipated capital expenditures. 25
In addition to its common stock offerings, the Company has capitalized the growth in its business through the issuance of unsecured fixed and floating-rate medium-term notes, underwritten bonds and perpetual preferred stock. Borrowings under the Company's revolving credit facility have also been an interim source of funds to both finance the purchase of properties and meet any short-term working capital requirements. The various instruments governing the Company's issuance of its unsecured public debt, bank debt and preferred stock impose certain restrictions on the Company with regard to dividends, voting, liquidation and other preferential rights available to the holders of such instruments. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 7 and 11 of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K. Reference should also be made to the documents incorporated by reference into Part II of this annual report listed in "Documents Incorporated by Reference" above for further information with respect to such restrictions. The Company does not believe that the preferential rights available to the holders of its Class A, Class B and Class C Preferred Stock, the financial covenants contained in its public bond Indenture or its revolving credit agreements will have any adverse impact on the Company's ability to pay dividends in the normal course to its common stockholders or to distribute amounts necessary to maintain its qualification as a REIT. The Company maintains a dividend reinvestment program pursuant to which common and preferred stockholders may elect to automatically reinvest their dividends to purchase shares of the Company's common stock. The Company may, from time to time, either (i) repurchase shares of its common stock in the open market, or (ii) issue new shares of its common stock, for the purpose of fulfilling its obligations under this dividend reinvestment program. Item 6. Selected Financial Data The following table sets forth selected, historical consolidated financial data for the Company and should be read in conjunction with the Consolidated Financial Statements of the Company and Notes thereto included in this annual report on Form 10-K. The Company believes that the book value of its real estate assets, which reflects the historical costs of such real estate assets less accumulated depreciation, is not indicative of the current market value of its properties. Historical operating results are not necessarily indicative of future operating performance. 26
<TABLE> <CAPTION> Year Ended December 31, -------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- (in thousands, except per share data) <S> <C> <C> <C> <C> <C> Operating Data: Revenues from rental property (1) $198,929 $168,144 $143,132 $125,272 $98,854 Depreciation and amortization $30,053 $27,067 $26,188 $23,478 $19,898 Income before extraordinary items $85,836(3) $73,827(3) $51,922 $41,071 $35,159(4) Income per common share, before extraordinary items: Basic $1.80(3) $1.61(3) $1.33 $1.17 $1.17(4) Diluted $1.78(3) $1.59(3) $1.32 $1.16 $1.17(4) Interest expense $31,745 $27,019 $25,585 $20,483 $17,203 Weighted average number of shares of common stock outstanding: Basic 37,388 35,906 33,388 30,072 28,657 Diluted 37,850 36,219 33,633 30,264 28,783 Cash dividends per common share $1.72 $1.56 $1.44 $1.33 $1.25 December 31, -------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- Balance Sheet Data: Real estate, before accumulated depreciation $1,404,196(5) $1,072,056(5) $932,390(5) $796,611 $662,874 Total assets $1,343,890 $1,023,033 $884,242 $736,709 $652,823 Total debt $531,614 $364,655 $389,223 $372,999 $290,886 Other Data: Year Ended December 31, -------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- Funds from Operations (2): Net Income $85,836 $73,827 $51,922 $40,247 $34,573 Depreciation and amortization 30,053 27,067 26,188 23,478 19,898 (Gain) loss on sales of properties and early repayment of mortgage debt (244) (802) (370) 824 (2,895) Preferred stock dividends (18,438) (16,134) (7,631) (5,812) (1,582) Other 976 1,148 2,019 901 875 ----------- ----------- ----------- ----------- ----------- Funds from Operations $98,183 $85,106 $72,128 $59,638 $50,869 =========== =========== =========== =========== =========== Cash flow provided by operations $125,108 $101,892 $74,233 $62,933 $54,886 Cash flow used for investing activities ($280,823) ($144,027) ($127,261) ($142,183) ($119,788) Cash flow provided by financing activities $149,269 $63,395 $58,248 $37,047 $109,384 </TABLE> (1) Does not include revenues from rental property relating to unconsolidated joint ventures or revenues relating to the investment in retail store leases. (2) Most industry analysts and equity REITs, including the Company, generally consider funds from operations ("FFO") to be an appropriate supplemental measure of the performance of an equity REIT. In March 1995, the National Assocation of Real Estate Invesment Trusts ("NAREIT") modified the definition of FFO, among other things, to eliminate adding back amortization of deferred financing costs and depreciation of non-real estate items to net income when computing FFO. The Company adopted this new method as of January 1, 1996. FFO is defined as net income applicable to common shares before depreciation and amortization, extraordinary items, gains or losses on sales of real estate, plus FFO of unconsolidated joint ventures determined on a consistent basis. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and therefore should not be considered an alternative for net income as a measure of results of operations, or for cash flows from operations calculated in accordance with generally accepted accounting principles as a measure of liquidity. In addition, the comparability of the Company's FFO with the FFO reported by other REITs may be affected by the differences that may exist regarding certain accounting policies relating to expenditures for repairs and other recurring items. (3) Includes $.2 million or $.01 per share in 1997 and $.8 million or $.02 per share in 1996 relating to non-recurring gains from the disposition of a shopping center property in each year. (4) Includes approximately $3.4 million, or $.12 per share, in non-recurring gains related to the sale of a shopping center and a casualty claim related to a joint venture property. (5) Does not include the Company's investment in retail store leases. 27
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in this annual report on Form 10-K. Historical results and percentage relationships set forth in the Consolidated Statements of Income contained in the Consolidated Financial Statements, including trends which might appear, should not be taken as indicative of future operations. Results of Operations Comparison of 1997 to 1996 Revenues from rental property increased approximately $30.8 million, or 18.3% to $198.9 million for the year ended December 31, 1997, as compared with $168.1 million for the year ended December 31, 1996. This increase resulted primarily from the combined effect of (i) the acquisition of 14 shopping center properties and 49 retail properties during 1997 providing revenues from rental property of $6.1 million and $14.0 million, respectively (ii) the full year impact related to the 39 property interests acquired in 1996 and (iii) new leasing and re-tenanting within the portfolio at improved rental rates providing an increase in the overall occupancy level from 87% at December 31, 1996 to 90% at December 31, 1997. Rental property expenses, including depreciation and amortization, increased approximately $18.2 million, or 18.8%, to $115.2 million for the year ended December 31, 1997, as compared with $97.0 million for the preceding calendar year. Rent, real estate taxes and depreciation and amortization charges contributed significantly to this net increase in rental property expenses (increasing $3.5 million, $6.5 million and $3.0 million, respectively, for the year ended December 31, 1997 as compared to the preceding year) primarily due to the 14 shopping center properties and 49 retail properties acquired during 1997 and the 39 property interests acquired during 1996. Interest expense increased approximately $4.7 million between the respective periods reflecting higher average outstanding borrowings during calendar year 1997 resulting from (i) the issuance of an aggregate $100 million unsecured medium-term notes during 1997 and (ii) the assumption of approximately $73.2 million of mortgage debt in connection with the acquisition of certain property interests during 1997, as compared to the preceding year. The Company has interests in various retail store leases relating to the anchor store premises in neighborhood and community shopping centers. These premises have been substantially sublet to retailers which lease the stores pursuant to net lease agreements. Income from the investment in retail store leases during the years ended December 31, 1997 and 1996 was $3.6 million in each year. General and administrative expenses increased approximately $1.3 million to $11.6 million for the year ended December 31, 1997, as compared to $10.3 million for the preceding calendar year. This increase is primarily attributable to increased senior management and staff levels during 1997 and 1996. During 1997, the Company disposed of a property in Troy, OH. Cash proceeds from the disposition totaling $1.6 million, together with an additional $8.3 million cash investment, were used to acquire an exchange shopping center property located in Ocala, FL. Net income for the year ended December 31, 1997 of approximately $85.8 million represented an improvement of approximately $12.0 million, as compared with net income of approximately $73.8 million for the preceding calendar year. After adjusting for the gains on the sale of shopping center properties during both periods, net income for 1997 increased by $12.6 million, or $.20 per share, compared to 1996. This substantially improved performance was primarily attributable to property acquisitions and redevelopments and increased leasing activity which strengthened operating profitability. 28
Comparison of 1996 to 1995 Revenues from rental property increased approximately $25.0 million, or 17.5% to $168.1 million for the year ended December 31, 1996, as compared with $143.1 million for the year ended December 31, 1995. This increase resulted primarily from the combined effect of shopping center acquisitions during the respective periods (39 property interests in 1996 and 18 property interests in 1995) as well as new leasing and re-tenanting within the portfolio at improved rental rates. Rental property expenses, including depreciation and amortization, increased approximately $8.1 million, or 9.1%, to $97.0 million for the year ended December 31, 1996, as compared with $88.9 million for the preceding calendar year. This increase is primarily due to property acquisitions and renovations within the existing portfolio during the respective periods which gave rise to an overall increase in real estate taxes and depreciation and amortization expenses, as well as increased snow removal costs during 1996. Interest charges increased approximately $1.4 million between the respective periods reflecting higher average outstanding borrowings during calendar year 1996 as compared to the preceding year. During July 1995, certain subsidiaries of the Company obtained interests in retail store leases relating to the anchor store premises in neighborhood and community shopping centers. These premises have been substantially sublet to retailers which lease the stores pursuant to net lease agreements. Income from the investment in retail store leases during the years ended December 31, 1996 and 1995 were $3.6 and $1.8 million, respectively. General and administrative expenses increased approximately $1.5 million to $10.3 million for the year ended December 31, 1996, as compared to $8.8 million for the preceding calendar year. This increase is primarily attributable to increased senior management and staff levels during 1996 and 1995. Other income, net increased approximately $3.3 million for the year ended December 31, 1996 as compared with the preceding year. This increase is primarily attributable to interest earned on funds raised through public equity offerings during 1996 and held in short-term income producing investments pending the acquisition of interests in neighborhood and community shopping center properties. During September 1996, the Company disposed of a property in Watertown, NY. Cash proceeds from the disposition totaling $1.8 million, together with an additional $2.2 million cash investment, were used to acquire an exchange shopping center property during January 1997. Net income for the year ended December 31, 1996 of approximately $73.8 million represented an improvement of approximately $21.9 million, as compared with net income of approximately $51.9 million for the preceding calendar year. After adjusting for the gain on the sale of a shopping center property during 1996, net income for 1996 increased by $21.1 million, or $.26 per share, compared to 1995. This substantially improved performance was primarily attributable to property acquisitions and redevelopments, the investment in retail store leases and sustained leasing activity which strengthened operating profitability. Liquidity and Capital Resources Completion of the Company's IPO, which resulted in net cash proceeds of approximately $116 million, permitted the Company to significantly deleverage its real estate portfolio and has made available the public debt and equity markets as the Company's principal source of capital for the future. A $100 million, unsecured revolving credit facility established in June 1994, which is scheduled to expire in June 2000, and an additional $150 million interim unsecured revolving credit facility established in March 1998, scheduled to expire in June 1998, have made available funds to both finance the purchase of properties and meet any short-term working capital requirements. It is the Company's intention to extend the term of the $150 million interim revolving credit facility and establish it as a continuing part of the Company's total unsecured revolving credit availability. As of December 31, 1997 there were no borrowings under the revolving 29
credit facility. The Company has also implemented a $150 million MTN program pursuant to which it may from time to time offer for sale its senior unsecured debt for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisitions and redevelopment costs and (ii) better managing the Company's debt maturities. (See Note 7 of the Notes to Consolidated Financial Statements included in this annual report on Form 10-K.) Since the IPO, the Company has completed additional offerings of its public unsecured debt and equity raising in the aggregate over $1.15 billion for the purposes of repaying indebtedness, acquiring neighborhood and community shopping centers and for expanding and improving properties in the portfolio. In connection with its intention to continue to qualify as a REIT for Federal income tax purposes, the Company expects to continue paying regular dividends to its stockholders. These dividends will be paid from operating cash flows which are expected to increase due to property acquisitions and growth in rental revenues in the existing portfolio and from other sources. Since cash used to pay dividends reduces amounts available for capital investment, the Company generally intends to maintain a conservative dividend payout ratio, reserving such amounts as it considers necessary for the expansion and renovation of shopping centers in its portfolio, debt reduction, the acquisition of interests in new properties as suitable opportunities arise, and such other factors as the Board of Directors considers appropriate. Cash dividends paid increased to $82.6 million in 1997, compared to $69.8 million in 1996 and $53.9 million in 1995. The Company's dividend payout ratio, based on funds from operations on a per common share basis, for 1997, 1996 and 1995 was approximately 65.4%, 65.8%, and 66.7%, respectively. Although the Company receives most of its rental payments on a monthly basis, it intends to continue paying dividends quarterly. Amounts accumulated in advance of each quarterly distribution will be invested by the Company in short-term money market or other suitable instruments. The Company anticipates its capital commitment toward redevelopment projects during 1998 will be approximately $30 million. It is management's intention that the Company continually have access to the capital resources necessary to expand and develop its business. Accordingly, the Company may seek to obtain funds through additional equity offerings or debt financings, including an increase in the Company's unsecured revolving credit facility, in a manner consistent with its intention to operate with a conservative debt capitalization policy. The Company anticipates that cash flows from operations will continue to provide adequate capital to fund its operating and administrative expenses, regular debt service obligations and all dividend payments in accordance with REIT requirements in both the short-term and long-term. In addition, the Company anticipates that cash on hand, borrowings under its revolving credit facilities, issuance of equity and public debt, as well as other debt and equity alternatives, will provide the necessary capital required by the Company. Cash flows from operations as reported in the Consolidated Statements of Cash Flows increased to $125.1 million for 1997 from $101.9 million for 1996 and $74.2 million for 1995. Effects of Inflation Many of the Company's leases contain provisions designed to mitigate the adverse impact of inflation. Such provisions include clauses enabling the Company to receive Percentage Rents, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses include increases in the consumer price index or similar inflation indices. In addition, many of the Company's leases are for terms of less than 10 years, which permits the Company to seek to increase rents upon renewal to market rates. Most of the Company's leases require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. The Company 30
periodically evaluates its exposure to short-term interest rates and will, from time to time, enter into interest rate protection agreements which mitigate, but do not eliminate, the effect of changes in interest rates on its floating-rate loans. New Accounting Pronouncements In 1997 the Financial Accounting Standards Board issued statement of Financial Accounting Standards No. 130 - "Reporting Comprehensive Income" which established standards for reporting and displaying comprehensive income and its components. In 1997 the Financial Accounting Standards Board also issued statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" which established standards for reporting information about operating segments. The Company is required to adopt these two standards with its December 31, 1998 financial statements. The Company is currently evaluating the effect, if any, these statements will have on the Company's financial presentation. Forward-looking statements This annual report on Form 10-K includes certain forward-looking statements reflecting the Company's and management's intentions and expectations, however, many factors which may affect the actual results are difficult to predict. Factors that may cause actual results to differ materially from current expectations include general economic conditions, local real estate conditions, increases in interest rates and increases in operating costs. Accordingly, there is no assurance that the Company's expectations will be realized. Item 8. Financial Statements and Supplementary Data The response to this Item 8 is included as a separate section of this annual report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 31
PART III Item 10. Directors and Executive Officers of the Registrant Incorporated herein by reference to the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Stockholders expected to be held on May 28, 1998. Information with respect to the Executive Officers of the Registrant follows Part I, Item 4 of this annual report on Form 10-K. Item 11. Executive Compensation Incorporated herein by reference to the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Stockholders expected to be held on May 28, 1998. Item 12. Security Ownership of Certain Beneficial Owners and Management Incorporated herein by reference to the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Stockholders expected to be held on May 28, 1998. Item 13. Certain Relationships and Related Transactions Incorporated herein by reference to the Company's definitive proxy statement to be filed with respect to its Annual Meeting of Stockholders expected to be held on May 28, 1998. 32
PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) 1. Financial Statements - Form 10-K The following consolidated financial information Report is included as a separate section of this annual Page report on Form 10-K. --------- Report of Independent Accountants 38 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 1997 and 1996 39 Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995 40 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995 41 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 42 Notes to Consolidated Financial Statements 43 2. Financial Statement Schedules - Schedule II - Valuation and Qualifying Accounts 58 Schedule III - Real Estate and Accumulated Depreciation 59 All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule. 3. Exhibits The exhibits listed on the accompanying Index to Exhibits are filed as part of this report. 34 (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company for the quarter ended December 31, 1997. A current report on Form 8-K was filed on January 21, 1998 to disclose the signing of a definitive agreement to merge The Price REIT, Inc. ("Price REIT") into a wholly owned subsidiary of the Company ("Merger Sub") and to disclose the Agreement and Plan of Merger, dated January 13, 1998 (the "Original Agreement") among the Company, Merger Sub and Price REIT. A current report on Form 8-K was filed on January 30, 1998 to disclose certain historical and pro forma financial information relating to the Company and Price REIT as if the Merger had occurred as of January 1, 1996 and September 30, 1997. A current report on Form 8-K was filed on March 12, 1998 to disclose that the Company, Merger-Sub and Price REIT entered into a first Amendment, dated March 5, 1998, to the Original Agreement. A current report on Form 8-K was filed on January 22, 1998 to disclose certain historical financial information for certain properties acquired during 1997 and pro forma financial information for all shopping center acquisitions during 1997. 33
INDEX TO EXHIBITS Form 10K Exhibits Page - -------- -------- 2.1 -- Form of Plan of Reorganization of Kimco Realty Corporation [Incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-11 No. 33-42588]. 2.2 -- Agreement and Plan of Merger dated July 29, 1994 between Kimco Realty Corporation, a Delaware corporation and Kimco Realty Corporation of Maryland, a Maryland corporation [Incorporated by reference to Exhibit 2.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the "1994 10-K")]. 2.3 -- Agreement and Plan of Merger, dated as of January 13, 1998, among Kimco Realty Corporation, REIT Sub, Inc. and The Price REIT (the "Merger Agreement). [Incorporated by reference to Exhibit 99.2 to the Company's Current Report on form 8-K filed January 21, 1998]. 2.4 -- First Amendment to the Merger Agreement, dated as of March 5, 1998, among Kimco Realty Corporation, REIT Sub, Inc. and The Price REIT, Inc. [Incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed March 12, 1998]. 3.1 -- Articles of Amendment and Restatement of the Company, dated August 4, 1994 [Incorporated by reference to Exhibit 3.1 to the 1994 10-K]. 3.2 -- By-laws of the Company, as amended to August 4, 1994. 3.3 -- Articles Supplementary relating to the 8 1/2% Class B Cumulative Redeemable Preferred Stock, par value $1.00 per share, of the Company, dated July 25, 1995. [Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (file #1-10899) (the "1995 Form 10-K")]. 3.4 -- Articles Supplementary relating to the 8 3/8% Class C Cumulative Redeemable Preferred Stock, par value $1.00 per share, of the Company, dated April 9, 1996 [Incorp- orated by reference to Exhibit 3.4 to the 1996 Form 10-K]. 4.1 -- Agreement of the Company pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K [Incorporated by reference to Exhibit 4.1 to Amendment No. 3 to the Company's Registration Statement on Form S-11 No. 33-42588]. 4.2 -- Form of $100 million 6-1/2% Senior Notes due 2003 [Incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, (file #1-10899) (the "1993 Form 10-K")]. 4.3 -- Form of $100 million Floating Rate Senior Notes due 1999 [Incorporated by reference to Exhibit 4.3 to the 1993 Form 10-K]. 4.4 -- Certificate of Designations [Incorporated by reference to Exhibit 4(d) to Amendment No. 1 to the Registration Statement on Form S-3 dated September 10, 1993 (the "Registration Statement", Commission File No. 33-67552)]. 4.5 -- Indenture dated September 1, 1993 between Kimco Realty Corporation and IBJ Schroder Bank and Trust Company [Incorporated by reference to Exhibit 4(a) to the Registration Statement]. 4.6 -- First Supplemental Indenture, dated as of August 4, 1994. [Incorporated by reference to Exhibit 4.6 to the 1995 Form 10-K.] 4.7 -- Second Supplemental Indenture, dated as of April 7, 1995 [Incorporated by reference to Exhibit 4(a) to the Company's Current Report on Form 8-K dated April 7, 1995 (the "April 1995 8-K")]. 34
INDEX TO EXHIBITS (continued) Form 10K Page -------- Exhibits - -------- 4.8 -- Form of Medium-Term Note (Fixed Rate) [Incorporated by reference to Exhibit 4(b) to the April 1995 8-K]. 4.9 -- Form of Medium-Term Note (Floating Rate) [Incorporated by reference to Exhibit 4(c) to the April 1995 8-K]. 10.1 -- Form of Acquisition Option Agreement between the Company and the subsidiary named therein [Incorporated by reference to Exhibit 10.1 to Amendment No. 3 to the Company's Registration Statement on Form S-11 No. 33-42588]. 10.2 -- Management Agreement between the Company and KC Holdings, Inc. [Incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-11 No. 33-47915]. 10.3 -- Amended and Restated Stock Option Plan [Incorporated by reference to Exhibit 10.3 to the 1995 Form 10-K.] 10.4 -- Credit Agreement among Kimco Realty Corporation, The Several Lenders from Time to Time Parties Hereto, Chemical Bank and The First National Bank of Chicago, as Co-Managers and Chemical Bank, as Administrative Agent, dated as of June 30, 1994. [Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1994]. 10.5 -- Employment Agreement, Restricted Equity Agreement, Non-Qualified and Incentive Stock Option Agreement, and Price Condition Non-Qualified and Incentive Stock Option Agreement between Kimco Realty Corporation and Michael J. Flynn, each dated November 1, 1995 [Incorporated by reference to Exhibit 10.5 to the 1995 Form 10-K]. 10.6 -- Employment Agreement between Kimco Realty Corporation and Bruce M. Kauderer, dated May 5, 1995 [Incorporated by Reference to Exhibit 10.6 to the 1996 Form 10-K]. *10.7 -- Employment Agreement between Kimco Realty Corporation and Michael V. Pappagallo, dated April 30, 1997. 63 *10.8 -- Credit Agreement among Kimco Realty Corporation, The Several Lenders from Time to Time, Parties Hereto, The Chase Manhattan Bank and The First National Bank of Chicago, as Co-Managers and The Chase Manhattan Bank, as Administrative Agent, dated as of March 2, 1998. 69 *12.1 -- Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 127 *12.2 -- Computation of Ratio of Funds from Operations to Combined Fixed Charges and Preferred Stock Dividends. 128 *21.1 -- Subsidiaries of the Company 129 *23.1 -- Consent of Coopers & Lybrand L.L.P. 135 99.1 -- Prospectus of Kimco Realty Corporation [Incorporated by reference to the Prospectus dated November 4, 1997, filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended]. - -------------------------------------------------------------------------------- * Filed herewith. 35
SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KIMCO REALTY CORPORATION (Registrant) By: /s/ Milton Cooper ----------------------- Milton Cooper Chief Executive Officer Dated: March 26, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- /s/ Martin S. Kimmel Chairman (Emeritus) of March 26, 1998 - --------------------------- the Board of Directors Martin S. Kimmel /s/ Milton Cooper Chairman of the Board March 26, 1998 - --------------------------- of Directors and Chief Milton Cooper Executive Officer /s/ Michael J. Flynn Vice Chairman of the March 26, 1998 - --------------------------- Board of Directors, Michael J. Flynn President and Chief Operating Officer /s/ Richard G. Dooley Director March 26, 1998 - -------------------------- Richard G. Dooley /s/ Joe Grills Director March 26, 1998 - -------------------------- Joe Grills /s/ Frank Lourenso Director March 26, 1998 - -------------------------- Frank Lourenso /s/ Michael V. Pappagallo Chief Financial Officer March 26, 1998 - -------------------------- Michael V. Pappagallo /s/ Glenn G. Cohen Treasurer March 26, 1998 - --------------------------- Glenn G. Cohen /s/ Toni Calandrino Controller March 26, 1998 - --------------------------- Toni Calandrino 36
ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 14 (a) (1) and (2) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES ------- FORM 10-K Page No. --------- KIMCO REALTY CORPORATION AND SUBSIDIARIES Report of Independent Accountants 38 Consolidated Financial Statements and Financial Statement Schedules: Consolidated Balance Sheets as of December 31, 1997 and 1996 39 Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995 40 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995 41 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 42 Notes to Consolidated Financial Statements 43 Financial Statement Schedules: II. Valuation and Qualifying Accounts 58 III. Real Estate and Accumulated Depreciation 59 37
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Kimco Realty Corporation: We have audited the consolidated financial statements and the financial statement schedules of Kimco Realty Corporation (the "Company") and Subsidiaries listed in the index on the preceding page of this annual report on Form 10-K. These financial statements and the financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kimco Realty Corporation and Subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. New York, New York February 27, 1998, except for Note 17, for which the date is March 5, 1998. 38
KIMCO REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ----------------------------------------- <TABLE> <CAPTION> December 31, December 31, 1997 1996 --------------- --------------- <S> <C> <C> ASSETS: Real Estate Rental property Land $212,019,596 $165,636,244 Buildings and improvements 1,190,828,854 905,033,615 --------------- --------------- 1,402,848,450 1,070,669,859 Less, accumulated depreciation and amortization 207,408,091 180,552,647 --------------- --------------- 1,195,440,359 890,117,212 Undeveloped land 1,347,709 1,386,127 --------------- --------------- Real estate, net 1,196,788,068 891,503,339 Investment in retail store leases 15,938,041 18,994,321 Investments and advances in real estate joint ventures 9,794,142 15,143,222 Cash and cash equivalents 30,978,178 37,425,206 Accounts and notes receivable 16,203,454 13,986,138 Deferred charges and prepaid expenses 21,260,041 17,854,754 Other assets 52,928,200 28,125,581 --------------- --------------- $1,343,890,124 $1,023,032,561 =============== =============== LIABILITIES & STOCKHOLDERS' EQUITY: Notes payable $410,250,000 $310,250,000 Mortgages payable 121,363,908 54,404,939 Accounts payable and accrued expenses 34,288,409 21,983,886 Dividends payable 22,545,806 18,720,819 Other liabilities 7,590,856 7,242,868 --------------- --------------- 596,038,979 412,602,512 --------------- --------------- Minority interests in partnerships 4,531,934 4,659,080 --------------- --------------- Commitments and contingencies Stockholders' equity Preferred Stock, $1 par value, authorized 5,000,000 and 930,000 shares, respectively Class A Preferred Stock, authorized 345,000 shares Issued and outstanding 300,000 shares 300,000 300,000 Aggregate liquidation preference $75,000,000 Class B Preferred Stock, authorized 230,000 shares Issued and outstanding 200,000 shares 200,000 200,000 Aggregate liquidation preference $50,000,000 Class C Preferred Stock, authorized 460,000 shares Issued and outstanding 400,000 shares 400,000 400,000 Aggregate liquidation preference $100,000,000 Common stock, $.01 par value, Authorized 100,000,000, and 50,000,000 shares, respectively Issued and outstanding 40,394,805 and 36,215,055 shares, respectively 403,948 362,151 Paid-in capital 857,658,054 719,601,956 Cumulative distributions in excess of net income (115,642,791) (115,093,138) --------------- --------------- 743,319,211 605,770,969 --------------- --------------- $1,343,890,124 $1,023,032,561 =============== =============== </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 39
KIMCO REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ---------------- <TABLE> <CAPTION> Year Ended December 31, ----------------------------------------------- 1997 1996 1995 ------------- ------------- ------------- <S> <C> <C> <C> Revenues from rental property $198,929,403 $168,144,419 $143,132,165 ------------- ------------- ------------- Rental property expenses: Rent 4,873,200 1,417,263 1,301,340 Real estate taxes 26,345,685 19,815,808 16,869,710 Interest 31,744,762 27,019,283 25,585,063 Operating and maintenance 22,194,628 21,659,620 18,935,374 Depreciation and amortization 30,052,714 27,066,709 26,187,794 ------------- ------------- ------------- 115,210,989 96,978,683 88,879,281 ------------- ------------- ------------- Income from rental property 83,718,414 71,165,736 54,252,884 Income from investment in retail store leases 3,571,946 3,631,845 1,810,505 ------------- ------------- ------------- 87,290,360 74,797,581 56,063,389 Management fee income 3,276,152 3,447,577 3,736,062 General and administrative expenses (11,651,341) (10,333,924) (8,831,626) Equity in income (losses) of real estate joint ventures, net 1,116,988 820,083 (288,582) Minority interests in income of partnerships, net (463,522) (470,441) (215,656) Other income, net 6,023,813 4,764,062 1,458,212 ------------- ------------- ------------- Income before gain on sale of shopping center 85,592,450 73,024,938 51,921,799 Gain on sale of shopping center 243,995 801,955 -- ------------- ------------- ------------- Net income $85,836,445 $73,826,893 $51,921,799 ============= ============= ============= Net income applicable to common shares $67,398,745 $57,692,418 $44,291,243 ============= ============= ============= Net income per common share Basic $1.80 $1.61 $1.33 ============= ============= ============= Diluted $1.78 $1.59 $1.32 ============= ============= ============= </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 40
KIMCO REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Years Ended December 31, 1997, 1996 and 1995 ----------------- <TABLE> <CAPTION> Preferred Stock Common Stock --------------------- -------------------------- Paid-in Issued Amount Issued Amount Capital ------- --------- ---------- --------- ------------- <S> <C> <C> <C> <C> <C> Balance, December 31, 1994 300,000 $ 300,000 30,097,896 $ 300,979 $ 430,935,721 Net income Dividends ($1.47 per common share; $1.9375 and $.99757 per Class A and Class B Depositary Share, respectively) Issuance of preferred stock 200,000 200,000 47,975,027 Issuance of common stock 3,592,871 35,929 82,724,947 Exercise of common stock options 40,581 405 676,127 ------- --------- ---------- --------- ------------- Balance, December 31, 1995 500,000 500,000 33,731,348 337,313 562,311,822 Net income Dividends ($1.60 per common share; $1.9375, $2.125 and $1.59943 per Class A, Class B and Class C Depositary Share, respectively) Issuance of preferred stock 400,000 400,000 96,037,337 Issuance of common stock 2,320,125 23,201 58,087,001 Exercise of common stock options 163,582 1,637 3,165,796 ------- --------- ---------- --------- ------------- Balance, December 31, 1996 900,000 900,000 36,215,055 362,151 719,601,956 Net income Dividends ($1.77 per common share; $1.9375, $2.125 and $2.0938 per Class A, Class B and Class C Depositary Share, respectively) Issuance of common stock 4,000,000 40,000 134,293,408 Exercise of common stock options 179,750 1,797 3,762,690 ------- --------- ---------- --------- ------------- Balance, December 31, 1997 900,000 $ 900,000 40,394,805 $ 403,948 $ 857,658,054 ======= ========= ========== ========= ============= <CAPTION> Cumulative Distributions Total in Excess Stockholders' of Net Income Equity -------------- ------------- <S> <C> <C> Balance, December 31, 1994 $ (109,335,607) $322,201,093 Net income 51,921,799 51,921,799 Dividends ($1.47 per common share; $1.9375 and $.99757 per Class A and Class B Depositary Share, respectively) (57,251,375) (57,251,375) Issuance of preferred stock 48,175,027 Issuance of common stock 82,760,876 Exercise of common stock options 676,532 -------------- ------------ Balance, December 31, 1995 (114,665,183) 448,483,952 Net income 73,826,893 73,826,893 Dividends ($1.60 per common share; $1.9375, $2.125 and $1.59943 per Class A, Class B and Class C Depositary Share, respectively) (74,254,848) (74,254,848) Issuance of preferred stock 96,437,337 Issuance of common stock 58,110,202 Exercise of common stock options 3,167,433 -------------- ------------ Balance, December 31, 1996 (115,093,138) 605,770,969 Net income 85,836,445 85,836,445 Dividends ($1.77 per common share; $1.9375, $2.125 and $2.0938 per Class A, Class B and Class C Depositary Share, respectively) (86,386,098) (86,386,098) Issuance of common stock 134,333,408 Exercise of common stock options 3,764,487 -------------- ------------ Balance, December 31, 1997 $ (115,642,791) $743,319,211 ============== ============ </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 41
KIMCO REALTY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------- <TABLE> <CAPTION> Year Ended December 31, --------------------------------------------------- 1997 1996 1995 ------------- ------------- ------------- <S> <C> <C> <C> Cash flow from operating activities: Net income $ 85,836,445 $ 73,826,893 $ 51,921,799 Adjustments for noncash items - Depreciation and amortization 30,052,714 27,066,709 26,187,794 Gain on sale of shopping center (243,995) (801,955) -- Minority interests in income of partnerships, net 463,522 470,441 215,656 Equity in (income) losses of real estate joint ventures, net (1,116,988) (820,083) 288,582 Change in accounts and notes receivable (2,217,316) 2,626,760 (940,256) Change in accounts payable and accrued expenses 12,304,523 2,730,442 1,162,406 Change in other operating assets and liabilities 28,736 (3,207,396) (4,602,986) ------------- ------------- ------------- Net cash flow provided by operations 125,107,641 101,891,811 74,232,995 ------------- ------------- ------------- Cash flow from investing activities: Acquisition of and improvements to real estate (261,225,536) (140,916,684) (105,139,671) Investment in retail store leases -- -- (23,026,673) Investment in real estate joint ventures (4,625,068) -- (6,523,502) Investment in marketable equity securities (11,138,247) (4,935,008) (2,470,990) Advances to affiliated companies (14,036,000) -- -- Construction advances to real estate joint ventures -- -- (1,870,500) Reimbursement of advances to real estate joint ventures 8,651,653 -- 6,794,928 Proceeds from sale of shopping center 1,550,000 1,825,000 4,975,582 ------------- ------------- ------------- Net cash flow used for investing activities (280,823,198) (144,026,692) (127,260,826) ------------- ------------- ------------- Cash flow from financing activities: Principal payments on debt, excluding normal amortization of rental property debt (4,650,000) (8,299,980) (29,037,746) Principal payments on rental property debt, net (1,618,255) (1,267,816) (1,221,912) Change in notes payable 100,000,000 (15,000,000) 20,050,000 Dividends paid (82,561,111) (69,751,755) (53,885,490) Proceeds from issuance of stock 138,097,895 157,714,972 122,343,419 ------------- ------------- ------------- Net cash flow provided by financing activities 149,268,529 63,395,421 58,248,271 ------------- ------------- ------------- Increase(decrease) in cash and cash equivalents (6,447,028) 21,260,540 5,220,440 Cash and cash equivalents, beginning of year 37,425,206 16,164,666 10,944,226 ------------- ------------- ------------- Cash and cash equivalents, end of year $ 30,978,178 $ 37,425,206 $ 16,164,666 ============= ============= ============= Supplemental schedule of noncash investing/financing activity: Acquisition of real estate interests by issuance of common stock and/or assumption of debt $ 73,227,224 $ -- $ 38,714,717 ============= ============= ============= Declaration of dividends paid in succeeding year $ 22,545,806 $ 18,720,819 $ 14,217,726 ============= ============= ============= </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 42
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------- 1. Summary of Significant Accounting Policies: Business Kimco Realty Corporation (the "Company"), its subsidiaries, affiliates and related real estate joint ventures are engaged principally in the operation of neighborhood and community shopping centers which are anchored generally by discount department stores, supermarkets or drugstores. Additionally, the Company provides management services for shopping centers owned by affiliated entities and various real estate joint ventures. The Company seeks to reduce its operating and leasing risks through diversification achieved by the geographic distribution of its properties, avoiding dependence on any single property, and a large tenant base. At December 31, 1997, the Company's single largest neighborhood and community shopping center accounted for only 1.9% of the Company's annualized base rental revenues and only 1.0% of the Company's total shopping center gross leasable area ("GLA"). At December 31, 1997, the Company's five largest tenants include Venture, Kmart Corporation, Kohl's, WalMart and TJX Companies, which represent approximately 11.7%, 4.1%, 3.4%, 2.7% and 2.2%, respectively, of the Company's annualized base rental revenues. Principles of Consolidation and Estimates The accompanying Consolidated Financial Statements include the accounts of the Company, its subsidiaries, all of which are wholly-owned, and all majority-owned partnerships. All significant intercompany balances and transactions have been eliminated in consolidation. Generally accepted accounting principles require the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during a reporting period. Actual results may differ from such estimates. Real Estate Real estate assets are stated at cost, less accumulated depreciation and amortization. Such carrying amounts would be adjusted, if necessary, to reflect an impairment in the value of the assets. Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets, as follows: Buildings 15 to 39 years Fixtures and leasehold improvements Terms of leases or useful lives, whichever is shorter Expenditures for maintenance and repairs are charged to operations as incurred. Significant renovations are capitalized. 43
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- Investments in Real Estate Joint Ventures Investments in real estate joint ventures are accounted for on the equity method. Deferred Leasing and Financing Costs Costs incurred in obtaining tenant leases and long-term financing, included in deferred charges and prepaid expenses in the accompanying Consolidated Balance Sheets, are amortized over the terms of the related leases or debt agreements, as applicable. Revenue Recognition Minimum revenues from rental property are recognized on a straight-line basis over the terms of the related leases. Income Taxes The Company and its subsidiaries file a consolidated Federal income tax return. The Company has made an election to qualify, and believes it is operating so as to qualify, as a Real Estate Investment Trust (a "REIT") for Federal income tax purposes. Accordingly, the Company generally will not be subject to Federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under the Code. Per Share Data In 1997 the Financial Accounting Standards Board issued Financial Accounting Standards No. 128 - "Earnings Per Share". Statement 128 replaces the presentation of primary and fully diluted earnings per share ("EPS") pursuant to Accounting Principles Board Opinion No. 15 with the presentation of basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares and then shared in the earnings of the Company. The following table sets forth the reconciliation between basic and diluted weighted average number of shares outstanding for each period: 1997 1996 1995 ---------- ---------- ---------- Basic EPS - weighted average number of common shares outstanding 37,387,984 35,906,029 33,388,004 Effect of dilutive securities - Stock options 462,076 312,993 244,633 ---------- ---------- ---------- Diluted EPS - weighted average number of common shares 37,850,060 36,219,022 33,632,637 ========== ========== ========== 44
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- New Accounting Pronouncements In 1997 the Financial Accounting Standards Board issued statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income" which established standards for reporting and displaying comprehensive income and its components. In 1997 the Financial Accounting Standards Board also issued statement of Financial Accounting Standards No. 131 - "Disclosures about Segments of an Enterprise and Related Information" which established standards for reporting information about operating segments. The Company is required to adopt these two standards with its December 31, 1998 financial statements. The Company is currently evaluating the effect, if any, these statements will have on the Company's financial presentation. Reclassifications Certain account balances in the accompanying Consolidated Balance Sheet as of December 31, 1996, have been reclassified to conform with the current year presentation. 2. Shopping Center Acquisitions: During the years 1997, 1996 and 1995 certain subsidiaries of the Company acquired real estate interests in various shopping center properties at aggregate costs of approximately $146 million, $39 million and $83 million, respectively. These acquisitions have been funded principally through the application of proceeds from the Company's public unsecured debt and equity offerings. (See Notes 7 and 11.) 3. Retail Property Acquisitions: In August 1997, certain subsidiaries of the Company acquired certain real estate assets from a retailer consisting of interests in 49 fee and leasehold properties totaling approximately 5.9 million square feet of leasable area located in Illinois, Missouri, Texas, Oklahoma, Kansas, Indiana and Iowa. The aggregate price was approximately $130 million, consisting of $70.5 million in cash and the assumption of approximately $59.5 million of existing mortgage debt on certain of these properties. The mortgage debt bears interest at 10.54% per annum and cannot be repaid without penalty, until its maturity on July 1, 2000. In addition, the Company was granted (i) an option to acquire two other properties for $4.5 million, (ii) an option to acquire up to 11 additional properties should certain conditions be satisfied and (iii) rights of first refusal, for a period of five years, to acquire 31 additional properties containing 4.2 million square feet of leasable area. The transaction also included approximately 573,000 square feet of retail space substantially occupied by other retailers and approximately 165,000 square feet of available retail space. Simultaneously with this transaction, the Company entered into a long-term unitary net lease covering all premises occupied by this retailer pursuant to which this seller/tenant may remain in occupancy and continue to conduct business in these premises. 45
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- During August 1996, certain subsidiaries of the Company acquired interests in 16 retail properties, including 2 properties to which the Company and its affiliates already held fee title, for $21.8 million in cash. These property interests were acquired from a retailer which had elected to discontinue operation of its discount department store division. During January 1996, certain subsidiaries of the Company entered into two sale-leaseback transactions pursuant to which it acquired fee title to 16 retail properties located in Texas, Iowa, Oklahoma, Illinois and Kansas for a purchase price of $40 million. Simultaneously, the Company executed two long-term unitary net leases covering the 16 locations pursuant to which the seller/tenant may remain in occupancy and continue to conduct business in these premises. During July 1997, the Company consented to the modification of these two unitary net lease agreements whereby the Company entered into two unitary net lease agreements with another retailer on 9 of the retail properties and a new unitary lease with the seller/tenant on the remaining 7 locations. These retail property acquisitions have been funded principally through the the application of proceeds from the Company's public unsecured debt and equity offerings. (See Notes 7 and 11.) 4. Investment in Retail Store Leases: The Company has interests in various retail store leases relating to the anchor store premises in neighborhood and community shopping centers. These premises have been substantially sublet to retailers which lease the stores pursuant to net lease agreements. Income from the investment in these retail store leases during the years ended December 31, 1997 and 1996 was approximately $3.6 million in each year. These amounts represent sublease revenues during the years ended December 31, 1997 and 1996 of approximately $20.9 million and $21.0 million, respectively, less related expenses of $15.2 million and $15.2 million, respectively, and an amount, which in management's estimate, reasonably provides for the recovery of the investment over a period representing the expected remaining term of the retail store leases. The Company's future minimum revenues under the terms of all noncancellable tenant subleases and future minimum obligations through the remaining terms of its retail store leases are as follows (in millions of dollars): 1998, $20.3 and $15.4; 1999, $19.3 and $14.2; 2000, $16.5 and $12.3; 2001, $13.1 and $9.8; 2002, $9.5 and $7.2; and thereafter, $26.3 and $18.4, respectively. 46
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- 5. Investments and Advances in Real Estate Joint Ventures: The Company and its subsidiaries have investments in and advances to various real estate joint ventures. These joint ventures are engaged in the operation of shopping centers which are either owned or held under long-term operating leases. Summarized financial information for the recurring operations of these real estate joint ventures is as follows (in millions of dollars): December 31, ------------------------ 1997 1996 ------- ------- Assets: Real estate, net $58.3 $41.5 Other assets 7.8 4.0 ------- ------- $66.1 $45.5 ======= ======= Liabilities and Partners' Capital/(Deficit): Mortgages payable $63.5 $30.3 Other liabilities 19.7 15.1 Partners' Capital/(Deficit) (17.1) .1 ------- ------- $66.1 $45.5 ======= ======= Years Ended December 31, ------------------------ 1997 1996 1995 ------- ------- ------- Revenues from rental property $14.8 $11.2 $8.3 Operating expenses (3.6) (2.9) (2.1) Mortgage interest (3.1) (2.5) (2.4) Depreciation and amortization (2.2) (2.2) (2.0) Other, net (1.8) (1.3) (1.2) ------- ------- ------- Net income $4.1 $2.3 $.6 ======= ======= ======= Other liabilities in the accompanying Consolidated Balance Sheets include accounts with certain real estate joint ventures totaling approximately $5.1 and $4.1 million at December 31, 1997 and 1996, respectively. The Company and its subsidiaries have varying equity interests in these real estate joint ventures which may differ from their proportionate share of net income or loss recognized in accordance with generally accepted accounting principles. 6. Cash and Cash Equivalents: Cash and cash equivalents (demand deposits in banks, commercial paper and certificates of deposit with original maturities of three months or less) includes tenants' security deposits, escrowed funds and other restricted deposits approximating $10.1 million and $2.4 million at December 31, 1997 and 1996, respectively. 47
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- Cash and cash equivalent balances may, at a limited number of banks and financial institutions, exceed insurable amounts. The Company believes it mitigates its risks by investing in or through major financial institutions. Recoverability of investments is dependent upon the performance of the issuers. 7. Notes Payable: The Company has implemented a $150 million unsecured medium-term notes ("MTN") program pursuant to which it may from time to time offer for sale its senior unsecured debt for any general corporate purposes, including (i) funding specific liquidity requirements in its business, including property acquisition and redevelopment costs, and (ii) better managing the Company's debt maturities. During May and July 1997, the Company issued under its MTN program $100 million in fixed-rate senior unsecured medium-term notes (the "1997 Notes"). These notes have maturities ranging from ten to twelve years, and bear interest ranging from 6.96% to 7.56%. Interest on these notes is payable semi-annually in arrears. As of December 31, 1997, a total principal amount of $160.25 million, including the 1997 notes, in fixed-rate senior unsecured notes had been issued under the MTN program primarily for the acquisition of neighborhood and community shopping centers and the expansion and improvement of properties in the Company's portfolio. These notes have maturities ranging from ten to twelve years and bear interest at rates ranging from 6.70% to 7.91%. Interest on these fixed-rate senior unsecured notes is payable semi-annually in arrears. As of December 31, 1997, the Company had $100 million in Floating Rate Senior Notes due 1999 bearing interest at LIBOR plus .50% (6.3% at December 31, 1997). Interest on these floating-rate, senior unsecured notes resets and is payable quarterly in arrears. As of December 31, 1997, the Company had $100 million in 6.5% fixed-rate unsecured Senior Notes due 2003. Interest on these senior unsecured notes is paid semi-annually in arrears. During August 1996, the Company redeemed its $50 million unsecured Floating Rate Senior Notes due in 1998. These Floating Rate Senior Notes, redeemable at par at the option of the Company after May 11, 1996 and bearing interest at LIBOR plus .50%, were refinanced with a $50 million floating-rate unsecured medium-term note issued under the Company's MTN program. This floating-rate medium-term note is due in 1998 and bears interest at LIBOR plus .12% (6.0% at December 31, 1997). Interest on this floating-rate, senior unsecured medium-term note resets and is payable quarterly in arrears. In accordance with the terms of the Indenture pursuant to which the Company's senior, unsecured notes have been issued, the Company is (a) subject to maintaining certain maximum leverage ratios on both unsecured 48
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- senior corporate and secured debt, minimum debt service coverage ratios and minimum equity levels, and (b) restricted from paying dividends in amounts that exceed by more than $26 million the funds from operations, as defined, generated through the end of the calendar quarter most recently completed prior to the declaration of such dividend; however, this dividend limitation does not apply to any distributions necessary to maintain the Company's qualification as a REIT providing the Company is in compliance with its total leverage limitations. The Company maintains a $100 million, unsecured revolving credit agreement with a group of banks. Borrowings under this facility are available for general corporate purposes, including property acquisitions and redevelopment. Interest on borrowings accrues at a spread (currently .50%) to LIBOR or money-market rates, as applicable, which fluctuates in accordance with changes in the Company's senior debt ratings. A fee approximating .14% per annum is payable on that portion of the facility which remains unused. Pursuant to the terms of the agreement, the Company, among other things, is (a) subject to maintaining certain maximum leverage ratios on both unsecured senior corporate and secured debt, a minimum debt service coverage ratio and minimum unencumbered asset and equity levels, and (b) restricted from paying dividends in amounts that exceed 90% of funds from operations, as defined, plus 10% of the Company's stockholders' equity determined in accordance with generally accepted accounting principles. There were no borrowings outstanding under this facility at December 31, 1997. This revolving credit facility is scheduled to expire in June 2000. 8. Mortgages Payable: Mortgages payable, collateralized by certain shopping center properties and related tenants' leases, are generally due in monthly installments of principal and/or interest which mature at various dates through 2008. Interest rates range from approximately 6.8% to 12.9% (weighted average interest rate of 9.5% as of December 31, 1997). The scheduled maturities of all mortgages payable as of December 31, 1997, are approximately as follows (in millions of dollars): 1998, $7.9; 1999, $22.6; 2000, $61.6; 2001, $5.7; 2002, $1.2; and thereafter, $22.4. Three of the Company's properties are encumbered by approximately $13.5 million in floating-rate, tax-exempt mortgage bond financing. The rates on the bonds are reset annually, at which time bondholders have the right to require the Company to repurchase the bonds. The Company has engaged a remarketing agent for the purpose of offering for resale those bonds that are tendered to the Company. All bonds tendered for redemption in the past have been remarketed and the Company has arrangements, including letters of credit, with banks to both collateralize the principal amount and accrued interest on such bonds and to fund any repurchase obligations. 9. KC Holdings, Inc.: To facilitate the Company's November 1991 initial public stock offering (the "IPO"), forty-six shopping center properties and certain other assets, together with indebtedness related thereto, were transferred to subsidiaries of KC Holdings, Inc. ("KC Holdings"), a newly-formed corporation that is owned by the stockholders of the Company prior to the 49
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- IPO. The Company continues to manage eighteen of these shopping center properties and was granted ten-year, fixed-price options to reacquire the real estate assets owned by KC Holdings' subsidiaries, subject to any liabilities outstanding with respect to such assets at the time of an option exercise. As of December 31, 1997, KC Holdings' subsidiaries had conveyed 14 shopping centers back to the Company and had disposed of ten additional centers in transactions with third parties. The members of the Company's Board of Directors who are not also shareholders of KC Holdings unanimously approved the purchase of each of the 14 shopping centers that have been reacquired by the Company from KC Holdings. Selected financial information for the twenty-two properties owned by KC Holdings' subsidiaries as of and for the year ended December 31, 1997, is as follows: Real estate, net of accumulated depreciation and amortization, $55.0 million; Notes and mortgages payable, $61.2 million; Revenues from rental property, $11.2 million; Loss from rental operations, $.2 million, after depreciation and amortization deductions of $2.1 million; Income adjustment for real estate joint ventures, net, $.3 million. 10. Fair Value Disclosure of Financial Instruments: All financial instruments of the Company are reflected in the accompanying Consolidated Balance Sheets at amounts which, in management's estimation based upon an interpretation of available market information and valuation methodologies (including discounted cash flow analyses with regard to fixed rate debt) considered appropriate, reasonably approximate their fair values. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition of the Company's financial instruments. 11. Preferred and Common Stock Offerings: On September 30, 1997, the Company completed a primary public stock offering of 4,000,000 shares of common stock at $35.50 per share. The net proceeds from this sale of common stock, totaling approximately $134.5 million (after related transaction costs of approximately $7.5 million), have been used primarily for the acquisition of neighborhood and community shopping centers. On February 2, 1996, the Company completed a primary public stock offering of 2,200,000 shares of common stock at $26.50 per share. The net proceeds from this sale of common stock, totaling approximately $55.0 million (after related transaction costs of approximately $3.4 million), have been used primarily for the acquisition of neighborhood and community shopping centers. On April 10, 1996, the Company completed a public offering of 4,000,000 Depositary Shares (the "Class C Depositary Shares") at $25.00 per share, each such Class C Depositary Share representing 1/10 of a share of the Company's 8-3/8% Class C Cumulative Redeemable Preferred Stock (the "Class C Preferred Stock"), par value $1.00 per share. The cash proceeds to the Company, net of related transaction costs of approximately $3.6 million, totaling approximately $96.4 million, were used for the acquisition of interests in neighborhood and community shopping centers, and the redevelopment, expansion and improvement of properties in the Company's portfolio. 50
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- Dividends on the Class C Depositary Shares are cumulative and payable quarterly in arrears at the rate of 8-3/8% per annum based on the $25 per share initial offering price, or $2.0938 per depositary share. The Class C Depositary Shares are redeemable, in whole or in part, for cash on or after April 15, 2001 at the option of the Company at a redemption price of $25 per depositary share, plus any accrued and unpaid dividends thereon. The redemption price of the Class C Preferred Stock may be paid solely from the sale proceeds of other capital stock of the Company, which may include other classes or series of preferred stock. The Class C Depositary Shares are not convertible or exchangeable for any other property or securities of the Company. The Class C Preferred Stock (represented by the Class C Depositary Shares outstanding) ranks pari passu with the Company's 7-3/4% Class A Cumulative Redeemable Preferred Stock and 8-1/2% Class B Cumulative Redeemable Preferred Stock as to voting rights, priority for receiving dividends and liquidation preferences as set forth below. The Company has outstanding 3,000,000 Depositary Shares (the "Class A Depositary Shares"), each such Class A Depositary Share representing 1/10 of a share of the Company's 7-3/4% Class A Cumulative Redeemable Preferred Stock (the "Class A Preferred Stock"), par value $1.00 per share, and 2,000,000 Depositary Shares (the "Class B Depositary Shares"), each such Class B Depositary Share representing 1/10 of a share of the Company's 8-1/2% Class B Cumulative Redeemable Preferred Stock (the "Class B Preferred Stock"), par value $1.00 per share. Dividends on the Class A Depositary Shares are cumulative and payable quarterly in arrears at the rate of 7-3/4% per annum based on the $25 per share initial offering price, or $1.9375 per depositary share. The Class A Depositary Shares are redeemable, in whole or in part, for cash on or after September 23, 1998 at the option of the Company, at a redemption price of $25 per depositary share, plus any accrued and unpaid dividends thereon. The Class A Depositary Shares are not convertible or exchangeable for any other property or securities of the Company. The Class A Preferred Stock (represented by the Class A Depositary Shares outstanding) ranks pari passu with the Company's Class B Preferred Stock and Class C Preferred Stock as to voting rights, priority for receiving dividends and liquidation preferences as set forth below. Dividends on the Class B Depositary Shares are cumulative and payable quarterly in arrears at the rate of 8-1/2% per annum based on the $25 per share initial offering price, or $2.125 per depositary share. The Class B Depositary Shares are redeemable, in whole or in part, for cash on or after July 15, 2000 at the option of the Company at a redemption price of $25 per depositary share, plus any accrued and unpaid dividends thereon. The redemption price of the Class B Preferred Stock may be paid solely from the sale proceeds of other capital stock of the Company, which may include other classes or series of preferred stock. The Class B Depositary Shares are not convertible or exchangeable for any other property or securities of the Company. The Class B Preferred Stock (represented by the Class B Depositary Shares outstanding) ranks pari passu with the Company's Class A Preferred Stock and Class C Preferred Stock as to voting rights, priority for receiving dividends and liquidation preferences as set forth below. 51
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- Voting Rights - As to any matter on which the Class A Preferred Stock, Class B Preferred Stock and Class C Preferred Stock (collectively, the "Preferred Stock") may vote, including any action by written consent, each share of Preferred Stock shall be entitled to 10 votes, each of which 10 votes may be directed separately by the holder thereof. With respect to each share of Preferred Stock, the holder thereof may designate up to 10 proxies, with each such proxy having the right to vote a whole number of votes (totaling 10 votes per share of Preferred Stock). As a result, each Class A, each Class B and each Class C Depositary Share is entitled to one vote. Liquidation Rights - In the event of any liquidation, dissolution or winding up of the affairs of the Company, the Preferred Stock holders are entitled to be paid, out of the assets of the Company legally available for distribution to its stockholders, a liquidation preference of $250.00 per share ($25 per Class A, Class B and Class C Depositary Share, respectively), plus an amount equal to any accrued and unpaid dividends to the date of payment, before any distribution of assets is made to holders of the Company's common stock or any other capital stock that ranks junior to the Preferred Stock as to liquidation rights. 12. Dispositions of Real Estate: During June 1997, the Company disposed of a property in Troy, OH. Proceeds from the disposition totaling approximately $1.6 million, together with an additional $8.3 million cash investment, were used to acquire an exchange shopping center property located in Ocala, FL. During September 1996, the Company disposed of a property in Watertown, NY. Proceeds from the disposition totaling approximately $1.8 million in cash, together with an additional $2.2 million cash investment, were used to acquire an exchange shopping center property located in Lafayette, IN during January 1997. 13. Transactions with Related Parties: The Company provides management services for shopping centers owned principally by affiliated entities and various real estate joint ventures in which certain stockholders of the Company have economic interests. Such services are performed pursuant to management agreements which provide for fees based upon a percentage of gross revenues from the properties and other direct costs incurred in connection with management of the centers. The Consolidated Statements of Income include management fee income from KC Holdings of approximately $.6 million, $.6 million, and $.6 million during years 1997, 1996 and 1995, respectively. Reference should be made to Notes 5 and 9 for further information regarding transactions with related parties. 14. Commitments and Contingencies: The Company and its subsidiaries are engaged in the operation of shopping centers which are either owned or held under long-term leases which expire at various dates through 2076. The Company and its subsidiaries, in turn, lease premises in these centers to tenants pursuant to lease agreements which provide for terms ranging generally from 5 to 25 years and for annual 52
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- minimum rentals plus incremental rents based on operating expense levels and tenants' sales volumes. Annual minimum rentals plus incremental rents based on operating expense levels comprised approximately 98%, 97% and 97% of total revenues from rental property for the years ended December 31, 1997, 1996 and 1995, respectively. The future minimum revenues from rental property under the terms of all noncancellable tenant leases, assuming no new or renegotiated leases are executed for such premises, for future years are approximately as follows (in millions of dollars): 1998, $175.1; 1999, $165.8; 2000, $153.1; 2001, $139.2; 2002, $126.1; and thereafter, $1,206.9. Minimum rental payments under the terms of all noncancellable operating leases pertaining to its shopping center portfolio for future years are approximately as follows (in millions of dollars): 1998, $9.8; 1999, $9.4; 2000, $8.8; 2001, $7.5; 2002, $6.6; and thereafter, $79.6. 15. Incentive Plans: The Company maintains a stock option plan (the "Plan") pursuant to which a maximum 3,000,000 shares of the Company's common stock may be issued for qualified and non-qualified options. Options granted under the Plan generally vest ratably over a three-year term, expire ten years from the date of grant and are exercisable at the market price on the date of grant, unless otherwise determined by the Board in its sole discretion. Information with respect to stock options under the Plan for years 1997, 1996 and 1995 is as follows: <TABLE> <CAPTION> Weighted Average Exercise Price Shares Per share ------ --------- <S> <C> <C> Options outstanding, December 31, 1994 1,069,269 $19.87 Exercised (40,581) $16.67 Granted 423,540 $24.96 --------- Options outstanding, December 31, 1995 1,452,228 $21.44 Exercised (163,582) $19.36 Granted 315,500 $28.32 --------- Options outstanding, December 31, 1996 1,604,146 $23.01 Exercised (179,750) $20.94 Granted 470,700 $31.72 --------- Options outstanding, December 31, 1997 1,895,096 $25.37 ========= Options exercisable - December 31, 1995 762,204 $19.45 ========= ====== December 31, 1996 954,175 $20.84 ========= ====== December 31, 1997 1,126,093 $22.39 ========= ====== </TABLE> The exercise prices for options outstanding as of December 31, 1997 range from $13.33 to $34.19 per share. The weighted average remaining contractual life for options outstanding as of December 31, 1997 was approximately 7.6 years. Options to purchase 329,673, 800,373 and 53
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- 1,115,873 shares of the Company's common stock were available for issuance under the Plan at December 31, 1997, 1996 and 1995, respectively. The Company has elected to adopt the disclosure-only provisions of Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation". Accordingly, no compensation cost has been recognized with regard to options granted under the Plan in the accompanying Consolidated Statements of Income. If stock-based compensation costs had been recognized based on the estimated fair values at the dates of grant for options awarded during 1997, 1996 and 1995, net income and net income per common share for these calendar years would have been reduced by approximately $.7 million, or $.02 per share, $.4 million, or $.01 per share, and $.1 million, or less than $.01 per share, respectively. These pro forma adjustments to net income and net income per common share assume fair values of each option grant estimated using the Black-Scholes option pricing formula. The more significant assumptions underlying the determination of such fair values for options granted during 1997, 1996 and 1995 include: (i) weighted average risk-free interest rates of 6.18%, 6.24% and 6.02%, respectively; (ii) weighted average expected option lives of 8.2 years, 7.25 years and 6.13 years, respectively; (iii) an expected volatility of 15.65%, 15.79% and 15.79%, respectively, and (iv) an expected dividend yield of 6.44%, 6.82% and 6.82%, respectively. The per share weighted average fair value at the dates of grant for options awarded during 1997, 1996 and 1995 was $3.02, $2.50 and $2.14, respectively. The Company maintains a 401(k) retirement plan covering substantially all officers and employees which permits participants to defer up to a maximum 10% of their eligible compensation. This deferred compensation, together with Company matching contributions which generally equal employee deferrals up to a maximum of 5%, is fully vested and funded as of December 31, 1997. Company contributions to the plan totaled less than $.3 million for each of years 1997, 1996 and 1995. 16. Supplemental Financial Information: The following summary represents the results of operations, expressed in thousands except per share amounts, for each quarter during years 1997 and 1996. 1997 (Unaudited) --------------------------------------------- Mar. 31 June 30 Sept. 30 Dec. 31 ------- ------- --------- ------- Revenues from rental property $45,195 $45,276 $50,823 $57,635 Net income $20,604 $21,045 $20,641 $23,546 Net income, per common share: Basic $.44 $.45 $.44 $.47 Diluted $.44 $.45 $.43 $.46 54
KIMCO REALTY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- 1996 (Unaudited) Mar. 31 June 30 Sept. 30 Dec. 31 ------- ------- -------- ------- Revenues from rental property $41,662 $42,444 $40,837 $43,201 Net income $15,928 $18,439 $19,833 $19,627 Net income, per common share: Basic $.38 $.39 $.42 $.42 Diluted $.38 $.39 $.41 $.41 Interest paid during years 1997, 1996 and 1995 approximated $29.9 million, $26.9 million and $25.0 million, respectively. Accounts and notes receivable in the accompanying Consolidated Balance Sheets are net of estimated unrecoverable amounts of approximately $1.8 million and $1.4 million, respectively, at December 31, 1997 and 1996. 17. Subsequent Events: Property Acquisitions / Disposition In January 1998, the Company acquired seven neighborhood and community shopping center properties comprising approximately 632,000 square feet of GLA in the Denver, CO market for approximately $43.6 million, including the assumption of $4.2 million of mortgage debt. These properties are primarily anchored by supermarket or drugstore tenants. In addition, the Company, through an affiliated entity, acquired interests in three retail properties in the Chicago, IL market comprising approximately 516,000 square feet of GLA for an aggregate purchase price of approximately $23.7 million. These properties include approximately 70,000 square feet of showroom space and adjoining warehouses of approximately 100,000 square feet at each location. Simultaneous with this transaction, the Company leased, to a national furniture retailer, the showroom portion of each property under individual long-term leases. The Company is currently planning the redevelopment of the warehouse portion of each property. The Company disposed of a property in Pinellas Park, FL during January 1998. Cash proceeds from the disposition totaling $2.3 million will be used to acquire an exchange shopping center property. Price REIT Merger On January 13, 1998, the Company and The Price REIT, Inc., a Maryland corporation ("Price REIT") signed a definitive agreement to merge, (the "Merger"). Pursuant to the terms of the Agreement and Plan of Merger dated January 13, 1998, as amended March 5, 1998 (the "Merger Agreement"), Price REIT will be merged into a newly formed wholly-owned subsidiary of the Company. The transaction is intended, for financial accounting purposes, to be accounted for as a purchase. Under the terms of the Merger Agreement each share of Price REIT common stock will be exchanged for a combination of the Company's common stock and Kimco depositary shares (the "Class D Depository Shares"), each 55
depositary share representing a 1/10 of a share interest in a new issue of Kimco 7.5% Class D Cumulative Convertible Preferred Stock (the "Class D Convertible Preferred Stock") having an aggregate value of at least $45 based on the "Kimco Average Price" (as defined herein) and the liquidation preference of the Class D Depositary Shares (collectively, the "Merger Consideration"). The Merger, which is expected to be completed in mid-1998, is subject to customary closing conditions, including certain regulatory approvals and the approval of the issuance of the Merger Consideration by the stockholders of the Company and the approval of the Merger by the stockholders of Price REIT. The Merger Agreement provides for a pre-closing adjustment to the number of shares of the Company's common stock and Class D Depositary Shares issuable per share of Price REIT common stock in order to ensure that Price REIT stockholders will receive at least, and possibly more than, $45 in the Company's securities per Price REIT share. Specifically, in the event that the average closing price of the Company's common stock (the "Kimco Average Price" as defined herein) ending on and including the seventh trading day immediately preceding the date of the Company's 1998 annual meeting of stockholders plus $10 is less than $45, the amount of Class D Depositary Shares will be increased up to a maximum of $11.25 of Class D Depositary Shares (based on a liquidation preference of $25 per Class D Depositary Share) to arrive at a value of $45. To the extent that the issuance of $11.25 of Class D Depositary Shares would still result in less than $45 of combined value, the number of shares of the Company's common stock issuable per Price REIT share will be increased in order to arrive at a total of $45 delivered in the Company's securities. However, the Company may elect to terminate the Merger Agreement in the event its Average Price (the "Average Price", as defined herein) during a specified calculation period or the closing price on the scheduled closing date or on either of the two days prior to the scheduled closing date is less than $32. In the event that the "Kimco Average Price" (as defined herein) plus $10 is greater than $45, each share of Price REIT common stock would continue to be converted into one share of the Company's common stock and the amount of Class D Depositary Shares will be decreased by 50% of the amount by which the Kimco Average Price referred to above plus $10 exceeds $45. However, Price REIT stockholders will never receive less than $9 of Class D Depositary Shares. Thus, as a result of the merger, Price REIT stockholders will obtain the benefit of 50% of the increase in value of the Company's common stock as reflected in the Kimco Average Price between $35 and $37, and 100% of any increase above $37. As used herein, the "Kimco Average Price" shall be the average of Average Prices (as defined herein) of the the Company's common stock for fifteen (15) randomly selected trading days within the thirty (30) consecutive trading days ending on and including the seventh trading day immediately preceding the date of the Company's 1998 annual meeting of stockholders. As used herein, the "Average Price" for any date means the average of the daily high and low prices of the Company's common stock on the New York Stock Exchange (the "NYSE") as reported in The Wall Street Journal, or if not reported thereby, by another authoritative source. The random selection of trading days shall be made under the joint supervision of the financial advisors retained by the Company and Price REIT in connection with the transactions contemplated hereby. 56
The dividend rate on the Class D Depositary Shares will be 7.5 % per annum, or, if greater, the dividend on the shares of the Company's common stock into which a Class D Depositary Share is convertible plus $0.0275 quarterly. The Class D Depositary Shares will be convertible into the Company's common stock at a conversion price of $40.25 per share at any time by the holder and may be redeemed by the Company at the conversion price in shares of the Company's common stock at any time after the third anniversary of the Merger if for any 20 trading days during a rolling 30 day consecutive trading-day period the Company's common stock closing price exceeds $48.30, subject to certain adjustments. The Class D Depositary Shares are expected to be listed on the NYSE. The Merger Agreement also provides that each party will be entitled to a Break-Up Fee in the amount of $12,500,000 or reimbursement of expenses up to $2,000,000 in the event the agreement is terminated under various circumstances. The Company has also agreed that if it elects to terminate the Merger Agreement because its common stock price closes below $32 Price REIT will be entitled to receive $6,250,000. Financings On March 2, 1998, the Company obtained an additional $150 million interim unsecured credit facility to both finance the purchase of properties and meet any short-term working capital requirements. The terms of this interim facility are substantially the same as those under the Company's $100 million revolving credit facility (See Note 7). This facility is scheduled to expire in June 1998, however, it is the Company's intention to extend the term of this facility and establish it as a continuing part of the Company's total unsecured revolving credit availability. 18. Pro Forma Financial Information (Unaudited): The Company and certain of its subsidiaries acquired and disposed of interests in shopping center properties during 1997. The pro forma financial information set forth below is based upon the Company's historical Consolidated Statements of Income for years 1997 and 1996, adjusted to give effect to these transactions as of January 1, 1996. The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transactions occurred on January 1, 1996, nor does it purport to represent the results of operations for future periods. (Amounts presented in millions of dollars, except per share figures.) Years Ended December 31, 1997 1996 ------------------------ ---- ---- Revenues from rental property $212.5 $187.8 Net Income $90.8 $80.5 Net Income, per common share $1.94 $1.79 57
Schedule II KIMCO REALTY CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 <TABLE> <CAPTION> Balance at Charged to Charged to Deductions Balance Beginning of expenses valuation at end of Period accounts period ------------ ----------- ------------ ----------- ---------- <S> <C> <C> <C> <C> <C> Year Ended December 31, 1997 Allowance for uncollectable accounts $1,350,000 $910,000 $ -- $460,000 $1,800,000 ========== ========== ========== ========== ========== Year Ended December 31, 1996 Allowance for uncollectable accounts $1,350,000 $955,000 $ -- $955,000 $1,350,000 ========== ========== ========== ========== ========== Year Ended December 31, 1995 Allowance for uncollectable accounts $1,000,000 $1,318,000 $ -- $968,000 $1,350,000 ========== ========== ========== ========== ========== </TABLE> 58
KIMCO REALTY CORPORATION AND SUBSIDIARIES REAL ESTATE ANJD ACCUMULATED DEPRECIATION DECEMBER 31, 1997 SCHEDULE III <TABLE> <CAPTION> INITIAL COST TOTAL COST BUILDINGS AND SUBSEQUENT BUILDINGS AND ACCUMULATED PROPERTIES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION ---------- ---- ------------ -------------- -------- ------------ ----- -------------- <S> <C> <C> <C> <C> <C> <C> <C> BOCA RATON $573,875 $2,295,501 $788,261 $573,875 $3,083,762 $3,657,637 $430,622 WHITEHALL 432,652 770,159.00 170,161 432,652 940,320 1,372,972 675,739 OGDEN 213,818 855,275 465,600 213,818 1,320,875 1,534,693 663,559 ORLANDO 923,956 3,646,904 1,761,902 1,172,119 5,160,643 6,332,762 408,220 PLAINVIEW 263,693 584,031 9,181,712 263,693 9,765,743 10,029,436 1,371,486 POMPANO BEACH 97,169 874,442 1,187,173 97,169 2,061,615 2,158,784 937,945 LIVONIA 178,785 925,818 595,807 178,785 1,521,625 1,700,410 369,789 LAUDERDALE LAKES 342,420 2,416,645 2,087,730 342,420 4,504,375 4,846,795 2,741,430 FERN PARK 225,000 902,000 2,325,340 225,000 3,227,340 3,452,340 893,618 ADDISON 0 753,343 1,100,049 0 1,853,392 1,853,392 832,646 LARGO 293,686 792,119 1,220,469 293,686 2,012,588 2,306,274 1,237,337 WINSTON-SALEM 540,667 719,655 3,303,629 540,667 4,023,284 4,563,951 948,887 MELBOURNE 0 1,754,000 2,234,629 0 3,988,629 3,988,629 1,392,619 ST. PETERSBURG 0 917,360 681,718 0 1,599,078 1,599,078 564,819 GROVE GATE 365,893 1,049,172 1,048,494 365,893 2,097,666 2,463,559 1,000,774 UPPER ARLINGTON 504,256 2,198,476 4,838,738 1,255,544 6,285,926 7,541,470 3,361,654 SHILOH SPRING RD 0 1,735,836 2,274,519 0 4,010,355 4,010,355 2,228,842 FELBRAM 72,971 302,579 401,599 72,971 704,178 777,149 407,584 LEESBURG 0 171,636 97,728 0 269,364 269,364 180,312 FOREST PARK 141,200 564,800 64,990 141,200 629,790 770,990 375,314 LARGO EAST BAY 2,832,296 11,329,185 509,327 2,832,296 11,838,512 14,670,808 1,806,966 LEXINGTON 1,675,031 6,848,209 4,549,848 1,675,031 11,398,057 13,073,088 1,044,813 CLAWSON 1,624,771 6,578,142 2,077,101 1,624,771 8,655,243 10,280,014 783,771 CHARLOTTE 919,251 3,570,981 891,509 919,251 4,462,490 5,381,741 293,510 LAFAYETTE 230,402 1,305,943 65,497 230,402 1,371,440 1,601,842 773,264 FARMINGTON 1,098,426 4,525,723 911,452 1,098,426 5,437,175 6,535,601 530,816 WEST MIFFLIN 475,815 1,903,231 634,314 475,815 2,537,545 3,013,360 208,727 BRADENTON 125,000 299,253 323,963 125,000 623,216 748,216 297,979 GREENWOOD 423,371 1,883,421 1,145,394 423,371 3,028,815 3,452,186 1,185,108 PINELLAS PARK 219,924 870,000 501,212 219,924 1,371,212 1,591,136 310,411 GRAVOIS 1,032,416 4,455,514 796,472 1,032,416 5,251,986 6,284,402 2,828,335 JENNINGS 257,782 1,031,128 1,233,616 257,782 2,264,744 2,522,526 182,766 DALLAS 1,299,632 5,168,727 5,324,830 1,299,632 10,493,557 11,793,189 7,730,659 TUTTLE BEE SARASOTA 254,961 828,465 1,535,603 254,961 2,364,068 2,619,029 1,063,467 LAUREL 349,562 1,398,250 626,668 349,562 2,024,918 2,374,480 204,750 LAUREL 274,580 1,100,968 0 274,580 1,100,968 1,375,548 639,011 EAST ORLANDO 491,676 1,440,000 1,864,450 491,676 3,304,450 3,796,126 1,224,785 OTTAWA 137,775 784,269 303,414 137,775 1,087,683 1,225,458 858,972 BLOOMINGTON 805,521 2,222,353 2,579,854 805,521 4,802,207 5,607,728 1,317,593 RALEIGH 5,208,885 20,885,792 1,489,509 5,208,885 22,375,301 27,584,186 2,071,894 CANTON HILLS 500,980 2,020,274 758,076 500,980 2,778,350 3,279,330 232,974 SAVANNAH 2,052,270 8,232,978 235,152 2,052,270 8,468,130 10,520,400 949,864 MACON 262,700 1,487,860 1,385,111 349,326 2,786,345 3,135,671 1,089,370 CANTON 792,985 1,459,031 4,454,851 792,985 5,913,882 6,706,867 2,063,765 CHARLOTTE 1,783,400 7,139,131 0 1,783,400 7,139,131 8,922,531 793,257 PALATKA 130,844 556,658 897,013 130,844 1,453,671 1,584,515 694,710 EAST STROUDSBURG 1,050,000 2,372,628 356,808 1,050,000 2,729,436 3,779,436 1,447,631 POUGHKEEPSIE 876,548 4,695,659 1,015,594 876,548 5,711,253 6,587,801 2,851,250 BARBERTON 505,590 1,948,135 107,840 505,590 2,055,975 2,561,565 1,203,487 HAGERSTOWN 541,389 2,165,555 936,929 541,389 3,102,484 3,643,873 1,389,467 ELGIN 842,555 2,108,674 901,399 842,555 3,010,073 3,852,628 1,264,086 GRAND HAVEN 356,800 1,532,689 947,496 356,800 2,480,185 2,836,985 946,018 HOUSTON 275,000 507,588 191,639 275,000 699,227 974,227 523,223 WICKLIFFE 610,991 2,471,965 12,339 610,991 2,484,304 3,095,295 192,885 LEOMINSTER 3,732,508 6,754,092 28,840,650 4,933,640 34,393,610 39,327,250 8,877,994 LAUDERHILL 1,002,733 2,602,415 9,135,669 1,774,443 10,966,374 12,740,817 0 CAMBRIDGE 0 1,848,195 744,742 473,060 2,119,877 2,592,937 1,177,259 OLMSTED 167,337 2,815,856 867,451 167,337 3,683,307 3,850,644 2,345,014 LEMAY 125,879 503,510 127,868 125,879 631,378 757,257 344,485 AKRON WATERLOO 437,277 1,912,222 163,558 437,277 2,075,780 2,513,057 1,326,575 BRUNSWICK 771,765 6,058,560 289,996 771,765 6,348,556 7,120,321 3,922,108 WEST MIFFLIN HILLS 654,366 3,199,729 6,411,726 654,366 9,611,455 10,265,821 3,474,270 CHARLESTON 770,000 3,132,092 3,738,711 770,000 6,870,803 7,640,803 1,189,578 MESQUITE 520,340 2,081,356 528,652 520,340 2,610,008 3,130,348 162,785 BELLEVUE 405,217 1,743,573 0 405,217 1,743,573 2,148,790 1,263,128 <CAPTION> TOTAL COST, DATE OF NET OF ACCUMULATED CONSTRUCTION(C) PROPERTIES DEPRECIATION ENCUMBRANCES ACQUISITION(A) ---------- ---------------- ------------ -------------- <S> <C> <C> <C> BOCA RATON $3,227,015 $0 1992(A) WHITEHALL 697,233 0 1967(C) OGDEN 871,134 0 1967(C) ORLANDO 5,924,542 0 1995(A) PLAINVIEW 8,657,950 0 1969(C) POMPANO BEACH 1,220,839 0 1968(C) LIVONIA 1,330,621 0 1968(C) LAUDERDALE LAKES 2,105,365 0 1968(C) FERN PARK 2,558,722 0 1968(C) ADDISON 1,020,746 0 1968(C) LARGO 1,068,937 0 1968(C) WINSTON-SALEM 3,615,064 0 1969(C) MELBOURNE 2,596,010 0 1968(C) ST. PETERSBURG 1,034,259 0 1968(C) GROVE GATE 1,462,785 0 1968(C) UPPER ARLINGTON 4,179,816 0 1969(C) SHILOH SPRING RD 1,781,513 0 1969(C) FELBRAM 369,565 0 1970(C) LEESBURG 89,052 0 1969(C) FOREST PARK 395,676 0 1969(C) LARGO EAST BAY 12,863,842 0 1992(A) LEXINGTON 12,028,275 0 1993(A) CLAWSON 9,496,243 0 1993(A) CHARLOTTE 5,088,231 0 1995(A) LAFAYETTE 828,578 0 1971(C) FARMINGTON 6,004,785 0 1993(A) WEST MIFFLIN 2,804,633 0 1993(A) BRADENTON 450,237 0 1968(C) GREENWOOD 2,267,078 1,258,779 1970(C) PINELLAS PARK 1,280,725 0 1970(C) GRAVOIS 3,456,067 0 1972(C) JENNINGS 2,339,760 0 1971(C) DALLAS 4,062,530 0 1969(C) TUTTLE BEE SARASOTA 1,555,562 0 1970(C) LAUREL 2,169,730 0 1995(A) LAUREL 736,537 0 1972(C) EAST ORLANDO 2,571,341 0 1971(C) OTTAWA 366,486 0 1970(C) BLOOMINGTON 4,290,135 0 1972(C) RALEIGH 25,512,292 0 1993(A) CANTON HILLS 3,046,356 0 1993(A) SAVANNAH 9,570,536 0 1993(A) MACON 2,046,301 0 1969(C) CANTON 4,643,102 0 1972(C) CHARLOTTE 8,129,274 0 1993(A) PALATKA 889,805 0 1970(C) EAST STROUDSBURG 2,331,805 0 1973(C) POUGHKEEPSIE 3,736,551 0 1972(C) BARBERTON 1,358,078 0 1972(C) HAGERSTOWN 2,254,406 0 1973(C) ELGIN 2,588,542 0 1972(C) GRAND HAVEN 1,890,967 0 1976(C) HOUSTON 451,004 0 1973(C) WICKLIFFE 2,902,410 0 1995(A) LEOMINSTER 30,449,256 0 1975(A) LAUDERHILL 12,740,817 0 1974(C) CAMBRIDGE 1,415,678 0 1973(C) OLMSTED 1,505,630 0 1973(C) LEMAY 412,772 0 1974(C) AKRON WATERLOO 1,186,482 0 1975(C) BRUNSWICK 3,198,213 0 1975(C) WEST MIFFLIN HILLS 6,791,551 0 1973(C) CHARLESTON 6,451,225 0 1978(C) MESQUITE 2,967,563 0 1995(A) BELLEVUE 885,662 0 1976(A) </TABLE> 59
<TABLE> <CAPTION> INITIAL COST TOTAL COST BUILDINGS AND SUBSEQUENT BUILDINGS AND ACCUMULATED PROPERTIES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION ---------- ---- ------------ -------------- -------- ------------ ----- -------------- <S> <C> <C> <C> <C> <C> <C> <C> ELSMERE 0 3,185,642 0 0 3,185,642 3,185,642 1,849,509 MADISON 0 4,133,904 2,126,058 0 6,259,962 6,259,962 3,024,957 SPRINGFIELD 919,998 4,981,589 2,213,910 919,998 7,195,499 8,115,497 3,797,978 CHERRY HILL 2,417,583 6,364,094 902,987 2,417,583 7,267,081 9,684,664 2,576,385 NANUET 798,932 2,361,900 1,300,829 798,932 3,662,729 4,461,661 1,308,444 OAKCREEK 1,245,870 4,339,637 3,762,195 1,245,870 8,101,832 9,347,702 2,604,606 NORRISTOWN 686,134 2,664,535 3,215,424 774,084 5,792,009 6,566,093 2,324,405 SPRINGBORO PIKE 1,854,527 2,572,518 2,428,558 1,854,527 5,001,076 6,855,603 1,843,481 LIMA 770,121 3,080,479 463,987 770,121 3,544,466 4,314,587 248,395 CHARLES TOWN 602,000 3,725,871 10,342,778 602,000 14,068,649 14,670,649 2,935,648 MUSKEGON 391,500 958,500 692,656 391,500 1,651,156 2,042,656 854,262 NORTH MIAMI 732,914 4,080,460 2,163,630 732,914 6,244,090 6,977,004 3,008,705 NEW KENSINGTON 521,945 2,548,322 573,181 521,945 3,121,503 3,643,448 1,846,398 PENN HILLS 0 1,737,289 0 0 1,737,289 1,737,289 1,021,689 BEAVERCREEK 635,228 3,024,722 1,924,519 635,228 4,949,241 5,584,469 2,192,705 HAMPTON BAYS 1,495,105 5,979,320 41,919 1,495,105 6,021,239 7,516,344 1,556,758 BRIDGEHAMPTON 1,811,752 3,107,232 20,647,203 1,811,752 23,754,435 25,566,187 4,849,853 EASTERN BLVD. 412,016 1,876,962 149,142 412,016 2,026,104 2,438,120 1,153,321 E. PROSPECT ST. 604,826 2,755,314 250,000 604,826 3,005,314 3,610,140 1,721,499 W. MARKET ST. 188,562 1,158,307 0 188,562 1,158,307 1,346,869 706,146 MIDDLETOWN 207,283 1,174,603 193,507 207,283 1,368,110 1,575,393 718,748 UPPER ALLEN 445,743 1,782,972 152,550 445,743 1,935,522 2,381,265 1,134,354 GETTYSBURG 74,626 671,630 101,519 74,626 773,149 847,775 471,658 MARTINSBURG 242,634 1,273,828 628,937 242,634 1,902,765 2,145,399 1,026,402 SOUTH EAST SARASOTA 1,283,400 5,133,544 1,087,560 1,440,264 6,064,240 7,504,504 1,375,333 AIKEN 980,808 3,923,234 31,700 980,808 3,954,934 4,935,742 1,045,244 TYVOLA RD. 0 4,736,345 1,494,281 0 6,230,626 6,230,626 2,750,950 RACINE 1,403,082 5,612,330 1,075,740 1,403,082 6,688,070 8,091,152 1,672,692 WEST MIFFLIN 1,468,341 0 0 1,468,341 0 1,468,341 0 INDIANAPOLIS 447,600 3,607,193 1,872,732 447,600 5,479,925 5,927,525 2,310,368 RICHBORO 788,761 3,155,044 3,297,541 976,439 6,264,907 7,241,346 2,665,621 MILLER ROAD 1,138,082 4,552,327 1,337,385 1,138,082 5,889,712 7,027,794 2,949,762 SANFORD 3,406,565 13,648,041 1,208,601 3,406,565 14,856,642 18,263,207 3,701,739 CARLE PLACE 1,183,290 4,903,642 10,409,825 1,314,540 15,182,217 16,496,757 309,008 PLAZA EAST 1,236,149 4,944,597 1,963,838 1,236,149 6,908,435 8,144,584 264,087 PLAZA WEST 808,435 3,210,187 575,057 808,435 3,785,244 4,593,679 117,478 MENTOR 503,981 2,455,926 361,206 503,981 2,817,132 3,321,113 932,647 MORSE RD. 835,386 2,097,600 2,587,666 835,386 4,685,266 5,520,652 1,160,778 HAMILTON RD. 856,178 2,195,520 3,270,616 856,178 5,466,136 6,322,314 1,304,267 OLENTANGY RIVER RD. 764,517 1,833,600 2,197,502 764,517 4,031,102 4,795,619 1,205,151 SALEM AVE. 665,314 347,818 4,967,368 665,314 5,315,186 5,980,500 998,800 KETTERING 1,190,496 4,761,984 414,232 1,190,496 5,176,216 6,366,712 1,428,575 W. BROAD ST. 982,464 3,929,856 1,572,526 982,464 5,502,382 6,484,846 1,449,332 ELYRIA 781,728 3,126,912 52,741 781,728 3,179,653 3,961,381 913,510 RIDGE ROAD 1,285,213 4,712,358 485,447 1,285,213 5,197,805 6,483,018 863,250 SPRINGFIELD 842,976 3,371,904 120,272 842,976 3,492,176 4,335,152 999,678 MENTOR ERIE CMNS. 2,234,474 9,648,000 2,440,175 2,234,474 12,088,175 14,322,649 2,444,754 SPRINGDALE 3,205,653 14,619,732 4,595,951 3,205,653 19,215,683 22,421,336 3,102,452 WESTERVILLE 1,050,431 4,201,616 7,303,469 1,050,431 11,505,085 12,555,516 1,709,115 IRONDEQUOIT 1,234,250 8,190,181 0 1,234,250 8,190,181 9,424,431 1,190,274 WEST GATES 1,784,718 9,721,970 78,077 1,784,718 9,800,047 11,584,765 1,053,652 HENRIETTA 1,075,358 6,635,486 0 1,075,358 6,635,486 7,710,844 939,853 JONESBORO RD. &I-285 468,118 1,872,473 53,114 468,118 1,925,587 2,393,705 488,721 STATEN ISLAND 2,280,000 9,027,951 3,931,524 2,280,000 12,959,475 15,239,475 2,819,389 GASTONIA 2,467,696 9,870,785 324,583 2,467,696 10,195,368 12,663,064 1,911,415 MARGATE 2,948,530 11,754,120 1,011,511 2,948,530 12,765,631 15,714,161 1,337,107 CENTEREACH 1,182,650 4,735,779 15,928,405 1,417,098 20,429,736 21,846,834 1,430,301 WALKER 3,682,478 14,730,060 35,709 3,682,478 14,765,769 18,448,247 1,542,905 TAYLOR 1,451,397 5,806,263 0 1,451,397 5,806,263 7,257,660 620,250 WATERBURY 2,253,078 9,017,012 59,581 2,253,078 9,076,593 11,329,671 968,188 GREAT BARRINGTON 642,170 2,547,830 6,100,504 1,280,713 8,009,791 9,290,504 236,404 KISSIMMEE 1,328,536 5,296,652 1,515,262 1,328,536 6,811,914 8,140,450 261,165 WESTMONT 601,655 2,404,604 7,263,252 601,655 9,667,856 10,269,511 277,402 RIDGEWOOD 450,000 2,106,566 0 450,000 2,106,566 2,556,566 216,864 MELBOURNE 715,844 2,878,374 317,408 715,844 3,195,782 3,911,626 281,608 NORTH BRUNSWICK 3,204,978 12,819,912 12,320,414 3,204,978 25,140,326 28,345,304 1,260,413 SAND LAKE 3,092,706 12,370,824 702,368 3,092,706 13,073,192 16,165,898 1,190,544 STUART 2,109,677 8,415,323 109,950 2,109,677 8,525,273 10,634,950 748,304 ROCKINGHAM 2,660,915 10,643,660 7,429,652 2,660,915 18,073,312 20,734,227 1,026,294 CORAL SPRINGS 710,000 2,842,907 3,031,115 710,000 5,874,022 6,584,022 249,516 <CAPTION> TOTAL COST, DATE OF NET OF ACCUMULATED CONSTRUCTION(C) PROPERTIES DEPRECIATION ENCUMBRANCES ACQUISITION(A) ---------- ---------------- ------------ -------------- <S> <C> <C> <C> ELSMERE 1,336,133 0 1979(C) MADISON 3,235,005 0 1978(C) SPRINGFIELD 4,317,519 3,545,000 1983(A) CHERRY HILL 7,108,279 4,900,000 1985(C) NANUET 3,153,217 0 1984(A) OAKCREEK 6,743,096 5,055,000 1984(A) NORRISTOWN 4,241,688 0 1984(A) SPRINGBORO PIKE 5,012,122 0 1985(C) LIMA 4,066,192 0 1995(A) CHARLES TOWN 11,735,001 0 1985(A) MUSKEGON 1,188,394 0 1985(A) NORTH MIAMI 3,968,299 0 1985(A) NEW KENSINGTON 1,797,050 0 1986(A) PENN HILLS 715,600 0 1986(A) BEAVERCREEK 3,391,764 0 1986(A) HAMPTON BAYS 5,959,586 0 1989(A) BRIDGEHAMPTON 20,716,334 0 1972(C) EASTERN BLVD. 1,284,799 0 1987(A) E. PROSPECT ST. 1,888,641 0 1986(A) W. MARKET ST. 640,723 0 1986(A) MIDDLETOWN 856,645 0 1986(A) UPPER ALLEN 1,246,911 0 1986(A) GETTYSBURG 376,117 0 1986(A) MARTINSBURG 1,118,997 0 1986(A) SOUTH EAST SARASOTA 6,129,171 0 1989(A) AIKEN 3,890,498 0 1989(A) TYVOLA RD. 3,479,676 0 1986(A) RACINE 6,418,460 0 1988(A) WEST MIFFLIN 1,468,341 0 1986(A) INDIANAPOLIS 3,617,157 0 1986(A) RICHBORO 4,575,725 0 1986(A) MILLER ROAD 4,078,032 0 1986(A) SANFORD 14,561,468 0 1989(A) CARLE PLACE 16,187,749 0 1993(A) PLAZA EAST 7,880,497 2,138,328 1995(A) PLAZA WEST 4,476,201 2,138,328 1995(A) MENTOR 2,388,466 0 1987(A) MORSE RD. 4,359,874 0 1988(A) HAMILTON RD. 5,018,047 0 1988(A) OLENTANGY RIVER RD. 3,590,468 0 1988(A) SALEM AVE. 4,981,700 3,668,618 1988(A) KETTERING 4,938,137 3,475,534 1988(A) W. BROAD ST. 5,035,514 0 1988(A) ELYRIA 3,047,871 3,861,704 1988(A) RIDGE ROAD 5,619,768 0 1992(A) SPRINGFIELD 3,335,474 4,054,789 1988(A) MENTOR ERIE CMNS. 11,877,895 4,247,874 1988(A) SPRINGDALE 19,318,884 0 1992(A) WESTERVILLE 10,846,401 0 1988(A) IRONDEQUOIT 8,234,157 0 1993(A) WEST GATES 10,531,113 0 1993(A) HENRIETTA 6,770,991 0 1993(A) JONESBORO RD. &I-285 1,904,984 0 1988(A) STATEN ISLAND 12,420,086 4,894,652 1989(A) GASTONIA 10,751,649 0 1989(A) MARGATE 14,377,054 0 1993(A) CENTEREACH 20,416,533 0 1993(A) WALKER 16,905,342 0 1993(A) TAYLOR 6,637,410 0 1993(A) WATERBURY 10,361,483 5,615,210 1993(A) GREAT BARRINGTON 9,054,100 0 1994(A) KISSIMMEE 7,879,285 0 1996(A) WESTMONT 9,992,109 0 1994(A) RIDGEWOOD 2,339,702 0 1993(A) MELBOURNE 3,630,018 0 1994(A) NORTH BRUNSWICK 27,084,891 0 1994(A) SAND LAKE 14,975,354 0 1994(A) STUART 9,886,646 0 1994(A) ROCKINGHAM 19,707,933 0 1994(A) CORAL SPRINGS 6,334,506 0 1994(A) </TABLE> 60
<TABLE> <CAPTION> INITIAL COST TOTAL COST BUILDINGS AND SUBSEQUENT BUILDINGS AND ACCUMULATED PROPERTIES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION ---------- ---- ------------ -------------- -------- ------------ ----- -------------- <S> <C> <C> <C> <C> <C> <C> <C> SPRINGFIELD 2,745,595 10,985,778 3,241,680 2,904,022 14,069,031 16,973,053 844,920 CHARLESTON 1,744,430 6,986,094 141,033 1,744,430 7,127,127 8,871,557 424,935 SAVANNAH 652,255 2,616,522 0 652,255 2,616,522 3,268,777 156,520 WEST PALM BEACH 550,896 2,298,964 318,210 550,896 2,617,174 3,168,070 206,319 SOUTH MIAMI 1,280,440 5,133,825 1,792,588 1,280,440 6,926,413 8,206,853 350,240 AUGUSTA 1,482,564 5,928,122 0 1,482,564 5,928,122 7,410,686 311,603 ALTAMONTE SPRINGS 770,893 3,083,574 0 770,893 3,083,574 3,854,467 158,132 KENT 2,261,530 0 0 2,261,530 0 2,261,530 0 ORLANDO 560,800 2,268,112 17,268 560,800 2,285,380 2,846,180 103,050 DURHAM 1,882,800 7,551,576 59,762 1,882,800 7,611,338 9,494,138 337,890 PHOENIX 1,430,790 3,348,652 4,839 1,430,790 3,353,491 4,784,281 224,076 GARLAND 210,286 845,845 0 210,286 845,845 1,056,131 35,940 MARLTON PIKE 0 4,318,534 0 0 4,318,534 4,318,534 147,642 CAMDEN 0 1,000,570 0 0 1,000,570 1,000,570 0 CINNAMINSON 657,140 2,628,559 0 657,140 2,628,559 3,285,699 0 FLORENCE 1,465,661 6,011,013 0 1,465,661 6,011,013 7,476,674 43,011 PHOENIX 2,450,341 9,802,046 0 2,450,341 9,802,046 12,252,387 41,886 MORRISVILLE 627,864 2,511,457 0 627,864 2,511,457 3,139,321 0 CENTER SQUARE 731,888 2,927,551 0 731,888 2,927,551 3,659,439 100,087 PHILADELPHIA 731,888 2,927,551 0 731,888 2,927,551 3,659,439 100,087 FEASTERVILLE 520,521 2,082,083 0 520,521 2,082,083 2,602,604 53,387 WARRINGTON 268,194 1,072,774 0 268,194 1,072,774 1,340,968 0 WHITEHALL 0 5,195,577 0 0 5,195,577 5,195,577 177,627 HARRIS COUNTY 1,843,000 7,372,420 0 1,843,000 7,372,420 9,215,420 94,512 HAVERTOWN 731,888 2,927,551 0 731,888 2,927,551 3,659,439 100,087 EXTON 731,888 2,927,551 0 731,888 2,927,551 3,659,439 100,087 EASTWICK 889,001 2,762,888 2,386,166 889,001 5,603,093 6,492,094 0 UPPER DARBY 231,821 927,286 3,049,951 285,828 3,923,230 4,209,058 0 TAMPA 2,820,000 11,283,189 0 2,820,000 11,283,189 14,103,189 216,900 OCALA 1,980,000 7,927,484 0 1,980,000 7,927,484 9,907,484 118,461 BATON ROUGE 3,125,527 12,503,083 0 3,125,527 12,503,083 15,628,610 160,284 WHITE LAKE 2,300,050 9,249,607 1,061,046 2,300,050 10,310,653 12,610,703 314,530 LAFAYETTE 2,115,000 8,508,218 0 2,115,000 8,508,218 10,623,218 36,318 LAFAYETTE 812,810 3,252,269 0 812,810 3,252,269 4,065,079 79,925 MANASSAS 1,788,750 7,162,661 0 1,788,750 7,162,661 8,951,411 22,932 CORAL SPRINGS 1,649,000 6,626,301 0 1,649,000 6,626,301 8,275,301 14,094 STATEN ISLAND 2,940,000 11,811,964 0 2,940,000 11,811,964 14,751,964 0 GREENVILLE 1,448,913 5,807,874 0 1,448,913 5,807,874 7,256,787 12,410 MT. DORA 1,011,000 4,062,890 0 1,011,000 4,062,890 5,073,890 8,681 N. CHARLESTON 2,965,748 11,895,294 0 2,965,748 11,895,294 14,861,042 0 RICHMOND 670,500 2,751,375 0 670,500 2,751,375 3,421,875 183,872 YONKERS 871,977 3,487,909 0 871,977 3,487,909 4,359,886 372,650 TULSA 500,950 2,002,508 0 500,950 2,002,508 2,503,458 98,486 WATERLOO 500,525 2,002,101 0 500,525 2,002,101 2,502,626 98,394 CLIVE 500,525 2,002,101 0 500,525 2,002,101 2,502,626 98,394 DES MOINES 500,525 2,002,101 0 500,525 2,002,101 2,502,626 98,394 E. WICHITA 500,414 2,001,656 0 500,414 2,001,656 2,502,070 98,371 W. WICHITA 500,414 2,001,656 0 500,414 2,001,656 2,502,070 98,371 PLANO 500,414 2,001,656 0 500,414 2,001,656 2,502,070 98,371 WEST OAKS 500,422 2,001,687 0 500,422 2,001,687 2,502,109 98,371 ARLINGTON 500,414 2,001,656 0 500,414 2,001,656 2,502,070 98,371 DUNCANVILLE 500,414 2,001,656 0 500,414 2,001,656 2,502,070 98,371 GARLAND 500,414 2,001,656 0 500,414 2,001,656 2,502,070 98,371 HOUSTON 500,422 2,001,687 0 500,422 2,001,687 2,502,109 146,458 GENEVA 500,422 2,001,687 0 500,422 2,001,687 2,502,109 98,371 BAYTOWN 500,422 2,001,687 0 500,422 2,001,687 2,502,109 98,371 FT. WORTH 500,414 2,001,656 0 500,414 2,001,656 2,502,070 98,371 BRADLEY 500,422 2,001,687 0 500,422 2,001,687 2,502,109 98,371 O'FALLON 300,000 1,200,000 0 300,000 1,200,000 1,500,000 10,256 N. RICHLAND HILLS 2,900,000 0 0 2,900,000 0 2,900,000 0 CORSICANA 1,600,000 6,400,000 0 1,600,000 6,400,000 8,000,000 54,701 OVERLAND 0 4,928,677 0 0 4,928,677 4,928,677 42,125 ST. LOUIS 0 5,756,736 0 0 5,756,736 5,756,736 49,203 PEORIA 0 3,029,106 0 0 3,029,106 3,029,106 25,890 KANSAS CITY 574,777 2,299,106 0 574,777 2,299,106 2,873,883 19,650 ST. LOUIS 0 2,242,258 0 0 2,242,258 2,242,258 19,165 OAK LAWN 1,316,783 5,267,130 0 1,316,783 5,267,130 6,583,913 45,018 CALUMET CITY 1,247,879 4,991,514 0 1,247,879 4,991,514 6,239,393 42,663 OAKBROOK TERRACE 1,393,667 5,576,268 0 1,393,667 5,576,268 6,969,935 47,660 MATTERSON 731,621 2,926,483 0 731,621 2,926,483 3,658,104 25,013 <CAPTION> TOTAL COST, DATE OF NET OF ACCUMULATED CONSTRUCTION(C) PROPERTIES DEPRECIATION ENCUMBRANCES ACQUISITION(A) ---------- ---------------- ------------ -------------- <S> <C> <C> <C> SPRINGFIELD 16,128,133 0 1994(A) CHARLESTON 8,446,622 0 1995(A) SAVANNAH 3,112,257 0 1995(A) WEST PALM BEACH 2,961,751 0 1995(A) SOUTH MIAMI 7,856,613 0 1995(A) AUGUSTA 7,099,083 0 1995(A) ALTAMONTE SPRINGS 3,696,335 0 1995(A) KENT 2,261,530 0 1995(A) ORLANDO 2,743,130 0 1996(A) DURHAM 9,156,248 0 1996(A) PHOENIX 4,560,205 0 1996(A) GARLAND 1,020,191 0 1996(A) MARLTON PIKE 4,170,892 0 1996(A) CAMDEN 1,000,570 0 1996(A) CINNAMINSON 3,285,699 0 1996(A) FLORENCE 7,433,663 0 1997(A) PHOENIX 12,210,501 8,107,496 1997(A) MORRISVILLE 3,139,321 0 1996(A) CENTER SQUARE 3,559,352 0 1996(A) PHILADELPHIA 3,559,352 0 1996(A) FEASTERVILLE 2,549,217 0 1996(A) WARRINGTON 1,340,968 0 1996(A) WHITEHALL 5,017,950 0 1996(A) HARRIS COUNTY 9,120,908 0 1997(A) HAVERTOWN 3,559,352 0 1996(A) EXTON 3,559,352 0 1996(A) EASTWICK 6,492,094 0 1997(A) UPPER DARBY 4,209,058 0 1996(A) TAMPA 13,886,289 0 1997(A) OCALA 9,789,023 0 1997(A) BATON ROUGE 15,468,326 0 1997(A) WHITE LAKE 12,296,173 0 1996(A) LAFAYETTE 10,586,900 0 1997(A) LAFAYETTE 3,985,154 0 1997(A) MANASSAS 8,928,479 0 1997(A) CORAL SPRINGS 8,261,207 0 1997(A) STATEN ISLAND 14,751,964 5,841,637 1997(A) GREENVILLE 7,244,377 0 1997(A) MT. DORA 5,065,209 0 1997(A) N. CHARLESTON 14,861,042 0 1997(A) RICHMOND 3,238,003 0 1995(A) YONKERS 3,987,236 0 1995(A) TULSA 2,404,972 0 1996(A) WATERLOO 2,404,232 0 1996(A) CLIVE 2,404,232 0 1996(A) DES MOINES 2,404,232 0 1996(A) E. WICHITA 2,403,699 0 1996(A) W. WICHITA 2,403,699 0 1996(A) PLANO 2,403,699 0 1996(A) WEST OAKS 2,403,738 0 1996(A) ARLINGTON 2,403,699 0 1996(A) DUNCANVILLE 2,403,699 0 1996(A) GARLAND 2,403,699 0 1996(A) HOUSTON 2,355,651 0 1996(A) GENEVA 2,403,738 0 1996(A) BAYTOWN 2,403,738 0 1996(A) FT. WORTH 2,403,699 0 1996(A) BRADLEY 2,403,738 0 1996(A) O'FALLON 1,489,744 0 1997(A) N. RICHLAND HILLS 2,900,000 0 1997(A) CORSICANA 7,945,299 0 1997(A) OVERLAND 4,886,552 0 1997(A) ST. LOUIS 5,707,533 0 1997(A) PEORIA 3,003,216 2,958,163 1997(A) KANSAS CITY 2,854,233 2,806,575 1997(A) ST. LOUIS 2,223,093 0 1997(A) OAK LAWN 6,538,895 6,429,714 1997(A) CALUMET CITY 6,196,730 6,093,263 1997(A) OAKBROOK TERRACE 6,922,275 6,806,686 1997(A) MATTERSON 3,633,091 3,572,429 1997(A) </TABLE> 61
<TABLE> <CAPTION> INITIAL COST TOTAL COST BUILDINGS AND SUBSEQUENT BUILDINGS AND ACCUMULATED PROPERTIES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL DEPRECIATION ---------- ---- ------------ -------------- -------- ------------ ----- -------------- <S> <C> <C> <C> <C> <C> <C> <C> MT. PROSPECT 797,082 3,188,329 0 797,082 3,188,329 3,985,411 27,251 ST. PETERS 1,182,194 4,728,775 0 1,182,194 4,728,775 5,910,969 40,417 KANSAS CITY 775,025 3,100,101 0 775,025 3,100,101 3,875,126 26,497 ROELAND PARK 0 4,328,087 0 0 4,328,087 4,328,087 36,992 MAPLEWOOD 604,803 2,419,213 0 604,803 2,419,213 3,024,016 20,677 NORRIDGE 0 2,560,464 0 0 2,560,464 2,560,464 21,884 COUNTRYSIDE 0 2,786,926 0 0 2,786,926 2,786,926 23,820 DUBUQUE 0 1,614,911 0 0 1,614,911 1,614,911 13,803 CARBONDALE 0 1,553,753 0 0 1,553,753 1,553,753 13,280 MERRILLVILLE 0 1,965,694 0 0 1,965,694 1,965,694 16,801 GRIFFITH 0 2,495,820 0 0 2,495,820 2,495,820 21,332 DOWNER GROVE 811,778 3,247,114 0 811,778 3,247,114 4,058,892 27,753 CHICAGO 0 2,111,433 0 0 2,111,433 2,111,433 18,046 SKOKIE 0 2,056,622 0 0 2,056,622 2,056,622 17,578 SCHAUMBURG 0 2,309,103 0 0 2,309,103 2,309,103 19,736 CHICAGO 0 2,011,534 0 0 2,011,534 2,011,534 17,193 DAVENPORT 0 1,756,328 0 0 1,756,328 1,756,328 15,011 TULSA 0 0 0 0 0 0 0 FOREST PARK 0 2,088,921 0 0 2,088,921 2,088,921 17,854 NAPERVILLE 488,267 1,953,067 0 488,267 1,953,067 2,441,334 16,693 INDIANAPOLIS 343,575 1,374,302 0 343,575 1,374,302 1,717,877 11,746 NILES 0 2,217,231 0 0 2,217,231 2,217,231 18,951 ARLINGTON 0 1,854,567 0 0 1,854,567 1,854,567 15,851 JOLIET 0 1,742,399 0 0 1,742,399 1,742,399 14,892 CAPE GIRARDEAU 0 1,542,659 0 0 1,542,659 1,542,659 13,185 BRIDGETON 0 1,975,978 0 0 1,975,978 1,975,978 16,889 EDMOND 477,036 1,908,145 0 477,036 1,908,145 2,385,181 16,309 HOUSTON 406,513 1,626,051 0 406,513 1,626,051 2,032,564 13,898 AMARILLO 0 1,998,531 0 0 1,998,531 1,998,531 17,081 OKLAHOMA CITY 0 1,419,957 0 0 1,419,957 1,419,957 12,136 ELSTON 337,869 1,351,474 0 337,869 1,351,474 1,689,343 11,551 S. CICERO 0 1,541,560 0 0 1,541,560 1,541,560 13,176 BALANCE OF PORTFOLIO 2,951,539 4,071,395 12,356,603 3,112,139 15,813,359 18,925,498 10,555,720 ------------------------------------------------------------------------------------------------------------- $208,025,559 $876,286,555 $319,884,045 $213,367,305 $1,190,828,854 $1,404,196,159 $207,408,091 ============================================================================================================= <CAPTION> TOTAL COST, DATE OF NET OF ACCUMULATED CONSTRUCTION(C) PROPERTIES DEPRECIATION ENCUMBRANCES ACQUISITION(A) ---------- ---------------- ------------ -------------- <S> <C> <C> <C> MT. PROSPECT 3,958,160 3,892,071 1997(A) ST. PETERS 5,870,552 5,772,532 1997(A) KANSAS CITY 3,848,629 3,784,369 1997(A) ROELAND PARK 4,291,095 0 1997(A) MAPLEWOOD 3,003,339 2,953,192 1997(A) NORRIDGE 2,538,580 0 1997(A) COUNTRYSIDE 2,763,106 2,721,654 1997(A) DUBUQUE 1,601,108 0 1997(A) CARBONDALE 1,540,473 0 1997(A) MERRILLVILLE 1,948,893 0 1997(A) GRIFFITH 2,474,488 2,437,366 1997(A) DOWNER GROVE 4,031,139 3,963,831 1997(A) CHICAGO 2,093,387 0 1997(A) SKOKIE 2,039,044 0 1997(A) SCHAUMBURG 2,289,367 0 1997(A) CHICAGO 1,994,341 0 1997(A) DAVENPORT 1,741,317 0 1997(A) TULSA 0 0 1997(A) FOREST PARK 2,071,067 0 1997(A) NAPERVILLE 2,424,641 2,384,156 1997(A) INDIANAPOLIS 1,706,131 0 1997(A) NILES 2,198,280 0 1997(A) ARLINGTON 1,838,716 0 1997(A) JOLIET 1,727,507 0 1997(A) CAPE GIRARDEAU 1,529,474 0 1997(A) BRIDGETON 1,959,089 0 1997(A) EDMOND 2,368,872 0 1997(A) HOUSTON 2,018,666 1,984,960 1997(A) AMARILLO 1,981,450 0 1997(A) OKLAHOMA CITY 1,407,821 0 1997(A) ELSTON 1,677,792 0 1997(A) S. CICERO 1,528,384 0 1997(A) BALANCE OF PORTFOLIO 8,369,778 0 VARIOUS --------------------------------------------------- $1,196,788,068 $121,363,910 =================================================== </TABLE> Depreciation and amortization of the Company's investment in buildings and improvements reflected in the statements of income is calculated over the estimated useful lives of the assets as follows: Buildings....................15 to 39 years Improvements.................Terms of leases or useful lives, whichever is shorter The aggregate cost for Federal income tax purposes was approximately $1,394 million at December 31, 1997. The changes in total real estate assets for the years ended December 31, 1997, 1996, and 1995 are as follows: <TABLE> <CAPTION> Years Ended December 31, ------------ 1997 1996 1995 -------------------------------------------------------- <S> <C> <C> <C> Balance, beginning of period $1,072,055,986 $932,390,261 $796,611,263 Acquisitions ............. 276,119,791 100,808,213 83,267,813 Improvements ............. 61,144,440 40,108,471 60,586,575 Sales .................... (5,124,058) (1,250,959) (8,075,390) -------------------------------------------------------- Balance, end of period ..... $1,404,196,159 $1,072,055,986 $932,390,261 ======================================================== </TABLE> The changes in accumulated depreciation for the years ended December 31, 1997, 1996, and 1995 are as follows: <TABLE> <CAPTION> Years Ended December 31, ------------- 1997 1996 1995 -------------------------------------------------- <S> <C> <C> <C> Balance, beginning of period $180,552,647 $156,131,718 $132,556,084 Depreciation for year .... 28,371,587 24,963,191 23,608,732 Sales .................... (1,516,143) (542,262) (33,098) -------------------------------------------------- Balance, end of period ..... $207,408,091 $180,552,647 $156,131,718 ================================================== </TABLE> 62