SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 19, 2002
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IRT PROPERTY COMPANY
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(Exact Name of Registrant as Specified in Charter)
Georgia 1-7859 58-1366611
---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
200 Galleria Parkway, Suite 1400, Atlanta, Georgia 30339
-------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (770) 955-4406
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1
ITEM 5. OTHER EVENTS.
IRT Property Company (the "Company") is filing financial statements that
were originally filed in Item 8 of its 2001 Annual Report on Form 10-K, to
include the audit report of Deloitte & Touche LLP on the Company's Consolidated
Financial Statements as of December 31, 2001 and 2000 and for the three years in
the period ended December 31, 2001. Deloitte & Touche audited these financial
statements after it replaced the Company's previous auditor in May 2002. The
audit report of Deloitte & Touche LLP contains an unqualified opinion, as did
the audit report of the Company's previous auditor. Certain amounts in the
consolidated financial statements have been reclassified to conform with the
presentation in the Company's 2002 Quarterly Condensed Consolidated Financial
Statements.
In addition, the Company is filing these financial statements to reflect
the reclassification of discontinued operations as prescribed by Statement of
Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." SFAS No. 144 requires the Company to report
in discontinued operations the results of operations of a property that has
either been disposed or is classified as held for sale, unless certain
conditions are met. SFAS No. 144 further requires the Company to reclassify
results of operations from a property disposed of or held for sale subsequent to
December 31, 2001 as income from discontinued operations during prior reported
periods.
During the nine-month period ended September 30, 2002, the Company sold one
property that was not classified as an asset held for sale as of December 31,
2001. The results of operations from this property have been reclassified as
income from discontinued operations for the three years in the period ended
December 31, 2001 in the accompanying consolidated statements of earnings. There
is no effect on the previously reported net earnings available for common
shareholders.
Management does not believe that adoption of SFAS No. 144 or the
reclassifications described above have a material effect on the Company's
selected consolidated financial data or management's discussion and analysis of
financial condition and results of operations for the three years in the period
ended December 31, 2001 as previously reported in the Company's 2001 Annual
Report on Form 10-K.
2
ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
IRT PROPERTY COMPANY AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
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Independent Auditors' Report 4
Consolidated Balance Sheets:
December 31, 2001 and 2000 5
Consolidated Statements of Earnings:
For the Years Ended December 31, 2001, 2000 and 1999 6
Consolidated Statements of Changes in Shareholders' Equity:
For the Years Ended December 31, 2001, 2000 and 1999 7
Consolidated Statements of Cash Flows:
For the Years Ended December 31, 2001, 2000 and 1999 8
Notes to Consolidated Financial Statements:
December 31, 2001, 2000 and 1999 9
SCHEDULES
III Real Estate and Accumulated Depreciation 38
IV Mortgage Loans on Real Estate 45
3
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
IRT Property Company
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of IRT
Property Company (the "Company") (a Georgia corporation) and subsidiaries as of
December 31, 2001 and 2000, and the related consolidated statements of earnings,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 2001. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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
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, such consolidated financial statements present fairly, in
all material respects, the financial position of IRT Property Company and
subsidiaries as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States of America.
As discussed in Note 26 to the consolidated financial statements, on
October 28, 2002, the Company executed a merger agreement with Equity One, Inc.
to which Equity One, Inc. will acquire the Company.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to
consolidated financial statements are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
November 19, 2002
4
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
2001 2000
---------- ---------
ASSETS
Real estate investments:
Rental properties $ 659,820 $632,337
Properties under development 23,445 4,922
---------- ---------
683,265 637,259
Accumulated depreciation (109,344) (96,183)
---------- ---------
Net rental properties 573,921 541,076
Equity investment in and advances to unconsolidated affiliates - 17,342
Net investment in direct financing leases 2,174 4,245
Mortgage loans, net 314 70
---------- ---------
Net real estate investments 576,409 562,733
Cash and cash equivalents 2,457 831
Prepaid expenses and other assets 11,634 10,996
---------- ---------
Total assets $ 590,500 $574,560
========== =========
LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable, net $ 134,672 $116,509
7.3% convertible subordinated debentures, net 23,275 23,275
Senior notes, net 124,760 124,714
Indebtedness to banks 51,654 55,000
Accrued interest 4,598 5,010
Accrued expenses and other liabilities 10,652 6,918
---------- ---------
Total liabilities 349,611 331,426
Commitments and contingencies (Notes 5 and 13)
Minority interest payable 7,755 7,981
Shareholders' equity:
Preferred stock, $1 par value, authorized 10,000,000 shares;
none issued - -
Common stock, $1 par value, 150,000,000 shares authorized;
33,234,206 shares issued in 2001 and 2000, respectively 33,234 33,234
Additional paid-in capital 272,172 272,040
Deferred compensation/stock loans (1,732) (1,850)
Treasury stock, at cost, 2,738,204 and 2,889,276 shares
in 2001 and 2000, respectively (22,783) (23,883)
Cumulative distributions in excess of net earnings (47,757) (44,388)
---------- ---------
Total shareholders' equity 233,134 235,153
---------- ---------
Total liabilities and shareholders' equity $ 590,500 $574,560
========== =========
The accompanying notes are an integral part of these consolidated balance
sheets.
5
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2001 2000 1999
-------- -------- --------
REVENUES:
Income from rental properties $84,992 $83,507 $83,094
Interest income 158 967 381
Interest on direct financing leases 385 542 560
Other income - - 969
-------- -------- --------
Total revenues 85,535 85,016 85,004
-------- -------- --------
EXPENSES:
Operating expenses of rental properties 21,315 20,229 19,619
Interest expense 22,525 21,747 21,473
Depreciation 14,941 14,226 13,739
Amortization of debt costs 641 541 460
General and administrative 4,570 3,507 3,432
-------- -------- --------
Total expenses 63,992 60,250 58,723
EQUITY IN (LOSS) EARNINGS OF UNCONSOLIDATED AFFILIATES (4) (56) 4
-------- -------- --------
Income from continuing operations before income taxes,
minority interest, gain on sales of properties,
discontinued operations and extraordinary item 21,539 24,710 26,285
INCOME TAX PROVISION (53) - -
MINORITY INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP (530) (568) (654)
GAIN ON SALES OF OPERATING PROPERTIES AND OUTPARCELS 3,848 4,549 2,483
-------- -------- --------
Income from continuing operations 24,804 28,691 28,114
-------- -------- --------
DISCONTINUED OPERATIONS
Income from discontinued operations, net of minority interest 416 348 374
-------- -------- --------
Income before extraordinary item 25,220 29,039 28,488
EXTRAORDINARY ITEM
Loss on extinguishment of debt - - (157)
-------- -------- --------
NET INCOME $25,220 $29,039 $28,331
======== ======== ========
PER SHARE: (Note 20)
Income from continuing operations - basic $ 0.82 $ 0.91 $ 0.85
Income from discontinued operations - basic 0.01 0.01 0.01
-------- -------- --------
Income before extraordinary item 0.83 0.92 0.86
Extraordinary item - basic - - -
-------- -------- --------
Net earnings - basic $ 0.83 $ 0.92 $ 0.86
======== ======== ========
Income from continuing operations - diluted $ 0.82 $ 0.90 $ 0.85
Income from discontinued operations - diluted 0.01 0.01 0.01
-------- -------- --------
Income before extraordinary item 0.83 0.91 0.86
Extraordinary item - diluted - - -
-------- -------- --------
Net earnings - diluted $ 0.83 $ 0.91 $ 0.86
======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 30,322 31,536 33,119
======== ======== ========
Diluted 33,301 34,432 33,904
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
6
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Total Shares
------------------ Additional Deferred
Common Treasury Common Paid-In Treasury Compensation/
Stock Stock Stock Capital Stock Stock Loans
------- --------- -------- --------- ---------- ---------------
BALANCE AT DECEMBER 31, 1998 33,252 - $33,252 $272,975 $ - $ (2,386)
Net earnings - - - - - -
Dividends declared - $.93 per share - - - - - -
Exercise of options 4 - 4 33 - -
Amortization of deferred compensation - - - - - 103
Forfeiture of restricted stock (22) - (22) (203) - 225
Adjustment to minority interest of unitholders
in operating partnership for
issuance of additional units - - - (357) - -
Acquisition of treasury stock - (517) - - (4,026) 250
------- --------- -------- --------- ---------- ---------------
BALANCE AT DECEMBER 31, 1999 33,234 (517) 33,234 272,448 (4,026) (1,808)
Net earnings - - - - - -
Dividends declared - $.94 per share - 59 - (16) 513 -
Exercise of options - 37 - (8) 295 -
Amortization of deferred compensation - - - - - 122
Issuance of restricted stock to employees - 25 - 13 191 (204)
Forfeiture of restricted stock - (5) - (2) (38) 40
Adjustment to minority interest of unitholders
in operating partnership for
issuance of additional units - - - (395) - -
Acquisition of treasury stock - (2,488) - - (20,818) -
------- --------- -------- --------- ---------- ---------------
BALANCE AT DECEMBER 31, 2000 33,234 (2,889) 33,234 272,040 (23,883) (1,850)
Net earnings - - - - - -
Dividends declared - $.94 per share - - - - - -
Exercise of options - 196 - 114 1,486 -
Shares issued pursuant to
the stock purchase plan - 2 - 5 19 -
Amortization of deferred compensation - - - - - 118
Adjustment to minority interest of unitholders
in operating partnership for
issuance of additional units - - - 13 - -
Acquisition of treasury stock - (47) - - (405) -
------- --------- -------- --------- ---------- ---------------
BALANCE AT DECEMBER 31, 2001 33,234 (2,738) $33,234 $272,172 $ (22,783) $ (1,732)
======= ========= ======== ========= ========== ===============
Cumulative
Distributions Total
in Excess of Shareholders'
Net Earnings Equity
-------------- ---------------
BALANCE AT DECEMBER 31, 1998 $ (41,068) $ 262,773
Net earnings 28,331 28,331
Dividends declared - $.93 per share (30,908) (30,908)
Exercise of options - 37
Amortization of deferred compensation - 103
Forfeiture of restricted stock - -
Adjustment to minority interest of unitholders
in operating partnership for
issuance of additional units - (357)
Acquisition of treasury stock - (3,776)
-------------- ---------------
BALANCE AT DECEMBER 31, 1999 (43,645) 256,203
Net earnings 29,039 29,039
Dividends declared - $.94 per share (29,782) (29,285)
Exercise of options - 287
Amortization of deferred compensation - 122
Issuance of restricted stock to employees -
Forfeiture of restricted stock - -
Adjustment to minority interest of unitholders
in operating partnership for
issuance of additional units - (395)
Acquisition of treasury stock - (20,818)
-------------- ---------------
BALANCE AT DECEMBER 31, 2000 (44,388) 235,153
Net earnings 25,220 25,220
Dividends declared - $.94 per share (28,589) (28,589)
Exercise of options - 1,600
Shares issued pursuant to
the stock purchase plan - 24
Amortization of deferred compensation - 118
Adjustment to minority interest of unitholders
in operating partnership for
issuance of additional units - 13
Acquisition of treasury stock - (405)
-------------- ---------------
BALANCE AT DECEMBER 31, 2001 $ (47,757) $ 233,134
============== ===============
The accompanying notes are an integral part of these consolidated statements.
7
IRT PROPERTY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)
2001 2000 1999
--------- --------- ---------
Cash flows from operating activities:
Net earnings $ 25,220 $ 29,039 $ 28,331
Adjustments to reconcile earnings to net cash from operating activities:
Depreciation 15,088 14,368 13,869
Gain on sales of operating properties (2,498) (4,549) (2,483)
Gain on sales of outparcels (1,350) - -
Minority interest of unitholders in partnership (213) 288 (50)
Straight line rent adjustment (533) (153) -
Amortization of deferred compensation 118 122 103
Amortization of debt costs and discounts 673 700 519
Amortization of capitalized leasing income 152 166 160
Extraordinary loss - extinguishment of debt - - 157
Changes in assets and liabilities:
Increase in accrued interest on debentures and senior notes 40 - -
Decrease (increase) in interest receivable, prepaid expenses
and other assets 476 (1,708) (146)
Increase in accrued expenses and other liabilities 2,317 143 992
--------- --------- ---------
Net cash flows from operating activities 39,490 38,416 41,452
--------- --------- ---------
Cash flows used in investing activities:
Additions to operating properties, net (23,801) (19,424) (14,714)
Additions to development properties, net (13,443) - -
Proceeds from sales of operating properties, net 11,196 16,719 12,409
Proceeds from sale of outparcels, net 2,113 - -
Investment in unconsolidated affiliates - (10,091) (7,251)
Purchase of unconsolidated affiliate, net of assets acquired 177 - -
Distribution from dissolution of unconsolidated affiliate 21 - -
Funding of mortgage loans (516) (4,507) -
Collections of mortgage loans 24 292 1,005
--------- --------- ---------
Net cash flows used in investing activities (24,229) (17,011) (8,551)
--------- --------- ---------
Cash flows used in financing activities:
Cash dividends, net (28,589) (29,285) (30,908)
Purchase of treasury stock (405) (20,818) (3,776)
Exercise of stock options 1,600 287 37
Issuance of shares under stock purchase plan 24 - -
Proceeds from mortgage notes payable 20,740 - 40,000
Principal amortization of mortgage notes payable (2,577) (2,134) (1,835)
Repayment of mortgage notes payable - (3,521) (3,958)
Proceeds from 7.77% senior notes issuance 50,000 - -
Repayment of 7.45% senior notes (50,000) - -
(Decrease) increase in bank indebtedness (3,346) 34,600 (31,100)
Payment of deferred financing costs (1,082) (217) (1,191)
--------- --------- ---------
Net cash flows used in financing activities (13,635) (21,088) (32,731)
--------- --------- ---------
Net increase in cash and cash equivalents 1,626 317 170
Cash and cash equivalents at beginning of period 831 514 344
--------- --------- ---------
Cash and cash equivalents at end of period $ 2,457 $ 831 $ 514
========= ========= =========
Supplemental disclosures of cash flow information:
Total cash paid during period for interest $ 23,937 $ 21,501 $ 21,344
========= ========= =========
The accompanying notes are an integral part of these consolidated statements.
8
IRT PROPERTY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000, AND 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. ORGANIZATION AND NATURE OF OPERATIONS
IRT Property Company, individually and collectively with its subsidiaries
("IRT" or the "Company"), was founded in 1969 and became a public company in May
1971 (NYSE: IRT). The Company is an owner, operator, redeveloper and developer
of high quality, well located neighborhood and community shopping centers. The
Company's portfolio consists of 87 shopping centers, three shopping center
investments, four development properties, one industrial property and four
mortgage loans. The 87 shopping centers and the three shopping center
investments total approximately 9.7 million square feet of retail space and are
located in eleven southeastern states. IRT shopping centers are anchored by
necessity-oriented retailers such as supermarkets, drug stores, national value
retailers and department stores.
The Company has four wholly-owned subsidiaries. VW Mall, Inc. ("VWM") was
formed in July 1994, but is currently inactive. IRT Alabama, Inc. ("IRTAL") was
formed in August 1997 to purchase Madison Centre in Madison, Alabama, which it
continues to own, but it conducts no significant operations beyond this
property. IRT Management Company ("IRTMC") was formed in 1990 and currently
holds 93.3% of the operating units of IRT Partners L.P ("LP").
IRT Capital Corporation II ("IRTCCII") is a taxable real estate investment
trust ("REIT") subsidiary and was formed under the laws of Georgia in 1999.
IRTCCII elected on March 15, 2001 to become a taxable REIT subsidiary pursuant
to the Tax Relief Extension Act of 1999 as amended (the "REIT Modernization Act
of 1999"). Although IRTCCII is primarily used by the company to develop
properties, it also has the ability to buy and sell properties, provide equity
to developers and perform third-party management, leasing and brokerage
operations.
The Company also serves as general partner of LP, a Georgia limited
partnership formed in 1998 to enhance the Company's acquisition opportunities
through a "downreit" structure. This structure offers potential sellers the
ability to make a tax-deferred sale of their real estate investment in exchange
for Operating Partnership Units ("OP Units") of LP. OP Units receive the same
distributions as the Company's common stock and are redeemable for shares of the
Company's common stock. IRT and IRTMC, together, owned approximately 1% and
93.3%, respectively, of LP as of December 31, 2001. The accounts of LP are
included in the accompanying consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
IRT, its wholly-owned subsidiaries, majority-owned and controlled subsidiaries
and the partnership. Prior to 2001, the Company had investments in affiliates
over which the Company did not exercise control, and therefore accounted for the
investments by the equity method. Intercompany transactions and balances have
been eliminated in consolidation.
9
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates and assumptions
within the financial statements include impairment evaluation of operating and
development properties and other long-term assets, determination of useful lives
of assets subject to depreciation or amortization and valuation adjustments to
tenant related accounts. Actual results could differ from those estimates.
REVENUE RECOGNITION
Leases with tenants are accounted for as operating leases. Rental revenue
for leases entered into after January 1, 2000 is recognized on a straight-line
basis over the initial lease term. Rental revenue for leases entered into prior
to January 1, 2000, is accounted for based on contractual rental obligations,
which is not materially different from revenue recorded on a straight-line basis
to any interim or annual period. Certain tenants are required to pay percentage
rents based on their gross sales exceeding specified amounts. This percentage
rental revenue is recorded upon collection, which is not materially different
from recognizing such percentage rental revenue on an accrual basis. The Company
receives reimbursements from tenants for real estate taxes, common area
maintenance and other recoverable costs. These tenant reimbursements are
recognized as revenue in the period the related expense is recorded.
The Company makes specific valuation adjustments (bad debt reserves) to
tenant related revenue based upon the tenant's credit and business risk.
Other non-rental revenue is recognized as revenue when earned.
Gain on sales of real estate assets is recognized at the time title to the
asset is transferred to the buyer, subject to the adequacy of the buyer's
initial and continuing investment and the assumption by the buyer of all future
ownership risks of the property. The gain on sales of operating properties is
calculated based on the net carrying value of the property at the time of sale.
The net carrying value represents the cost of acquisition, renovation or
betterment of the property less the accumulated depreciation of such costs. For
gains on outparcel sales, the gain is calculated based on the value assigned to
the outparcel lot through specific identification of costs or the relative sales
value of the outparcel lot to the entire property.
10
RENTAL PROPERTIES AND PROPERTIES UNDER DEVELOPMENT
Rental properties are stated at cost less accumulated depreciation. Costs
incurred for the acquisition, renovation, and betterment of the properties are
capitalized and depreciated over their estimated useful lives. Recurring
maintenance and repairs are charged to expense as incurred. Depreciation is
computed on a straight-line basis generally for a period of sixteen to forty
years for significant improvements and buildings. Tenant improvements are
depreciated on a straight-line basis over the life of the related lease.
Properties under development are stated at cost. Depreciation does not
begin until the asset is placed in service. Acquisition, development and
construction costs are capitalized, including predevelopment costs, interest and
salaries. Predevelopment costs include costs for zoning, planning, development
feasibility studies and other costs directly related to the development
property. Unsuccessful predevelopment efforts and their related costs are
expensed when it is probable development efforts will not continue. Interest
costs and salaries directly attributable to the development process are
capitalized for the period of development to ready the property for its intended
use.
The Company periodically evaluates the carrying value of its long-lived
assets, including operating and development properties, in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Impairment is based on whether it is probable that undiscounted future cash
flows from each property will be less than its net book value. If an impairment
exists, the asset is written down to its estimated fair value and an impairment
loss is recognized.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
DEFERRED LEASING COSTS
Internal and external commission costs incurred in obtaining tenant leases
are included in prepaid expenses and other assets. The costs are amortized on a
straight-line basis over the terms of the related leases. Upon lease
cancellation or termination, unamortized costs are charged to operations.
DEBT ISSUE AND DEFERRED FINANCE COSTS
Costs related to the issuance of debt instruments and loan costs incurred
in obtaining long-term financing are included within prepaids and other assets.
The costs are capitalized and amortized over the life of the related issue or
financing on a straight-line basis, which approximates the effective interest
method. Upon conversion, in the event of redemption or prepayment, applicable
unamortized costs are charged to shareholders' equity or to operations,
respectively.
11
INCOME TAXES
The Company has elected since its inception to be treated as a REIT under
the Internal Revenue Code of 1986, as amended (the "Code"). In accordance with
the Code, a REIT must distribute at least 90% (95% prior to 2001) of its taxable
income to its shareholders each year and meet certain other qualifications
prescribed by the Code. If all qualifications are met, the Company will not be
taxed on that portion of its taxable income which is distributed to its
shareholders. For the special provisions applicable to REITs, see Sections
856-860 of the Code. IRT intends to continue to elect to be treated and to
continue to qualify as a REIT under the Code.
If the Company fails to qualify as a REIT in any taxable year, the Company
will be subject to federal income tax, at regular corporate tax rates, on its
taxable income. The Company may be disqualified from treatment as a REIT for the
four taxable years following the year during which its REIT qualification is
lost. Even if the Company maintains its qualification for taxation as a REIT,
the Company also may be subject to certain state and local taxes on its income
and property and to federal income and excise taxes on its undistributed income.
The Company has one wholly-owned subsidiary, IRTCCII, that elected on March
15, 2001 to become a taxable REIT subsidiary pursuant to the REIT Modernization
Act of 1999. The services provided by this subsidiary generate taxable income
and are taxed at regular corporate income tax rates. The corresponding income
tax is expensed.
EARNINGS PER SHARE
Basic EPS excludes dilution and is computed by dividing net earnings by the
weighted average number of 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.
STOCK-BASED COMPENSATION
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25"). The Company has adopted the disclosure option of SFAS
No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 requires
companies that do not choose to account for stock-based compensation as
prescribed by the statement to disclose the pro forma effects on net income and
earnings per share as if SFAS No. 123 had been adopted. Additionally, certain
other disclosures are required with respect to stock-based compensation and the
assumptions used to determine the pro forma effects of SFAS No. 123.
12
SEGMENT REPORTING
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement established standards
for reporting financial and descriptive information about operating segments in
annual financial statements. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Company's chief operating
decision maker is its senior management group.
The Company owns and operates retail shopping centers in the southeastern
United States. Such shopping centers generate rental and other revenue through
the leasing of shop spaces to a diverse base of tenants. The Company evaluates
the performance of each of its shopping centers on an individual basis due to
specific geographical market demographics and local competitive forces. However,
because the shopping centers have generally similar economic characteristics and
tenants, the shopping centers have been aggregated into one reportable segment.
DERIVATIVE FINANCIAL INSTRUMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. This statement, as amended, establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair market value. SFAS No. 133 requires that changes in the derivative's fair
market value be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in
the income statement and requires that a company must formally document,
designate, and assess the effectiveness of transactions that receive hedge
accounting. The Company adopted this statement on January 1, 2001. The Company
did not hold and has not engaged in transactions using derivative financial
instruments. The adoption of this statement did not have a material effect on
the Company's balance sheets or statements of earnings.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, SFAS No. 141, "Business Combinations," was issued. This
statement eliminates pooling of interests accounting and requires all business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method. The Company adopted this standard on July 1, 2001 and adoption
of this standard did not have a significant effect on the Company's financial
statements.
In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets," was
issued establishing accounting and reporting standards that address how goodwill
and intangible assets should be accounted for within the financial statements.
The statement requires companies to not amortize goodwill and intangible assets
with infinite lives, but to test such assets for impairment on a regular basis.
An intangible asset that has a finite life should be amortized over its useful
life and evaluated for impairment on a regular basis. This statement is
effective for fiscal years beginning after December 15, 2001. The Company
adopted this standard on January 1, 2002 and adoption of this standard did not
have a significant effect on the Company's financial statements.
13
In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," was issued establishing new rules and clarifying
implementation issues with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," by allowing a
probability-weighted cash flow estimation approach to measure the impairment
loss of a long-lived asset. The statement also established new standards for
accounting for discontinued operations. Transactions that qualify for reporting
in discontinued operations include the disposal of a component of an entity's
operations that comprises operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the rest
of the entity. The statement is effective for fiscal years beginning after
December 15, 2001. The Company adopted this standard on January 1, 2002 and
adoption of this standard did not have a significant effect on the Company's
financial statements.
In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and
64, Amendment of FASB Statement No. 13, and Technical Corrections", was issued.
This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from
Extinguishment of Debt", and an amendment of that Statement, FASB Statement No.
64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". This
Statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets
of Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for
Leases", to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. This Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The adoption of SFAS No.
145 had no effect on the financial position and results of operations of the
Company.
In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities", was issued which nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit and Activity (including Certain Costs Incurred
in a Restructuring)". The adoption of SFAS No. 146 had no effect on the
financial position and results of operations of the Company.
RECLASSIFICATION OF AMOUNTS
Certain amounts in the consolidated financial statements have been
reclassified to conform with the presentation in the Company's 2002 Quarterly
Condensed Consolidated Financial Statements.
14
3. RENTAL PROPERTIES
Buildings and related improvements are depreciated on a straight-line basis
for a period of 16 to 40 years. Tenant improvements are depreciated on a
straight-line basis over the life of the related lease. Rental properties are
comprised of the following:
DECEMBER 31,
------------------
2001 2000
-------- --------
Land covered by purchase-leaseback agreements $ 250 $ 686
Land related to building and improvements 153,300 146,102
Building and improvements 493,188 476,510
Tenant improvements 13,082 9,039
-------- --------
Total rental properties $659,820 $632,337
======== ========
Upon expiration of the leases for land covered by purchase-leaseback
agreements, all improvements on the land will become the property of the
Company. The lessee of one of these properties had the option, subject to
certain conditions, to repurchase the land. The option price was for an amount
greater than the Company's carrying value of the related land. This option to
repurchase the land was exercised in 2001, resulting in a gain to the Company of
$347, included in the gain on sale of operating properties and outparcels in the
accompanying Consolidated Statements of Earnings.
Rental properties acquired and disposed in 2001, 2000 and 1999 are
summarized below. In addition, see Footnote 7 for additional disclosure of a
property disposition in 2001.
SHOPPING CENTER ACQUISITIONS
Date Square Year Built/ % Leased Total Initial
Acquired Property Name City, State Footage Renovated at Acquisition Cost Cash Paid
--------------- ----------------------- ----------------- ----------- --------- -------------- --------- ----------
(unaudited)
2001 ACQUISITIONS
4/12/01 Unigold Shopping Center Orlando, FL 102,985 1987 97% $ 8,000 $ 7,903
11/30/01 Carrollwood Center Tampa, FL 96,242 1971/1996 85% 6,763 6,763
--------- ------- ---------
199,227 $14,763 $ 14,666
========== ========= =========
2000 ACQUISITIONS
12/28/00 Pine Ridge Square Coral Springs, FL 117,399 1986 100% $11,600 $ 11,438
1999 ACQUISITIONS
2/26/99 Shoppes at Lago Mar Kendall, FL 82,613 1995 98% $ 9,916 $ 4,174
3/15/99 Willamsburg at Dunwoody Dunwoody, GA 44,928 1983 100% 5,602 5,602
----------- ------- ---------
127,541 $15,518 $ 9,776
=========== ======== =========
15
SHOPPING CENTER DISPOSITIONS
Date Square Sales Net Gain
Sold Property Name City, State Footage Price Proceeds (Loss)
----------------- ----------------------- -------------------- ----------- ------- --------- -------
(unaudited)
2001 DISPOSITIONS
4/18/01 Eden Center Eden, NC 56,355 $ 3,950 $ 3,830 $ 742
5/31/01 Chadwick Square Hendersonville, NC 32,100 2,401 2,351 366
6/8/01 Ft. Walton Beach Plaza Ft. Walton Beach, FL 48,248 1,650 1,515 (135)
----------- ------- --------- -------
136,703 $ 8,001 $ 7,696 $ 973
=========== ======= ========= =======
2000 DISPOSITIONS
1/14/00 Palm Gardens Largo, FL 49,890 $ 1,500 $ 1,389 $ 804
8/1/00 Palm Gardens (1) 651 651
2/18/00 Westgate Square Sunrise, FL 104,853 11,355 10,271 1,934
8/31/00 Abbeville Abbeville, SC 59,525 177 135 (5)
10/3/00 Carolina Place Hartsville, SC 36,560 2,104 2,016 228
12/29/00 Chester Plaza Chester, SC 71,443 2,250 2,257 937
----------- ------- --------- -------
322,271 $17,386 $ 16,719 $4,549
=========== ======= ========= =======
1999 DISPOSITIONS
6/1/99 Litchfield Landing Pawley's Island, SC 42,201 $ 3,190 $ 3,129 $1,191
6/1/99 First Street Station Albemarle, NC 52,230 3,137 3,038 320
6/1/99 Taylorsville Taylorsville, NC 48,537 2,571 2,430 609
6/1/99 University Center Greenville, NC 56,180 3,462 3,399 202
Other 417 413 161
----------- ------- -------- ------
199,148 $12,777 $ 12,409 $2,483
=========== ======= ========= ======
(1) Represents additional sale proceeds received subsequent to the sale of the property.
4. PROPERTIES UNDER DEVELOPMENT
Development properties consisted of the following:
DECEMBER 31,
---------------
2001 2000
------- ------
Land related to building and improvements $11,491 $ 415
Building and improvements 11,108 264
Development agreements and loans 846 4,243
------- ------
Total properties under development $23,445 $4,922
======= ======
At December 31, 2001, the Company is in the process of developing four
shopping centers.
- Conway Crossing, located in Orlando, Florida, will consist of a 44,270
square foot Publix with 28,740 additional square feet of shop space.
- The Shops at Huntcrest, in Lawrenceville, Georgia, will be a 97,000 square
foot shopping center anchored by a 54,340 square foot Publix.
- Lutz Lake Crossing, in Tampa, Florida, will have approximately 68,000
square feet of retail space, anchored by a 44,270 square foot Publix.
- Miramar, located in Broward County, Florida, encompasses approximately 23
acres and site preparation has been completed. This development is
anticipated to consist of one outparcel and a 185,000 square foot
developable tract for a national anchor tenant.
16
During the year, IRTCCII completed the first development property, Regency
Square, a 85,864 square foot shopping center, located in Port Richey, Florida
and anchored by a 44,270 square foot Publix. The total cost of the development
property was $9,817.
Costs capitalized for development properties include, but are not limited
to, interest and internal development costs. Amounts capitalized for interest in
2001, 2000 and 1999 were $776, $906 and $288, respectively. Internal development
costs capitalized in 2001, 2000 and 1999 were $642, $276 and $230, respectively.
5. DEVELOPMENT AGREEMENTS AND LOANS
The Company enters into agreements and loans to develop shopping centers
with local developers. The loans generally consist of the Company committing to
loan a fixed amount, at a specified interest rate, for the development of the
shopping center. The loan is secured by the development property and due upon
completion of the shopping center.
Additionally, the Company could enter into a separate agreement to purchase
the completed shopping center. Generally, the purchase price to the Company is
based on the shopping center's net operating income and an implied rate of
return at the time when the developer meets certain budgetary and leasing
requirements. The developer is responsible for all construction matters as well
as initial leasing efforts.
During 2001, the Company completed one such development agreement and loan,
Chastain Square II. This agreement was to purchase the expansion of a currently
owned shopping center by 13,500 square feet. The Company made the development
loan pursuant to a January 2000 development agreement with the developer. The
Company loaned the developer a total of $3,645, which was repaid upon completion
of the expansion. This loan had an interest rate of one month London Interbank
Offering Rate ("LIBOR") plus a premium of 2.5%. Interest capitalized from this
loan was $189 and $218 for 2001 and 2000, respectively. The Company then
purchased the expansion, under the terms of the agreement, for approximately
$4,155.
In October 2000, the Company entered into a development loan for the
development of a 89,720 square foot center, Freehome Village, located in
Cherokee County, Georgia. The Company has guaranteed to loan an amount not to
exceed $925, of which $846 has been distributed as of December 31, 2001. The
loan bears interest at the one month LIBOR plus a premium of 3%. Interest
capitalized from this loan was $53 and $17 for 2001 and 2000, respectively. The
loan is secured by the development property and is due in full in October 2002.
As of December 31, 2001, the Company does not have an obligation to purchase
this development.
17
6. INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
IRT Capital Corporation ("IRTCC") was formed under the laws of Georgia in
1996 and subsequently dissolved in January 2001. This taxable subsidiary of the
Company had the ability to develop properties, buy and sell properties, provide
equity to developers and perform third-party management, leasing and brokerage.
The Company held 96% of the non-voting common stock and 1% of the voting common
stock of IRTCC. The remaining common stock was held by a former member of the
Board of Directors and a former executive officer of the Company. In January
2001, the Company purchased the remaining outstanding common stock from the
former member of the Board of Directors and the former executive officer of the
Company for $16. Subsequent to IRTCC becoming wholly-owned, the Company
dissolved IRTCC and recognized a $4 loss. The loss upon dissolution is included
within the accompanying Consolidated Statements of Earnings. Prior to IRTCC
becoming wholly owned and consolidated, it was accounted for by the Company
under the equity method.
IRTCCII was formed under the laws of Georgia in 1999 and is used by the
Company primarily to develop properties. IRTCCII elected on March 15, 2001 to
become a taxable REIT subsidiary pursuant to the REIT Modernization Act of 1999.
In conjunction with the election, the Company made IRTCCII wholly-owned by
purchasing the remaining outstanding common stock of IRTCCII for $2. Prior to
March 15, 2001, the Company held 96% of the non-voting common stock and 1% of
the voting common stock of IRTCCII. The remaining common stock was held by an
executive officer and a director of the Company. IRTCCII was accounted for by
the Company under the equity method prior to it becoming wholly-owned and
consolidated as of March 15, 2001. As a result of the consolidation, the equity
investment in IRTCCII of $17,313 was eliminated and the equity investment was
allocated, based on net book values, to the respective places within the 2001
Consolidated Balance Sheet. Within the allocation, net rental properties of the
Company increased $17,989, cash increased $177, other assets increased $220 and
liabilities increased $1,073.
LP, IRTCCII, IRTAL and IRTMC guarantee the Company's indebtedness under the
Company's existing unsecured revolving term loan and its other senior debt. The
guarantees are joint and several and full and unconditional.
Condensed consolidating financial information for the wholly owned
subsidiaries and the affiliates is presented as follows:
GUARANTORS
------------------------------- CONSOLIDATED
IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY
COMPANY SUBSIDIARIES(1) PARTNERS, LP ENTRIES COMPANY
------------- ---------------- ------------- ------------- -------------
AS OF DECEMBER 31, 2001
ASSETS
Net rental properties $ 400,158 $ 28,138 $ 145,625 $ - $ 573,921
Investment in affiliates 122,168 - - (122,168) -
Other assets 34,831 33,488 21,248 (72,988) 16,579
------------- ---------------- ------------- ------------- -------------
Total assets 557,157 61,626 166,873 (195,156) 590,500
============= ================ ============= ============= =============
LIABILITIES
Mortgage notes payable 93,115 4,093 37,464 - 134,672
Senior Notes, net 124,760 - - - 124,760
Indebtedness to banks 51,654 - - - 51,654
Other liabilities 84,928 24,431 10,802 (73,881) 46,280
------------- ---------------- ------------- ------------- -------------
Total liabilities 354,457 28,524 48,266 (73,881) 357,366
------------- ---------------- ------------- ------------- -------------
SHAREHOLDERS' EQUITY
Total shareholders' equity 202,700 33,102 118,607 (121,275) 233,134
------------- ---------------- ------------- ------------- -------------
Total liabilities and shareholders' equity $ 557,157 $ 61,626 $ 166,873 $ (195,156) $ 590,500
============= ================ ============= ============= =============
18
GUARANTORS
---------------------------------------------------
IRT PROPERTY COMBINED IRT IRT CAPITAL IRT CAPITAL
COMPANY SUBSIDIARIES (1) PARTNERS, LP CORPORATION II CORPORATION I
------------- ------------- ------------- ---------------- --------------
AS OF DECEMBER 31, 2000
ASSETS
Net rental properties $ 398,387 $ 5,575 $ 137,114 $ 17,989 $ -
Investment in affiliates 107,555 - - - -
Mortgage loans, net 70 - - - -
Other assets 25,131 21,720 8,700 397 31
------------- ------------- ------------- ---------------- --------------
Total assets 531,143 27,295 145,814 18,386 31
============= ============= ============= ================ ==============
LIABILITIES
Mortgage notes payable 81,741 4,173 30,595 - -
Senior Notes, net 124,714 - - - -
Indebtedness to banks 55,000 - - - -
Other liabilities 54,344 1,319 8,320 18,396 2
------------- ------------- ------------- ---------------- --------------
Total liabilities 315,799 5,492 38,915 18,396 2
------------- ------------- ------------- ---------------- --------------
SHAREHOLDERS' EQUITY
Total shareholders' equity 215,344 21,803 106,899 (10) 29
------------- ------------- ------------- ---------------- --------------
Total liabilities and shareholders' equity $ 531,143 $ 27,295 $ 145,814 $ 18,386 $ 31
============= ============= ============= ================ ==============
CONSOLIDATED
ELIMINATING IRT PROPERTY
ENTRIES COMPANY
------------- -------------
AS OF DECEMBER 31, 2000
ASSETS
Net rental properties $ (17,989) $ 541,076
Investment in affiliates (90,213) 17,342
Mortgage loans, net - 70
Other assets (39,907) 16,072
------------- -------------
Total assets (148,109) 574,560
============= =============
LIABILITIES
Mortgage notes payable - 116,509
Senior Notes, net - 124,714
Indebtedness to banks - 55,000
Other liabilities (39,197) 43,184
------------- -------------
Total liabilities (39,197) 339,407
------------- -------------
SHAREHOLDERS' EQUITY
Total shareholders' equity (108,912) 235,153
------------- -------------
Total liabilities and shareholders' equity $ (148,109) $ 574,560
============= =============
GUARANTORS
--------------------------------
IRT PROPERTY COMBINED IRT ELIMINATING
COMPANY SUBSIDIARIES(1) PARTNERS, LP ENTRIES
-------------- ---------------- -------------- -------------
AS OF DECEMBER 31, 2001
REVENUES
Income from rental properties $ 61,071 $ 1,330 $ 22,591 $ -
Interest Income 801 - 417 (1,060)
Interest on direct financing leases 385 - - -
Other income 696 10,989 - (11,685)
-------------- ---------------- -------------- -------------
Total revenues 62,953 12,319 23,008 (12,745)
-------------- ---------------- -------------- -------------
EXPENSES
Operating expenses of rental properties 14,904 322 6,089 -
Interest expense 20,182 632 2,772 (1,061)
Depreciation 10,974 219 3,748 -
Amortization of debt costs 629 3 9 -
General and administrative 2,920 289 1,050 311
-------------- ---------------- -------------- -------------
Total expenses 49,609 1,465 13,668 (750)
-------------- ---------------- -------------- -------------
Equity in earnings (losses) of affiliates 10,854 - - (10,858)
-------------- ---------------- -------------- -------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and discontinued operations 24,198 10,854 9,340 (22,853)
Income tax provision - - - (53)
Minority interest in operating partnership 24 - - (554)
Gain on sales of properties 1,390 - 1,401 1,057
-------------- ---------------- -------------- -------------
Income from continuing operations before
discontinued operations 25,612 10,854 10,741 (22,403)
Income from discontinued operations (49) - 465 -
-------------- ---------------- -------------- -------------
Net Income $ 25,563 $ 10,854 $ 11,206 $ (22,403)
============== ================ ============== =============
Net cash flows provided by (used in)
operating activities $ 26,432 $ 10,741 $ 13,698 $ (11,381)
============== ================ ============== =============
Net cash flows (used in) provided by
investing activities $ (9,088) $ (4,164) $ (10,979) $ 2
============== ================ ============== =============
Net cash flows (used in) provided by
financing activities $ (9,796) $ (6,357) $ (8,862) $ 11,380
============== ================ ============== =============
CONSOLIDATED
IRT PROPERTY
COMPANY
--------------
AS OF DECEMBER 31, 2001
REVENUES
Income from rental properties $ 84,992
Interest Income 158
Interest on direct financing leases 385
Other income -
--------------
Total revenues 85,535
--------------
EXPENSES
Operating expenses of rental properties 21,315
Interest expense 22,525
Depreciation 14,941
Amortization of debt costs 641
General and administrative 4,570
--------------
Total expenses 63,992
--------------
Equity in earnings (losses) of affiliates (4)
--------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and discontinued operations 21,539
Income tax provision (53)
Minority interest in operating partnership (530)
Gain on sales of properties 3,848
--------------
Income from continuing operations before
discontinued operations 24,804
Income from discontinued operations 416
--------------
Net Income $ 25,220
==============
Net cash flows provided by (used in)
operating activities $ 39,490
==============
Net cash flows (used in) provided by
investing activities $ (24,229)
==============
Net cash flows (used in) provided by
financing activities $ (13,635)
==============
19
GUARANTORS
-----------------------------------------------------
IRT PROPERTY COMBINED IRT IRT CAPITAL
COMPANY SUBSIDIARIES (1) PARTNERS, LP CORPORATION II
-------------- -------------- -------------- ----------------
FOR THE YEAR ENDED DECEMBER 31, 2000
REVENUES
Income from rental properties $ 63,111 $ 688 $ 19,708 $ 129
Interest Income 636 - 331 -
Interest on direct financing leases 542 - - -
Other income 84 7,705 - -
-------------- -------------- -------------- ----------------
Total revenues 64,373 8,393 20,039 129
-------------- -------------- -------------- ----------------
EXPENSES
Operating expenses of rental properties 14,777 128 5,324 84
Interest expense 19,033 273 2,441 -
Depreciation 10,710 77 3,439 30
Amortization of debt costs 539 2 - -
General and administrative 2,656 3 848 79
-------------- -------------- -------------- ----------------
Total expenses 47,715 483 12,052 193
-------------- -------------- -------------- ----------------
Equity in earnings (losses) of affiliates 16,236 - - -
-------------- -------------- -------------- ----------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and
discontinued operations 32,894 7,910 7,987 (64)
Income tax provision - - - -
Minority interest in operating partnership 28 - - -
Gain on sales of properties 4,549 - - -
-------------- -------------- -------------- ----------------
Income from continuing operations before
discontinued operations 37,471 7,910 7,987 (64)
Income from discontinued operations (50) - 398 -
-------------- -------------- -------------- ----------------
Net Income $ 37,421 $ 7,910 $ 8,385 $ (64)
============== ============== ============== ================
Net cash flows provided by (used in) operating activities $ 28,178 $ 7,645 $ 10,837 $ 881
============== ============== ============== ================
Net cash flows provided by (used in) investing activities $ (13,749) $ (14) $ (13,898) $ (10,841)
============== ============== ============== ================
Net cash flows provided by (used in) financing activities $ (20,395) $ (7,631) $ 9,345 $ 10,148
============== ============== ============== ================
CONSOLIDATED
IRT CAPITAL ELIMINATING IRT PROPERTY
CORPORATION I ENTRIES COMPANY
--------------- ------------- --------------
FOR THE YEAR ENDED DECEMBER 31, 2000
REVENUES
Income from rental properties $ 15 $ (144) $ 83,507
Interest Income - - 967
Interest on direct financing leases - - 542
Other income - (7,789) -
--------------- ------------- --------------
Total revenues 15 (7,933) 85,016
--------------- ------------- --------------
EXPENSES
Operating expenses of rental properties - (84) 20,229
Interest expense - - 21,747
Depreciation - (30) 14,226
Amortization of debt costs - - 541
General and administrative 10 (89) 3,507
--------------- ------------- --------------
Total expenses 10 (203) 60,250
--------------- ------------- --------------
Equity in earnings (losses) of affiliates - (16,292) (56)
--------------- ------------- --------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and
discontinued operations 5 (24,022) 24,710
Income tax provision - - -
Minority interest in operating partnership - (596) (568)
Gain on sales of properties - - 4,549
--------------- ------------- --------------
Income from continuing operations before
discontinued operations 5 (24,618) 28,691
Income from discontinued operations - - 348
--------------- ------------- --------------
Net Income $ 5 $ (24,618) $ 29,039
=============== ============= ==============
Net cash flows provided by (used in) operating activities $ (7) $ (9,118) $ 38,416
=============== ============= ==============
Net cash flows provided by (used in) investing activities $ - $ 21,491 $ (17,011)
=============== ============= ==============
Net cash flows provided by (used in) financing activities $ - $ (12,555) $ (21,088)
=============== ============= ==============
20
GUARANTORS
----------------------------------------------------
IRT PROPERTY COMBINED IRT IRT CAPITAL
COMPANY SUBSIDIARIES (1) PARTNERS, LP CORPORATION II
-------------- -------------- -------------- ----------------
FOR THE YEAR ENDED DECEMBER 31, 1999
REVENUES
Income from rental properties $ 63,209 $ 742 $ 19,104 $ 57
Interest Income 57 - 324 -
Interest on direct financing leases 560 - - -
Other income 1,067 9,012 - -
-------------- -------------- -------------- ----------------
Total revenues 64,893 9,754 19,428 57
-------------- -------------- -------------- ----------------
EXPENSES
Operating expenses of rental properties 14,687 135 4,759 24
Interest expense 18,820 235 2,418 -
Depreciation 10,443 76 3,220 10
Amortization of debt costs 458 2 - -
General and administrative 2,642 2 788 20
-------------- -------------- -------------- ----------------
Total expenses 47,050 450 11,185 54
-------------- -------------- -------------- ----------------
Equity in earnings (losses) of affiliates 19,096 - - -
-------------- -------------- -------------- ----------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and
discontinued operations 36,939 9,304 8,243 3
Income tax provision - - - -
Minority interest in operating partnership 29 - - -
Gain on sales of properties 1,353 - 1,130 -
-------------- -------------- -------------- ----------------
Income from continuing operations before
discontinued operations 38,321 9,304 9,373 3
Income from discontinued operations (44) - 418 -
-------------- -------------- -------------- ----------------
Income from continuing operations 38,277 9,304 9,791 3
Extraordinary item
Loss on extinguishment of debt (157) - - -
-------------- -------------- -------------- ----------------
Net Income $ 38,120 $ 9,304 $ 9,791 $ 3
============== ============== ============== ================
Net cash flows provided by (used in) operating activities $ 30,113 $ 8,854 $ 12,218 $ (45)
============== ============== ============== ================
Net cash flows provided by (used in) investing activities $ 7,217 $ - $ (2,246) $ (7,188)
============== ============== ============== ================
Net cash flows provided by (used in) financing activities $ (36,389) $ (8,854) $ (10,716) $ 7,223
============== ============== ============== ================
CONSOLIDATED
IRT CAPITAL ELIMINATING IRT PROPERTY
CORPORATION I ENTRIES COMPANY
--------------- ------------- --------------
FOR THE YEAR ENDED DECEMBER 31, 1999
REVENUES
Income from rental properties $ 5 $ (23) $ 83,094
Interest Income - - 381
Interest on direct financing leases - - 560
Other income - (9,110) 969
--------------- ------------- --------------
Total revenues 5 (9,133) 85,004
--------------- ------------- --------------
EXPENSES
Operating expenses of rental properties - 14 19,619
Interest expense - - 21,473
Depreciation - (10) 13,739
Amortization of debt costs - - 460
General and administrative 7 (27) 3,432
--------------- ------------- --------------
Total expenses 7 (23) 58,723
--------------- ------------- --------------
Equity in earnings (losses) of affiliates - (19,092) 4
--------------- ------------- --------------
Earnings from continuing operations before
income taxes, minority interest, gain on
sales of properties and
discontinued operations (2) (28,202) 26,285
Income tax provision - - -
Minority interest in operating partnership - (683) (654)
Gain on sales of properties - - 2,483
--------------- ------------- --------------
Income from continuing operations before
discontinued operations (2) (28,885) 28,114
Income from discontinued operations - - 374
--------------- ------------- --------------
Income from continuing operations (2) (28,885) 28,488
Extraordinary item
Loss on extinguishment of debt - - (157)
--------------- ------------- --------------
Net Income $ (2) $ (28,885) $ 28,331
=============== ============= ==============
Net cash flows provided by (used in) operating activities $ 36 $ (9,724) $ 41,452
=============== ============= ==============
Net cash flows provided by (used in) investing activities $ - $ (6,334) $ (8,551)
=============== ============= ==============
Net cash flows provided by (used in) financing activities $ (35) $ 16,040 $ (32,731)
=============== ============= ==============
NOTES:
(1) Includes IRT Management Co. and IRT Alabama.
7. NET INVESTMENT IN DIRECT FINANCING LEASES
At December 31, 2001, two retail facilities are leased to Wal-Mart Stores,
Inc. at a total annual rental of $333 plus percentage rentals of 1% of gross
sales in excess of the tenants' actual sales for its fiscal year ended January
31, 1990. Rental income, including percentage rent, from these leases totaled
$281, $402 and $399 in 2001, 2000 and 1999, respectively.
The Company sold in May 2001 ten branch bank buildings acquired in a 1984
merger. These facilities were leased to The Old Phoenix National Bank at a
total annual rental of $313. For 2001, the Company recognized rental income of
$104. The Company sold the bank buildings for $3,500 and recognized a gain on
the sale of $1,525.
Of the total rental income on direct financing leases, $153, $166 and $160
was recorded as amortization of capitalized leasing income in 2001, 2000 and
1999, respectively.
The Company is to receive minimum lease payments of $333 per year during
2002 through 2006 and a total of $1,332 thereafter through the remaining lease
terms.
21
8. MORTGAGE LOANS
The Company has two mortgage loans, Cypress Chase "A" Condominiums and Mill
Creek Club Condominiums. The Cypress Chase "A" Condominium loan has an interest
rate of 10.0% and is due in May 2009. The Mill Creek Club Condominium loan is a
participating loan of which the Company has a 46.2% interest. The loans
associated with the Company's interest are due in 2006 and 2007 and have
interest rates ranging from 8.63% to 12.38%. As of December 31, 2001 the balance
outstanding on these two mortgage loans was approximately $91.
In June 2001, the Company entered into a second mortgage in the amount of
$250, with an interest rate of 7.0%, in connection with the sale of an operating
property. The loan is due in its entirety in June 2003.
The Company's investments in mortgage loans, all of which are secured by
real estate investments, are summarized by type of loan at December 31, 2001 and
2000, as follows:
2001 2000
----------------------- -----------------------
NUMBER AMOUNT NUMBER AMOUNT
OF LOANS OUTSTANDING OF LOANS OUTSTANDING
-------- ------------- -------- -------------
First Mortgage 1 $ 76 1 $ 82
Mortgage Participation 1 16 1 19
Second Mortgage 1 250 - -
-------- ------------- -------- -------------
3 342 2 101
Less: Interest discounts and
negative goodwill - (28) - (31)
-------- ------------- -------- -------------
Mortgage Loans, net 3 $ 314 2 $ 70
======== ============= ======== =============
Annual principal payments applicable to mortgage loan investments in the next
five years and thereafter are as follows:
YEAR AMOUNT
---------- -------
2002 $ 9
2003 260
2004 11
2005 6
2006 7
Thereafter 21
-------
$ 314
=======
Based on current rates at which similar loans would be made, the estimated
fair value of mortgage loans was approximately $375 and $111 at December 31,
2001 and 2000, respectively.
22
9. MORTGAGE NOTES PAYABLE
Mortgage notes payable are collateralized by various real estate
investments having a net carrying value of approximately $207,895 at December
31, 2001. These notes have stated interest rates ranging from 6.50% to 9.625%
and are due in monthly installments with maturity dates ranging from 2002 to
2024.
In April 2001, the Company entered into three notes totaling $20,740,
secured by first mortgages on three properties. These notes are due and payable
in ten years and the principal amortization is based on a thirty year
amortization schedule. The notes bear interest at a weighted average interest
rate of 7.17% and range from 7.02% to 7.25%. Costs associated with obtaining the
secured notes totaled $366 and are being amortized over the term of the loans.
During 2000, the Company made a scheduled balloon payment at maturity of
$3,521 on a note bearing interest at 7.75%.
Future principal amortization and balloon payments applicable to mortgage
notes payable at December 31, 2001 are as follows:
PRINCIPAL BALLOON
YEAR AMORTIZATION PAYMENTS TOTAL
---------------- ------------- --------- --------
2002 $ 2,684 $ 7,155 $ 9,839
2003 2,805 - 2,805
2004 3,023 - 3,023
2005 3,266 7,500 10,766
2006 3,393 4,797 8,190
Thereafter 53,150 45,604 98,754
------------- --------- --------
$ 68,321 $ 65,056 133,377
============= =========
Interest Premium 1,295
--------
$134,672
========
The $1,295 of interest premium as of December 31, 2001 relates to the fair
value adjustment of the three mortgages assumed from the minority interest
holder in connection with the formation of LP in 1998.
Based on the borrowing rates currently available to the Company for notes
with similar terms and maturities, the estimated fair value of mortgage notes
payable was approximately $137,522 and $129,371 at December 31, 2001 and 2000,
respectively.
10. CONVERTIBLE SUBORDINATED DEBENTURES
Effective August 31, 1993, the Company issued $86,250 of 7.3% convertible
subordinated debentures due August 15, 2003, $23,275 of which are outstanding as
of December 31, 2001. Interest on the debentures is payable semi-annually on
February 15 and August 15. The debentures are convertible at any time prior to
maturity into common stock of the Company at $11.25 per share, subject to
adjustment in certain events. Costs associated with the issuance of the
debentures are approximately $3,701 and are being amortized over the life of the
debentures.
23
During 1997, $1,653 of these debentures were converted into 146,921 shares
of common stock. During 1998, $5,178 of these debentures were converted into
460,263 shares of common stock. No debentures were converted during 2001, 2000
or 1999. Based upon the conversion price, 2,068,889 authorized but unissued
common shares have been reserved for possible issuance if the $23,275 debentures
outstanding at December 31, 2001 are converted.
The Company had the option to redeem the debentures at par and, on December
24, 2001, the Company gave notice it intended to exercise such redemption option
by January 24, 2002. See Note 25 for additional disclosure.
Based on the closing market price of the debentures at year-end, the
estimated fair value of the debentures was approximately $23,828 and $22,111 at
December 31, 2001 and 2000, respectively.
11. SENIOR NOTES
On March 26, 1996, the Company issued $50,000 of 7.45% senior notes. These
notes were due April 1, 2001 and were repaid on such date. These senior notes
were issued at a discount of $84 which was amortized over the life of the notes
on a straight-line basis for financial reporting purposes. Net proceeds from the
issuance totaled approximately $49,394. Interest on the 7.45% senior notes was
payable semi-annually on April 1 and October 1. Costs associated with the
issuance of these senior notes totaled approximately $522 and were amortized
over the life of the notes.
On August 15, 1997, the Company issued $75,000 of 7.25% senior notes due
August 15, 2007. These senior notes were issued at a discount of $426 which is
being amortized over the life of the notes on a straight-line basis for
financial reporting purposes. Net proceeds from the issuance totaled $73,817.
Interest on the 7.25% senior notes is payable semi-annually on February 15 and
August 15. Costs associated with the issuance of these senior notes totaled
approximately $757 and are being amortized over the life of the notes.
On March 23, 2001, the Company established a Medium Term Note Program (the
"MTN Program"), pursuant to the Company's shelf registration statement filed in
January, 2001. The MTN Program allows the Company, from time to time, to issue
and sell up to $100,000 of medium term notes. Medium term notes have a maturity
of nine months or more from the date of issuance and are unconditionally
guaranteed as to the payment of principal, premium, if any, and interest, if
any, by each of LP, IRTMC, IRTAL and IRTCCII.
On March 29, 2001, pursuant to the MTN Program, the Company issued $50,000
of 7.77% senior notes due April 1, 2006. Net proceeds from the issuance totaled
$49,324. Interest on these senior notes is payable semi-annually on April 1 and
October 1. Costs associated with the issuance of these senior notes totaled
approximately $676 and are being amortized over the life of the notes.
24
12. INDEBTEDNESS TO BANKS
On November 1, 1999, the Company obtained a $100,000 unsecured revolving
loan facility ("Revolving Loan"), which was scheduled to mature on November 1,
2002. This loan replaced the Company's previous credit facility which was
cancelled in conjunction with the new Revolving Loan. Due to the cancellation of
the previous credit facility, the Company recognized an extraordinary loss of
$157 for the write-off of the related unamortized loan costs. In addition to
the new Revolving Loan, the Company secured a $5,000 swing line credit facility
with terms similar to those of the Revolving Loan and a scheduled maturity date
of October 31, 2000. On November 1, 2000, the Company extended the maturity
date of the Revolving Loan and swing line credit facility to November 1, 2003
and the Company secured an option to increase the Revolving Loan at its
discretion by $50,000.
Under the Revolving Loan, the Company may elect to pay interest at either
the lender's prime, adjusted daily or the LIBOR plus the "Applicable Margin"
based upon the rating of the senior unsecured debt obligations of the Company.
The Applicable Margin ranges from 0.95% to 1.40%. The Applicable Margin based
on the Company's current rating is 1.15%. At December 31, 2001, the weighted
average interest rate was 3.67% on outstanding borrowings under the Revolving
Loan. The terms of the Revolving Loan and swing line credit facility require
the Company to pay an annual facility fee equal to 0.2% of the total commitment
and include certain restrictive covenants which require compliance with certain
financial ratios and measurements. At December 31, 2001, the Company was in
compliance with these covenants.
LP, IRTCCII, IRTAL and IRTMC guarantee the Company's indebtedness on the
Revolving Loan and swing line credit facility.
The following data is presented with respect to the Revolving Loan and
swing line credit facility in 2001 and 2000:
2001 2000
-------- --------
Available balance at year end $53,346 $50,000
Average borrowing for the period $43,355 $35,583
Maximum amount outstanding during the period $57,000 $55,000
Average interest rate for the period 6.48% 7.61%
Interest rate at year end 3.67% 7.97%
The Company incurred facility fees of approximately $224, $202, and $201
for the years ended December 31, 2001, 2000 and 1999, respectively.
25
13. COMMITMENTS AND CONTINGENCIES
The Company has entered into change in control employment agreements with
certain key executives. Under each agreement in the event employment is
terminated following a "Change In Control," the Company is committed to pay
certain benefits, including the payment of each employee's base salary through
the expiration of each agreement.
Certain of the Company's properties have environmental concerns that have
been or are being addressed. The Company maintains limited insurance coverage
for this type of environmental risk. Although no assurance can be given that
Company properties will not be affected adversely in the future by environmental
problems, the Company presently believes that there are no environmental matters
that are reasonably likely to have a material adverse effect on the Company's
financial position.
14. MINORITY INTEREST
Minority interest for the years ended December 31, 2001 and 2000 represents
a 5.66% and 7.0% interest, respectively, in the results of the LP which are
owned by a third party. In 1998, LP was formed with a contribution of three
Florida shopping centers by an unaffiliated limited partner and a contribution
of twenty shopping centers by the Company. Subsequent to the formation of LP,
the Company has contributed cash to acquire seven shopping centers and LP has
divested of five shopping centers. At December 31, 2001 and 2000, 815,852 OP
Units were held by the limited partner. The unaffiliated limited partner has the
option to require LP to redeem its OP Units at any time, in which event LP has
the option to purchase the OP Units for cash or convert them into one share of
the Company's common stock for each OP Unit.
Adjustments have been made to the minority interest balance in LP to
properly reflect its ownership interest in the Company. During 2001, 2000 and
1999, adjustments of $13, $(395) and $(357) were recorded, respectively. The
adjustments are a result of the purchase or issuance of additional shares of
common stock and OP units.
The Company also records a minority interest for the limited partners'
share of equity in two properties. The two properties in which the Company has a
general partner interest are Venice Plaza (75% interest) and North Village
Center (49.5% interest). The aggregate balance of the minority interest in these
properties as of December 31, 2001 and 2000 is $528 and $434, respectively, and
is included within accrued expenses and other liabilities on the accompanying
Consolidated Balance Sheets.
15. DEFERRED COMPENSATION AND STOCK LOANS
On June 18, 1998, 119,760 restricted shares of common stock were granted
and 119,760 shares (the "Loan Shares") were issued pursuant to non-recourse
loans due June 18, 2008. The loans were made to certain Company officers as
incentives for future services. The restricted shares vest ratably over 10
years from the date of grant. The restricted shares and the Loan Shares were
valued at the closing price of the Company's common stock on June 18, 1998 of
$10.437.
On January 7, 2000, an additional 25,001 restricted shares of common stock
were granted to certain Company officers as incentives for future services. The
restricted shares vest ratably over 9 years from the date of grant. The
restricted shares were valued at the closing price of the Company's common stock
on January 7, 2000 of $8.1875.
26
Compensation expense recognized for the three years in the period ended
December 31, 2001 for the restricted stock grants was as follows:
GRANT DATE 2001 2000 1999
--------------- -------- -------- --------
June 18, 1998 $100,000 $100,000 $102,000
January 7, 2000 17,690 22,745 -
-------- -------- --------
Total $117,690 $122,745 $102,000
======== ======== ========
16. TREASURY STOCK
In November 1999, the Board of Directors authorized the Company to
repurchase up to $25,000 of its common stock through the open market or in
privately negotiated transactions. During 2001 and 2000, the Company repurchased
47,000 and 2,488,701 shares, for a cost of $405 and $20,818, respectively,
including commissions and other costs.
On January 16, 2001, the Company completed the stock repurchase program.
The Company repurchased a total of 3,028,276 shares at an average price of $8.26
per share.
17. RENTAL INCOME
Leases with tenants are accounted for as operating leases. Certain tenants
are required to pay percentage rents based on gross sales exceeding stated
amounts. The Company receives reimbursements from tenants for real estate taxes,
common area maintenance and other recoverable costs. Rents from tenants are
summarized as follows:
2001 2000 1999
------- ------- -------
Minimum rental income $68,343 $66,721 $68,130
Percentage rental income 896 1,016 1,018
Other rental income 15,753 15,770 13,946
------- ------- -------
Total rental income $84,992 $83,507 $83,094
======= ======= =======
27
Minimum rents to be received from tenants on noncancellable operating
leases for the Company's shopping center, industrial, and land
purchase-leaseback investments at December 31, 2001 are as follows:
YEAR AMOUNT
---------- --------
2002 $ 68,920
2003 62,197
2004 54,232
2005 46,147
2006 37,922
Thereafter 189,982
--------
$459,400
========
18. INCOME TAXES
The Company has one subsidiary, IRTCCII, that became wholly-owned by the
Company in March 2001. As a result, IRTCCII had federal taxable income of $179
which caused income tax expense of $53.
19. CASH DISTRIBUTIONS AND DIVIDEND REINVESTMENT PLAN
The Company has elected since inception to be treated as a REIT under the
Code. In accordance with the Code, a REIT must distribute at least 90% (95%
prior to 2001) of its taxable income to its shareholders each year. See Note 2
for additional disclosure. The differences between taxable income as reported on
the Company's tax return (estimated 2001 and actual 2000 and 1999) and net
earnings as reported on the Consolidated Statements of Earnings are as follows:
2001 2000 1999
-------- -------- --------
Net earnings available to common shareholders $25,220 $29,039 $28,331
Rental income timing differences 1,032 (628) 152
Taxable direct financing lease income 152 171 161
Depreciation timing differences on real estate 1,402 1,032 666
Minority interest adjustments 445 (172) 1,003
Taxable gain (loss) on sale of operating properties 1,903 (1,638) 760
Taxable loss (gain) for unconsolidated affiliates - 56 (4)
Elimination of earnings for taxable REIT subsidiary (36) - -
Miscellaneous timing differences (97) 66 (21)
-------- -------- --------
Taxable income available to common shareholders $30,021 $27,926 $31,048
======== ======== ========
28
The following is a reconciliation between dividends declared and dividends
applied in 2000 and 1999 and estimated to be applied in 2001 to meet REIT
distribution requirements:
2001 2000 1999
------- -------- -------
Dividends Declared $28,589 $29,782 $30,908
Portion of dividends declared in current year,
and paid in current year, which was applied
to the prior year distribution requirements - (140) -
Portion of dividends declared in subsequent
year, and paid in subsequent year, which
will apply to current year 1,432 - 140
------- -------- -------
Dividends applied to meet current year
REIT distribution requirements $30,021 $29,642 $31,048
======= ======== =======
The taxability of per share distributions paid to shareholders during the
years ended December 31, 2001, 2000 and 1999 was as follows:
2001 2000 1999
-------------------- -------------------- --------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------- ----------- ------- ----------- ------- -----------
Ordinary income $ 0.769 81.8% $ 0.787 83.7% $ 0.787 84.6%
Capital gains 0.171 18.2% 0.092 9.8% 0.143 15.4%
Return of capital - 0.0% 0.061 6.5% - 0.0%
------- ----------- ------- ----------- ------- -----------
Total rental income $ 0.940 100.0% $ 0.940 100.0% $ 0.930 100.0%
======= =========== ======= =========== ======= ===========
The Company has a Dividend Reinvestment Plan (the "DRIP") which allows
shareholders, who own at least 100 shares of the Company's common stock, to
elect to reinvest all or a portion of their distributions in newly issued shares
of common stock of the Company. The Company did not receive any proceeds under
the DRIP in 2001 and 1999 as shares were purchased on the open market to fund
the DRIP. In 2000, the Company issued 59,089 treasury shares and received net
proceeds of $497.
29
20. EARNINGS PER SHARE
Basic earnings per share were computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the year.
The effects of the conversion of the 7.3% subordinated debentures have been
included in the calculation of diluted earnings per share, as they are dilutive
for the year ended December 31, 2001 and 2000. The effects of such conversion of
the 7.3% debentures for the year ended December 31, 1999 is excluded, as they
are antidilutive. The effects of the conversion of the OP Units have been
included in the calculation of diluted earnings per share, as they are dilutive
for the years ended December 31, 2001, 2000 and 1999. The effects of the
exercise of certain stock options and issuances of restricted stock, using the
treasury stock method, have been included in the diluted earnings per share
calculation for the year ended December 31, 2001. Also, the effects of the stock
options were dilutive for the year ended December 31, 2000. However, the effects
of the restricted stock for the year ended December 31, 2000 and the effects of
the stock options and restricted stock for the year ended December 31, 1999 were
antidilutive and excluded from the calculation.
PER SHARE
INCOME SHARES AMOUNT
------- -------------- -------
(in thousands)
For the fiscal year ended December 31, 2001
Basic net earnings available to shareholders $25,220 30,322 $ 0.83
Options outstanding - 91 =======
Restricted stock - 3
Minority interest of unitholders in operating partnership 554 816
Conversion of 7.3% debentures 1,799 2,069
------- --------------
Diluted net earnings available to shareholders $27,573 33,301 $ 0.83
======= ============== =======
For the fiscal year ended December 31, 2000
Basic net earnings available to shareholders $29,039 31,536 $ 0.92
Options outstanding - 11 =======
Minority interest of unitholders in operating partnership 596 816
7.3% Convertible Debentures 1,799 2,069
------- --------------
Diluted net earnings available to shareholders $31,434 34,432 $ 0.91
======= ============== =======
For the fiscal year ended December 31, 1999
Basic net earnings available to shareholders $28,331 33,119 $ 0.86
Minority interest of unitholders in operating partnership 683 785 =======
------- --------------
Diluted net earnings available to shareholders $29,014 33,904 $ 0.86
======= ============== =======
30
21. STOCK OPTION AND PURCHASE PLANS
Effective May 8, 1989, the Company adopted and its shareholders approved
the 1989 Stock Option Plan (the "1989 Plan"). The 1989 Plan includes provisions
for a) the granting of both Incentive Stock Options ("ISOs") (as defined in
Section 422A of the Code) and nonqualified options to officers and employees and
b) the automatic granting of nonqualified options for 1,250 shares to each
non-employee director upon the election and each annual re-election of each
non-employee director. Under the terms of the 1989 Plan, the option price shall
be no less than the fair market value of the optioned shares at the date of
grant. The options are automatically vested and expire after ten years. There
is a maximum of 1,062,500 shares of common stock reserved under the 1989 Plan.
Effective June 18, 1998, the Company adopted and its shareholders approved
the 1998 Long-Term Incentive Plan (the "1998 Plan"). The 1998 Plan includes
provisions for the granting of ISOs, nonqualified options, stock appreciation
rights, performance shares, restricted stock, dividend equivalents and other
stock-based awards. Under the terms of the 1998 Plan, the option exercise price
shall be no less than the fair market value of the optioned shares at the date
of the grant. The options are automatically vested and expire after ten years.
There is a maximum of 1,625,000 shares of common stock reserved under the 1998
Plan.
The Company also adopted the IRT Property Company 2000 Employee Stock
Purchase Plan (the "ESPP"), approved by the shareholders on May 16, 2000. The
ESPP allows eligible employees to acquire shares of the Company's stock on a
quarterly basis through payroll deductions. A maximum of 300,000 shares of
common stock are reserved for issuance under the ESPP. The purchase price of the
shares of common stock are 90% of the lesser of the closing price of a share of
common stock on the first trading day of the purchase period or the last trading
day of the purchase period. The Company initiated the ESPP
in 2001 and there were two purchase periods in 2001, which ended on September
30, 2001 and December 31, 2001, respectively. For the purchase period ended
September 30, 2001, 1,159 shares were purchased at a price of $9.72 per share.
For the purchase period ended December 31, 2001, 1,380 shares were purchased at
a price of $9.36 per share.
The Company accounts for these plans under APB No. 25, under which no
compensation cost has been recognized for stock option grants. Had compensation
cost for these plans been determined consistent with SFAS No. 123, the Company's
net income and earnings per share would have been reduced to the following pro
forma amounts:
2001 2000 1999
------- ------- -------
Net earnings:
As reported $25,220 $29,039 $28,331
Pro forma $25,080 $28,932 $28,331
EPS - basic:
As reported $ 0.83 $ 0.92 $ 0.86
Pro forma $ 0.83 $ 0.92 $ 0.85
EPS - diluted:
As reported $ 0.83 $ 0.91 $ 0.86
Pro forma $ 0.82 $ 0.90 $ 0.85
31
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
Under SFAS No. 123, the fair value of each option grant and stock purchase
right is estimated as of the date of grant and date of purchase, respectively,
using the Black-Scholes option pricing model. The weighted average fair value of
options granted is $0.40, $0.46 and $0.62 for 2001, 2000 and 1999, respectively.
The weighted average fair value of the rights to purchase stock pursuant to the
ESPP were $1.98 for 2001. The following weighted-average assumptions were used
for option grants and stock purchase rights in 2001, 2000 and 1999,
respectively:
2001 2000 1999
------ ------ ------
Risk free interest rate 4.98% 6.71% 4.74%
Expected dividend yield 11.10% 12.03% 9.50%
Expected volatility 21.00% 21.00% 21.00%
Expected annual forfeiture rate 0.00% 5.00% 0.00%
Expected lives (in years) 5 5 5
Details of the stock option activity during 2001, 2000, and 1999 are as
follows:
NUMBER OF SHARES
---------------------- OPTION PRICE
EMPLOYEES DIRECTORS PER SHARE
---------- ---------- ---------------
Options outstanding at December 31, 1998 485,968 67,500 $ 7.63 - $14.90
Granted 156,400 - $ 9.69
Granted - 5,000 $ 9.38
Exercised (4,000) - $ 9.25
Expired unexercised (130,500) (10,000) $ 9.25 - $14.90
---------- ----------
Options outstanding at December 31, 1999 507,868 62,500 $ 7.63 - $13.38
Granted 321,393 - $ 7.81 - $ 8.63
Granted - 5,000 $ 8.75
Exercised (36,800) - $ 7.81
Expired unexercised (107,032) (10,000) $ 7.81 - $12.50
---------- ----------
Options outstanding at December 31, 2000 685,429 57,500 $ 7.63 - $13.38
Granted 317,627 - $ 8.31
Granted - 25,000 $ 10.30
Exercised (204,818) - $ 7.81 - $10.13
Expired unexercised (25,000) (6,250) $ 7.625 - $10.25
---------- ----------
Options outstanding at December 31, 2001 773,238 76,250 $ 7.81 - $13.38
========== ==========
32
The following table summarizes information about stock options outstanding
and exercisable at December 31, 2001:
NUMBER WEIGHTED AVERAGE WEIGHTED
RANGE OF OUTSTANDING REMAINING AVERAGE
EXERCISE PRICES AND EXERCISABLE CONTRACTUAL LIFE EXERCISE PRICE
---------------- --------------- ---------------- ---------------
7.81 - $ 8.75 422,688 8.56 years $ 8.35
9.25 - $ 9.75 192,950 5.22 years $ 9.58
10.00 - $10.75 85,500 4.57 years $ 10.35
11.38 - $11.69 124,850 5.61 years $ 11.58
12.00 - $13.38 23,500 1.27 years $ 12.52
---------------- --------------- ---------------- ---------------
7.81 - $13.38 849,488 6.77 years $ 9.42
=============== =============== ================ ===============
22. EMPLOYEE RETIREMENT BENEFITS
Under the Company's 401(k) Plan, employees who annually work over 1,750
hours and are at least 18 years of age are eligible for participation in the
Plan. Employees may elect to make contributions to the Plan as defined by the
Internal Revenue Code. The Company matches 100% of such contributions up to 6%
of the individual participant's compensation, based on the length of service.
The Company contributed approximately $192, $184 and $159 to the 401(k) Plan in
2001, 2000 and 1999, respectively.
23. SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES
Significant noncash transactions for the years ended December 31, 2001,
2000 and 1999 were as follows:
2001 2000 1999
----- ------ -------
Adjustment for minority interest ownership of LP $ 13 $(395) $ (357)
Issuance of employee restricted stock - $ 204 -
Mortgages assumed in purchase of rental properties - - $5,742
24. RELATED PARTY TRANSACTIONS
Beginning in 2000, the Company provides management services for two
shopping centers owned principally by real estate joint ventures in which an
officer of the Company has 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
Earnings include management fee income from these management services of $100
and $14 for the years ended December 31, 2001 and 2000.
33
25. DISCONTINUED OPERATIONS
The Company adopted SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," effective January 1, 2002. SFAS No. 144 requires
the Company to report in discontinued operations the results of operations of a
property that has either been disposed or is classified as held for sale, unless
certain conditions are met. SFAS No. 144 further requires the Company to
reclassify results of operations from a property disposed of or held for sale
subsequent to December 31, 2001 as income from discontinued operations during
prior reported periods.
The Company classified the results of operations from a property sold
during the nine months ended September 30, 2002, as income from discontinued
operations for the three years in the period ended December 31, 2001 in the
accompanying consolidated statements of earnings. The effect of the adoption of
SFAS No. 144 on the consolidated statements of earnings is shown below.
2001 2000 1999
------ ------ ------
Income from rental properties $ 772 $ 710 $ 698
------ ------ ------
Operating expenses of rental properties 160 170 150
Interest Expense 25 22 15
Depreciation 147 142 130
------ ------ ------
Total expenses 332 334 295
Minority interest (24) (28) (29)
------ ------ ------
Income from discontinued operations $ 416 $ 348 $ 374
====== ====== ======
26. SUBSEQUENT EVENTS
On January 22, 2002, one of the Company's tenants, Kmart Corporation, filed
for bankruptcy protection. The Company has eight stores leased to Kmart which
accounted for 4.5% of the Company's revenues for the year ended December 31,
2001.
On January 23, 2002, pursuant to the MTN Program, the Company issued
$25,000 of 7.84% senior unsecured notes due January 23, 2012. Proceeds were used
to redeem the Company's 7.3% convertible subordinated debentures and to
partially prepay a mortgage note payable.
On January 24, 2002, the Company redeemed all of the outstanding 7.3%
convertible subordinated debentures due August, 2003 at par plus accrued
interest. Prior to redemption, 165 bonds were converted into 14,659 shares of
common stock. The Company paid $23,220 to redeem the remaining bonds
outstanding and recognized an extraordinary loss of $156.
On February 19, 2002, the Company acquired Parkwest Crossing, a 85,602
square foot neighborhood shopping center located in the Raleigh-Durham area of
North Carolina. The Company acquired the center for approximately $6,600,
including an assumption of a $4,800, 8.1% mortgage secured by the property. The
mortgage is due and payable in ten years and the principal amortization is based
on a thirty year amortization schedule.
34
On March 1, 2002, the Company prepaid a 9.63% mortgage note payable which
was due on June 1, 2002 for approximately $5,210.
In May 2002, the Company completed an offering of 3,450,000 shares of
common stock at $11.79 per share. Net proceeds to the Company were approximately
$38,508.
On May 30, 2002, 160,000 restricted shares of common stock were granted to
certain Company officers as incentives for future services. The restricted
shares vest proportionately over 4 years from the date of grant. The restricted
shares were valued at the closing price of the Company's common stock on May 30,
2002 of $11.97.
On September 25, 2002, LP sold Forest Hills Centre, a 74,180 square foot
shopping center, located in Wilson, NC for approximately $6,850 in cash and
recognized a gain on the sale of approximately $2,062.
On September 30, 2002, the Company prepaid a 7.65% secured loan of
approximately $1,989. The loan was due on December 1, 2002.
On October 7, 2002, an agreement was signed for the sale of the Lexington
Shopping Center in Lexington, VA to close on November 29, 2002. This unsolicited
offer was from the single tenant occupying the center. The Company expects to
recognize a gain on the sale of approximately $1,400.
On October 28, 2002, Equity One, Inc. (NYSE: EQY) and the Company executed a
merger agreement pursuant to which Equity One will acquire the Company. In
connection with the merger, each of the Company's shareholders may elect to
receive for each share of the Company's common stock either $12.15 in cash or
0.9 shares of Equity One common stock, or a combination thereof. The terms of
the merger agreement further provide that the holders of no more than 50% of the
Company's outstanding common stock may elect to receive cash.
Completion of the transaction, which is expected to take place in the first
quarter of 2003, is subject to the approval of Equity One's and the Company's
shareholders and other customary conditions. The boards of each of the Company
and Equity One have unanimously approved the transaction. Additionally, holders
of approximately 75% of Equity One's common stock and approximately 8% of the
Company's common stock have agreed to vote their shares in favor of the
transactions contemplated by the merger.
On the 4th business day prior to the shareholder meetings, the Equity One
holders may withdraw their voting support, and the Company's board may withdraw
its merger recommendation, if Equity One's weighted average stock price for the
30 preceding trading days is less than $12.06 or less than $11.00 for the three
preceding trading days. In addition, on the 4th business day prior to the
shareholder meetings the Equity One holders may withdraw their voting support if
the Company's weighted average stock price for the 30 preceding trading days is
less than $10.935 or less than $9.935 for the three preceding trading days.
The Company cannot make any assurances that the merger with Equity One will
be consummated according to the terms set forth in the merger agreement, if at
all. Either the Company or Equity One may terminate the merger agreement if the
merger is not consummated by March 31, 2003. The Company will be required to
pay a $15 million break-up fee to Equity One in the event that the Company
enters into an agreement for a superior transaction or if, under certain
circumstances, the Company's board withdraws its recommendation for the
transaction.
35
On October 31, 2002, Janet Herszenhorn, an individual stockholder of IRT,
purporting to represent a class of holders of IRT common stock, filed a putative
class action lawsuit in the Superior Court of Cobb County, Georgia, against IRT,
Equity One and each of the directors of IRT. The complaint alleges, among other
things, that IRT and its individual directors breached their fiduciary duties by
agreeing to the merger between Equity One and IRT and that Equity One aided and
abetted such breach. The complaint seeks injunctive relief, an order enjoining
consummation of the merger and unspecified damages.
On October 31, 2002, John Greaves, an individual stockholder of IRT,
purporting to represent a class of holders of IRT common stock, also filed a
putative class action lawsuit in the Superior Court of Cobb County, Georgia,
against IRT, Equity One and each of the directors of IRT. The complaint alleges,
among other things, that IRT and its individual directors breached their
fiduciary duties by agreeing to the merger between Equity One and IRT and that
Equity One aided and abetted such breach. The complaint seeks injunctive relief,
an order enjoining consummation of the merger and unspecified damages.
Although the defendants believe that these suits are without merit and
intend to defend themselves vigorously, there can be no assurance that the
pending litigation will not interfere with the consummation of the merger. IRT
and Equity One do not expect that these suits will interfere with the scheduling
of their respective shareholder meetings or the consummation of the merger, if
approved.
36
27. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial information
for the fiscal years ended December 31, 2001 and 2000.
2001
------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
Revenues $ 21,459 $ 21,378 $ 21,339 $ 21,359
========= ========= ========= =========
Income from continuing operations before income taxes,
minority interest, gain on sales of properties and
discontinued operations $ 5,662 $ 5,130 $ 5,448 $ 5,299
Income taxes - (53) - -
Minority interest - OP unitholders (55) (238) (111) (126)
Gain on sales of operating properties and outparcels 293 2,950 258 347
--------- --------- --------- ---------
Income from continuing operations 5,900 7,789 5,595 5,520
Discontinued Operations 88 104 121 103
--------- --------- --------- ---------
Net earnings $ 5,988 $ 7,893 $ 5,716 $ 5,623
========= ========= ========= =========
Per share:
Basic $ 0.20 $ 0.26 $ 0.19 $ 0.18
========= ========= ========= =========
Diluted $ 0.19 $ 0.26 $ 0.19 $ 0.18
========= ========= ========= =========
2000
------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
Revenues $ 21,362 $ 21,256 $ 21,804 $ 20,594
========= ========= ========= =========
Income from continuing operations before income taxes,
minority interest, gain on sales of properties and
discontinued operations $ 6,660 $ 6,316 $ 6,142 $ 5,592
Minority interest - OP unitholders (152) (150) (136) (130)
Gain on sales of operating properties 2,738 - 645 1,166
--------- --------- --------- ---------
Income from continuing operations 9,246 6,166 6,651 6,628
Discontinued Operations 82 79 93 94
--------- --------- --------- ---------
Net earnings $ 9,328 $ 6,245 $ 6,744 $ 6,722
========= ========= ========= =========
Per share:
Basic $ 0.29 $ 0.20 $ 0.21 $ 0.22
========= ========= ========= =========
Diluted $ 0.28 $ 0.20 $ 0.21 $ 0.22
========= ========= ========= =========
37
SCHEDULE III
IRT PROPERTY COMPANY AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(IN THOUSANDS, EXCEPT USEFUL LIVES)
COSTS AMOUNT ACCUMULATED USEFUL
INITIAL CAPITALIZED AT WHICH DEPRECIATION LIFE OF
ENCUM- COST TO SUBSEQUENT TO CARRIED AT AT CLOSE BUILDINGS DATE
DESCRIPTION BRANCES COMPANY ACQUISITION CLOSE OF YEAR OF YEAR (YEARS) ACQUIRED
-------------------------------- -------- -------- --------------- -------------- --------- ---------- ----------------
Alafaya Commons
Orlando, FL
Land $ - $ 5,526 $ - $ 5,526 $ - 40 November, 1996
Buildings 4,724 498 5,222 666
Ambassador Row
Lafayette, LA
Land - 2,452 - 2,452 - 40 December, 1994
Buildings 7,244 876 8,120 1,578
Ambassador Row Courtyards
Lafayette, LA
Land - 2,899 - 2,899 - 40 December, 1994
Buildings 8,698 1,476 10,174 1,851
Asheville Plaza (1)
Asheville, NC
Land - 53 15 68 - 30 April, 1986
Buildings 336 2 338 178
Bay Pointe Plaza (1)
St. Petersburg, FL
Land - 3,250 - 3,250 - 40 December, 1998
Buildings 3,138 2,040 5,178 265
Bluebonnet Village
Baton Rouge, LA
Land - 2,540 (146) 2,394 - 40 December, 1994
Buildings 5,510 415 5,925 1,081
The Boulevard
Lafayette, LA
Land - 948 - 948 - 40 December, 1994
Buildings 2,845 260 3,105 570
Carrollwood Center (1)
Tampa, FL
Land - 1,661 - 1,661 - 40 November, 2001
Buildings 4,999 87 5,086 10
Centre Pointe Plaza (1)
Smithfield, NC
Land - 984 12 996 - 40 December, 1992 &
Buildings 8,003 303 8,306 1,957 December, 1993
Charlotte Square (1)
Port Charlotte, FL
Land 3,993 2,114 - 2,114 - 40 August, 1998
Buildings 3,892 364 4,256 391
Chastain Square
Atlanta, GA
Land 4,093 1,689 1,700 3,389 - 40 December, 1997
Buildings 5,069 2,609 7,678 554
Chelsea Place
New Port Richey, FL
Land - 1,388 - 1,388 - 40 July, 1993
Buildings 5,550 77 5,627 1,197
Chestnut Square (1)
Brevard, NC
Land - 296 - 296 - 40 January, 1992
Buildings 1,113 106 1,219 323
Colony Square
Fitzgerald, GA
Land - 273 - 273 - 40 February, 1988
Buildings 2,456 254 2,710 1,073
38
Commerce Crossing
Commerce, GA
Land - 380 1 381 - 40 December, 1992
Buildings 4,090 132 4,222 959
Country Club Plaza
Slidell, LA
Land - 1,069 - 1,069 - 40 January, 1995
Buildings 3,010 193 3,203 648
Countryside Shops
Cooper City, FL
Land - 5,652 - 5,652 - 40 June, 1994
Buildings 10,977 1,053 12,030 2,267
The Crossing
Slidell, LA
Land - 1,282 - 1,282 - 40 December, 1994
Buildings 3,214 109 3,323 662
Daniel Village
Augusta, GA
Land 4,473 2,633 - 2,633 - 40 March, 1998
Buildings 9,612 190 9,802 952
Douglas Commons
Douglasville, GA
Land 5,331 2,543 3 2,546 - 40 August, 1992
Buildings 5,958 341 6,299 1,573
Elmwood Oaks
Harahan, LA
Land 7,500 4,559 - 4,559 - 40 January, 1992
Buildings 6,560 118 6,678 1,705
Fairview Oaks
Ellenwood, GA
Land 5,045 714 - 714 - 40 June, 1997
Buildings 6,396 2 6,398 727
Forest Hills Centre (1)
Wilson, NC
Land - 870 (9) 861 - 40 August, 1990
Buildings 4,121 772 4,893 1,327
Forrest Gallery (1)
Tullahoma, TN
Land - 2,137 11 2,148 - 40 December, 1992
Buildings 9,978 821 10,799 2,689
The Galleria (1)
Wrightsville Beach, NC
Land - 1,070 (41) 1,029 - 40 August, 1986
Buildings 6,139 1,390 7,529 2,597 & December, 1987
Grassland Crossing
Alpharetta, GA
Land 6,265 1,075 - 1,075 - 40 February, 1997
Buildings 8,832 410 9,242 1,204
Greenwood
Palm Springs, FL
Land - 4,129 - 4,129 - 40 July, 1997
Buildings 8,954 325 9,279 1,091
Gulf Gate Plaza
Naples, FL
Land - 278 - 278 - 28 June, 1979
Buildings 1,858 2,553 4,411 3,475
Heritage Walk
Milledgeville, GA
Land 7,166 810 - 810 - 40 June,1993
Buildings 7,944 121 8,065 1,736
Lancaster Plaza
Lancaster, SC
Land - 121 - 121 - 30 April, 1986
Buildings 744 604 1,348 822
39
Lancaster Shopping Center
Lancaster, SC
Land - 338 - 338 - 30 August, 1986 &
Buildings 1,228 77 1,305 621 December, 1987
Lawrence Commons (1)
Lawrenceburg, TN
Land - 816 - 816 - 40 August, 1992
Buildings 2,729 63 2,792 695
Lexington Shopping Center
Lexington, VA
Land - 312 - 312 - 30 June, 1988 &
Buildings 1,639 650 2,289 1,024 June, 1989
Mableton Crossing
Mableton, GA
Land 4,328 2,781 - 2,781 - 40 June, 1998
Buildings 5,389 12 5,401 478
Macland Pointe
Marietta, GA
Land 5,972 1,252 (12) 1,240 - 40 January, 1993
Buildings 4,317 642 4,959 1,126
Madison Centre
Madison, AL
Land 4,093 2,772 - 2,772 - 40 August, 1997
Buildings 3,046 20 3,066 338
Market Place
Norcross, GA
Land - 3,820 - 3,820 - 40 April, 1997
Buildings 3,254 450 3,704 544
McAlpin Square
Savannah, GA
Land - - - - - 40 December, 1997
Buildings 6,152 1,475 7,627 765
Millervillage
Baton Rouge, LA
Land - 1,927 - 1,927 - 40 December, 1994
Buildings 5,662 130 5,792 1,088
New Smyrna Beach Regional
New Smyrna Beach, FL
Land - 3,704 7 3,711 - 40 August, 1992
Buildings 6,401 483 6,884 1,834
North River Village
Ellenton, FL
Land - 2,949 - 2,949 - 40 December, 1992 &
Buildings 7,161 651 7,812 1,607 December, 1993
North Village Center
North Myrtle Beach, SC
Land 1,876 483 - 483 - 37 August, 1986
Buildings 2,785 114 2,899 993
Old Kings Commons
Palm Coast, FL
Land - 1,491 - 1,491 - 40 May, 1988
Buildings 4,474 197 4,671 1,694
Parkmore Plaza
Milton, FL
Land - 1,799 8 1,807 - 40 December, 1992
Buildings 6,454 612 7,066 1,567
Paulding Commons
Dallas, GA
Land 6,949 2,312 3 2,315 - 40 August, 1992
Buildings 10,607 234 10,841 2,627
Pensacola Plaza
Pensacola, FL
Land - 131 - 131 - 30 July, 1986
Buildings 2,392 187 2,579 1,381
40
Pine Ridge Sqare (1)
Coral Springs, FL
Land 7,502 2,909 - 2,909 - 40 December, 2000
Buildings 8,727 34 8,761 219
Pinhook Plaza
Lafayette, LA
Land - 2,768 - 2,768 - 40 December, 1994
Buildings 8,304 475 8,779 1,591
Plaza Acadienne
Eunice, LA
Land - - - - - 40 December, 1994
Buildings 2,918 135 3,053 579
Plaza North (1)
Hendersonville, NC
Land - 658 - 658 - 40 August, 1992
Buildings 1,796 65 1,861 448
Powers Ferry Plaza
Marietta, GA
Land - 1,725 (9) 1,716 - 40 May, 1997
Buildings 5,785 585 6,370 762
Providence Square (1)
Charlotte, NC
Land - 450 - 450 - 35 December, 1971
Buildings 1,896 2,422 4,318 3,545
Regency Square
Port Richey, FL
Land - 3,036 - 3,036 - 40 March, 2001
Buildings 6,195 - 6,195 180
Riverside Square (1)
Coral Springs, FL
Land 8,488 5,893 - 5,893 - 40 August, 1998
Buildings 7,131 223 7,354 672
Riverview Shopping Center (1)
Durham, NC
Land - 400 - 400 - 35 March, 1972
Buildings 1,823 4,713 6,536 3,166
Salisbury Marketplace (1)
Salisbury, NC
Land - 734 - 734 - 40 August, 1996
Buildings 3,878 62 3,940 543
Scottsville Square
Bowling Green, KY
Land - 653 1 654 - 20 August, 1992
Buildings 1,782 196 1,978 809
Seven Hills
Spring Hill, FL
Land - 1,903 - 1,903 - 40 July, 1993
Buildings 2,977 43 3,020 662
Shelby Plaza (1)
Shelby, NC
Land - - - - - 21 April, 1986
Buildings 937 855 1,792 1,156
Sherwood South
Baton Rouge, LA
Land - 496 - 496 - 40 December, 1994
Buildings 1,489 487 1,976 473
Shipyard Plaza
Pascagoula, MS
Land - 359 - 359 - 40 April, 1988
Buildings 4,130 381 4,511 1,498
Shoppes at Lago Mar (1)
Miami, FL
Land 5,423 3,170 - 3,170 - 40 February, 1999
Buildings 6,743 17 6,760 477
41
Shoppes of Silverlakes
Pembroke Pines, FL
Land 3,056 4,043 - 4,043 - 40 November, 1997
Buildings 12,826 179 13,005 1,367
Siegen Village
Baton Rouge, LA
Land 4,521 2,375 (325) 2,050 - 40 December, 1994
Buildings 6,952 695 7,647 1,190
Smyrna Village (1)
Smyrna, TN
Land - 968 21 989 - 40 August, 1992
Buildings 4,744 181 4,925 1,186
Smyth Valley Crossing
Marion, VA
Land - 1,693 7 1,700 - 40 December, 1992
Buildings 5,231 276 5,507 1,313
South Beach Regional
Jacksonville Beach, FL
Land - 3,958 20 3,978 - 40 August, 1992
Buildings 17,130 1,784 18,914 4,553
Spalding Village
Griffin, GA
Land 11,080 2,814 3 2,817 - 40 August, 1992
Buildings 12,470 239 12,709 3,093
Spring Valley
Columbia, SC
Land - 1,382 - 1,382 - 40 March, 1998
Buildings 4,722 129 4,851 459
Stadium Plaza
Phenix City, AL
Land - 1,829 2 1,831 - 40 August, 1992
Buildings 2,614 96 2,710 663
Stanley Market Place (1)
Stanley, NC
Land - 198 - 198 - 35 January, 1992
Buildings 1,603 66 1,669 442
Tamarac Town Square (1)
Tamarac, FL
Land 6,772 4,637 - 4,637 - 40 August, 1998
Buildings 6,015 979 6,994 647
Tarpon Heights
Galliano, LA
Land - 706 - 706 - 40 January, 1995
Buildings 2,117 15 2,132 381
Thomasville Commons
Thomasville, NC
Land 5,211 963 - 963 - 40 August, 1992
Buildings 6,183 105 6,288 1,518
Town & Country
Kissimmee, FL
Land 2,029 1,065 - 1,065 - 40 January, 1998
Buildings 3,200 23 3,223 328
Treasure Coast (1)
Vero Beach, FL
Land 5,286 2,471 - 2,471 - 40 May, 1998
Buildings 8,622 240 8,862 804
Unigold Shopping Center (1)
Orlando, FL
Land - 2,410 - 2,410 - 40 April, 2001
Buildings 5,627 87 5,714 95
Venice Plaza
Venice, FL
Land - 333 - 333 - 27 June, 1979
Buildings 1,973 1,342 3,315 2,231
42
Village at Northshore
Slidell, LA
Land 4,650 2,066 - 2,066 - 40 December, 1994
Buildings 6,197 1,206 7,403 1,209
Walton Plaza
Augusta, GA
Land - 598 - 598 - 40 August 1998
Buildings 2,561 2 2,563 427
Waterlick Plaza
Lynchburg, VA
Land - 1,071 - 1,071 - 40 October, 1989
Buildings 5,091 329 5,420 1,737
Watson Central
Warner Robins, GA
Land - 1,646 12 1,658 - 40 December, 1992 &
Buildings 11,317 184 11,501 2,597 October, 1993
Wesley Chapel Crossing
Decatur, GA
Land 3,570 3,829 9 3,838 - 40 December, 1992
Buildings 7,032 272 7,304 1,703
West Gate Plaza
Mobile, AL
Land - 475 - 475 - 25 June, 1974 &
Buildings 3,782 656 4,438 1,706 January, 1985
West Towne Square
Rome, GA
Land - 325 - 325 - 40 March, 1990
Buildings 5,581 376 5,957 1,835
Williamsburg at Dunwoody (1)
Dunwoody, GA
Land - 1,638 - 1,638 - 40 March 1999
Buildings 3,964 32 3,996 286
Willowdaile Shopping Center (1)
Durham, NC
Land - 937 (178) 759 - 40 August, 1986 &
Buildings 7,352 985 8,337 3,026 December, 1987
Industrial Buildings
Charlotte, NC - Industrial
Land - 143 176 319 - 14 June, 1979
Buildings 2,170 1,360 3,530 3,254
Grand Marche
Shopping Center
Lafayette, LA
Land - 250 - 250 - September, 1972
Conway Crossing
Orlando, FL
Land - 337 774 1,111 - - June, 1979
Buildings 147 3,318 3,465 4
Lutz Lake Crossing
Tampa, FL
Land - 3,304 - 3,304 - - September, 2000
Buildings 3,671 - 3,671 -
Miramar
Miami, FL
Land - 3,551 - 3,551 - - June, 1999
Buildings 2,187 - 2,187 -
Shops at Huntcrest
Tampa, FL
Land - 3,525 - 3,525 - - September, 2001
Buildings 1,785 - 1,785 -
Freehome Village
Development Loan - 846 - 846 - - October, 2000
$134,672 $630,853 $ 52,412 $ 683,265 $ 109,344
======== ======== =============== ============== =========
YEAR
DESCRIPTION COMPLETED
-------------------------------- ----------
Alafaya Commons
Orlando, FL
Land 1987
Buildings
Ambassador Row
Lafayette, LA
Land 1980 &
Buildings 1991
Ambassador Row Courtyards
Lafayette, LA
Land 1986 &
Buildings 1991
Asheville Plaza (1)
Asheville, NC
Land 1967
Buildings
Bay Pointe Plaza (1)
St. Petersburg, FL
Land 1998
Buildings
Bluebonnet Village
Baton Rouge, LA
Land 1983
Buildings
The Boulevard
Lafayette, LA
Land 1976 &
Buildings 1994
Carrollwood Center (1)
Tampa, FL
Land 1971 &
Buildings 1996
Centre Pointe Plaza (1)
Smithfield, NC
Land 1989 &
Buildings 1993
Charlotte Square (1)
Port Charlotte, FL
Land 1998
Buildings
Chastain Square
Atlanta, GA
Land 1981 &
Buildings 2001
Chelsea Place
New Port Richey, FL
Land 1992
Buildings
Chestnut Square (1)
Brevard, NC
Land 1985
Buildings
Colony Square
Fitzgerald, GA
Land 1987
Buildings
Commerce Crossing
Commerce, GA
Land 1988
Buildings
Country Club Plaza
Slidell, LA
Land 1982
Buildings
Countryside Shops
Cooper City, FL
Land 1986, 1988
Buildings & 1991
The Crossing
Slidell, LA
Land 1988 &
Buildings 1993
Daniel Village
Augusta, GA
Land 1998
Buildings
Douglas Commons
Douglasville, GA
Land 1988
Buildings
Elmwood Oaks
Harahan, LA
Land 1989
Buildings
Fairview Oaks
Ellenwood, GA
Land 1997
Buildings
Forest Hills Centre (1)
Wilson, NC
Land 1990 &
Buildings 1995
Forrest Gallery (1)
Tullahoma, TN
Land 1987
Buildings
The Galleria (1)
Wrightsville Beach, NC
Land 1986, 1990
Buildings &1996
Grassland Crossing
Alpharetta, GA
Land 1996
Buildings
Greenwood
Palm Springs, FL
Land 1982 &
Buildings 1994
Gulf Gate Plaza
Naples, FL
Land 1969 &
Buildings 1974
Heritage Walk
Milledgeville, GA
Land 1991 &
Buildings 1992
Lancaster Plaza
Lancaster, SC
Land 1971
Buildings
Lancaster Shopping Center
Lancaster, SC
Land 1963 &
Buildings 1987
Lawrence Commons (1)
Lawrenceburg, TN
Land 1987
Buildings
Lexington Shopping Center
Lexington, VA
Land 1981 &
Buildings 1989
Mableton Crossing
Mableton, GA
Land 1998
Buildings
Macland Pointe
Marietta, GA
Land 1992 &
Buildings 1993
Madison Centre
Madison, AL
Land 1997
Buildings
Market Place
Norcross, GA
Land 1976
Buildings
McAlpin Square
Savannah, GA
Land 1979
Buildings
Millervillage
Baton Rouge, LA
Land 1983 &
Buildings 1992
New Smyrna Beach Regional
New Smyrna Beach, FL
Land 1987
Buildings
North River Village
Ellenton, FL
Land 1988 &
Buildings 1993
North Village Center
North Myrtle Beach, SC
Land 1984
Buildings
Old Kings Commons
Palm Coast, FL
Land 1988
Buildings
Parkmore Plaza
Milton, FL
Land 1986 &
Buildings 1992
Paulding Commons
Dallas, GA
Land 1991
Buildings
Pensacola Plaza
Pensacola, FL
Land 1985
Buildings
Pine Ridge Sqare (1)
Coral Springs, FL
Land 1986
Buildings
Pinhook Plaza
Lafayette, LA
Land 1979 &
Buildings 1992
Plaza Acadienne
Eunice, LA
Land 1980
Buildings
Plaza North (1)
Hendersonville, NC
Land 1986
Buildings
Powers Ferry Plaza
Marietta, GA
Land 1979 &
Buildings 1983
Providence Square (1)
Charlotte, NC
Land 1973
Buildings
Regency Square
Port Richey, FL
Land 2001
Buildings
Riverside Square (1)
Coral Springs, FL
Land 1998
Buildings
Riverview Shopping Center (1)
Durham, NC
Land 1973 &
Buildings 1994
Salisbury Marketplace (1)
Salisbury, NC
Land 1987
Buildings
Scottsville Square
Bowling Green, KY
Land 1986
Buildings
Seven Hills
Spring Hill, FL
Land 1991
Buildings
Shelby Plaza (1)
Shelby, NC
Land 1972
Buildings
Sherwood South
Baton Rouge, LA
Land 1972, 1988
Buildings & 1992
Shipyard Plaza
Pascagoula, MS
Land 1987
Buildings
Shoppes at Lago Mar (1)
Miami, FL
Land 1995
Buildings
Shoppes of Silverlakes
Pembroke Pines, FL
Land 1995 &
Buildings 1996
Siegen Village
Baton Rouge, LA
Land 1988 &
Buildings 1996
Smyrna Village (1)
Smyrna, TN
Land 1992
Buildings
Smyth Valley Crossing
Marion, VA
Land 1989
Buildings
South Beach Regional
Jacksonville Beach, FL
Land 1990 &
Buildings 1991
Spalding Village
Griffin, GA
Land 1989
Buildings
Spring Valley
Columbia, SC
Land 1998
Buildings
Stadium Plaza
Phenix City, AL
Land 1988
Buildings
Stanley Market Place (1)
Stanley, NC
Land 1980 &
Buildings 1991
Tamarac Town Square (1)
Tamarac, FL
Land 1998
Buildings
Tarpon Heights
Galliano, LA
Land 1982
Buildings
Thomasville Commons
Thomasville, NC
Land 1991
Buildings
Town & Country
Kissimmee, FL
Land 1998
Buildings
Treasure Coast (1)
Vero Beach, FL
Land 1998
Buildings
Unigold Shopping Center (1)
Orlando, FL
Land 1987
Buildings
Venice Plaza
Venice, FL
Land 1971 &
Buildings 1979
Village at Northshore
Slidell, LA
Land 1988 &
Buildings 1993
Walton Plaza
Augusta, GA
Land 1991
Buildings
Waterlick Plaza
Lynchburg, VA
Land 1973 &
Buildings 1988
Watson Central
Warner Robins, GA
Land 1989 &
Buildings 1993
Wesley Chapel Crossing
Decatur, GA
Land 1989
Buildings
West Gate Plaza
Mobile, AL
Land 1974 &
Buildings 1995
West Towne Square
Rome, GA
Land 1988
Buildings
Williamsburg at Dunwoody (1)
Dunwoody, GA
Land 1983
Buildings
Willowdaile Shopping Center (1)
Durham, NC
Land 1986
Buildings
Industrial Buildings
Charlotte, NC - Industrial
Land 1956 &
Buildings 1963
Grand Marche
Shopping Center
Lafayette, LA
Land 1969
Conway Crossing
Orlando, FL
Land 1972
Buildings
Lutz Lake Crossing
Tampa, FL
Land -
Buildings
Miramar
Miami, FL
Land -
Buildings
Shops at Huntcrest
Tampa, FL
Land -
Buildings
Freehome Village
Development Loan -
(1) Ownership through IRT Partners, L.P.
43
SCHEDULE III - CONTINUED
Real estate activity is summarized as follows:
2001 2000 1999
--------- --------- ---------
RENTAL AND DEVELOPMENT PROPERTIES:
Cost -
Balance at beginning of year $637,259 $630,005 $622,117
Acquisitions and improvements 59,008 19,613 20,456
Retirements (231) - -
Funding of development loans 248 4,507 -
Collection of development loans (3,645) (264) -
---------- --------- ---------
692,639 653,861 642,573
Cost of properties sold (9,374) (16,602) (12,568)
---------- --------- ---------
Balance at end of year $683,265 $637,259 $630,005
========== ========= =========
Accumulated depreciation -
Balance at beginning of year $ 96,183 $ 86,170 $ 74,943
Depreciation 15,088 14,368 13,869
---------- --------- ---------
111,271 100,538 88,812
Accumulated depreciation related to
rental properties sold (1,927) (4,355) (2,642)
---------- --------- ---------
Balance at end of year $109,344 $ 96,183 $ 86,170
========== ========= =========
44
SCHEDULE IV
IRT PROPERTY COMPANY AND SUBSIDIARIES
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 2001
(IN THOUSANDS)
Face Amount
Final Periodic and Carrying
Type of Type of Interest Maturity Payment Amount of
Location of Property Loan Property Rate Date Terms Mortgages
--------------------------------------------- --------------- --------------- --------- ---------- -------- -----------
Lauderdale Lakes, FL First Mortgage Condominiums 10.00% May, 2009 (1) $ 76
Nashville, TN First Mortgage Condominiums 8.63% - 2006-2007 (1) 16
Participation 12.38%
Ft. Walton Beach, FL Second Mortgage Shopping Center 7.00% June, 2003 (2) 250
-----------
342
Less interest discounts and negative goodwill (28)
-----------
$ 314
===========
(1) Monthly payments include principal and interest.
(2) Interest is payable monthly. Entire principal balance is payable on the maturity date.
Mortgage loan activity is summarized as follows:
Year Ended December 31,
------------------------
2001 2000 1999
------ ------ --------
Balance at beginning of year $ 70 $ 92 $ 1,097
New mortgage loans 250 - 365
Amortization of interest discounts and negative
goodwill 6 6 4
Collections of principal (12) (28) (1,374)
------ ------ --------
Balance at end of year $ 314 $ 70 $ 92
====== ====== ========
45
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
IRT PROPERTY COMPANY
Date: December 9, 2002 /s/ Thomas H. McAuley
----- ------------------ ------------------------
Thomas H. McAuley
President & Chief Executive Officer
Date: December 9, 2002 /s/ James G. Levy
----- ------------------ --------------------
James G. Levy
Executive Vice President &
Chief Financial Officer
46
(c) Exhibits
Exhibit Number Description
-------------- -------------------------------------------------------
23 Consent of Deloitte & Touche LLP to the incorporation
of their report included in this Form 8-K in the
Company's previously filed Registration Statements File
Nos. 333-64628, 333-59938, 333-64742, 333-66780,
333-62435, 333-38847, 333-53638 and 333-59366.
47