Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
GRT > SEC Filings for GRT > Form 10-Q on 25-Apr-2014All Recent SEC Filings

Show all filings for GLIMCHER REALTY TRUST

Form 10-Q for GLIMCHER REALTY TRUST


25-Apr-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following should be read in conjunction with the unaudited consolidated financial statements of Glimcher Realty Trust ("GRT" or the "Company") including the respective notes thereto, all of which are included in this Form 10-Q.

This Form 10-Q, together with other statements and information publicly disseminated by GRT, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ from the results discussed in the forward-looking statements. Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, changes in political, economic or market conditions generally and the real estate and capital markets specifically; impact of increased competition; availability of capital and financing; tenant or joint venture partner(s) bankruptcies; failure to increase mall store occupancy and same-mall operating income; rejection of leases by tenants in bankruptcy; financing and development risks; construction and lease-up delays; cost overruns; the level and volatility of interest rates; the rate of revenue increases as compared to expense increases; the financial stability of tenants within the retail industry; the failure of the Company to make additional investments in regional mall properties and to redevelop properties; failure of the Company to comply or remain in compliance with the covenants in our debt instruments, including, but not limited to, the covenants under our corporate credit facility; defaults by the Company under its debt instruments; failure to complete proposed or anticipated acquisitions; the failure to sell properties as anticipated and to obtain estimated sale prices; the failure to upgrade our tenant mix; restrictions in current financing arrangements; the failure to fully recover tenant obligations for common area maintenance, insurance, taxes and other property expenses; the impact of changes to tax legislation and, generally, our tax position; the failure of GRT to qualify as a real estate investment trust ("REIT"); the failure to refinance debt at favorable terms and conditions; inability to exercise available extension options on debt instruments; impairment charges with respect to Properties (defined herein) as well as additional impairment charges with respect to Properties for which there has been a prior impairment charge; loss of key personnel; material changes in GRT's dividend rates on its securities or the ability to pay its dividend on its common shares or other securities; possible restrictions on our ability to operate or dispose of any partially-owned Properties; failure or inability to achieve earnings/funds from operations targets or estimates; conflicts of interest with existing joint venture partners; failure to achieve projected returns on development or investment properties; changes in generally accepted accounting principles ("GAAP") or interpretations thereof; terrorist activities and international hostilities, which may adversely affect the general economy, domestic and global financial and capital markets, specific industries and us; the unfavorable resolution of legal proceedings; the impact of future acquisitions and divestitures; significant costs related to environmental issues; bankruptcies of lending institutions participating in the Company's construction loans and corporate credit facility; as well as other risks listed from time to time in the Company's Form 10-K and in the Company's other reports and statements filed with the Securities and Exchange Commission ("SEC").

Overview

GRT is a fully-integrated, self-administered and self-managed REIT which commenced business operations in January 1994 at the time of its initial public offering. The "Company," "we," "us" and "our" are references to GRT, Glimcher Properties Limited Partnership ("GPLP" or "Operating Partnership"), as well as entities in which the Company has a material ownership or financial interest. We own, lease, manage and develop a portfolio of retail properties ("Properties" or "Property"). The Properties consist of open-air centers, enclosed regional malls, outlet centers and community shopping centers. As of March 31, 2014, we owned material interests in and managed 28 Properties (25 wholly-owned and three partially owned through joint ventures) which are located in 16 states. The Properties contain an aggregate of approximately 19.5 million square feet of gross leasable area ("GLA"), of which approximately 94.6% was occupied at March 31, 2014.


Table of Contents

Our primary business objective is to achieve growth in net income and Funds From Operations ("FFO") by developing and acquiring retail properties, by improving the operating performance and value of our existing portfolio through selective expansion and renovation of our Properties, and by maintaining high occupancy rates, increasing minimum rents per square-foot of GLA, and aggressively controlling costs.

Key elements of our growth strategies and operating policies are to:

• Increase Property values by aggressively marketing available GLA and renewing existing leases;

• Negotiate and sign leases which provide for regular or fixed contractual increases to minimum rents;

•         Capitalize on management's long-standing relationships with national
          and regional retailers and extensive experience in marketing to local
          retailers, as well as exploit the leverage inherent in a larger
          portfolio of properties in order to lease available space;

• Establish and capitalize on strategic joint venture relationships to maximize capital resource availability;

• Utilize our team-oriented management approach to increase productivity and efficiency;

•         Hold Properties for long-term investment and emphasize regular
          maintenance, periodic renovation and capital improvements to preserve
          and maximize value;

• Selectively dispose of assets we believe have achieved long-term investment potential and redeploy the proceeds;

• Strategic acquisitions of high quality retail properties subject to market conditions and availability of capital;

•         Capitalize on opportunities to raise additional capital on terms
          consistent with the Company's long term objectives as market conditions
          may warrant;



•         Control operating costs by utilizing our employees to perform
          management, leasing, marketing, finance, accounting, construction
          supervision, legal and information technology services;



•         Renovate, reconfigure or expand Properties and utilize existing land
          available for expansion and development of outparcels to meet the needs
          of existing or new tenants; and

• Utilize our development capabilities to develop quality properties at low cost.

Our strategy is to be a leading REIT focusing on retail properties such as open-air centers, enclosed regional malls, and outlet properties located primarily in the top 100 metropolitan statistical areas by population. We expect to continue investing in select development opportunities and in strategic acquisitions of quality retail properties that provide growth potential while disposing of non-strategic assets.

Critical Accounting Policies and Estimates

General

Management's Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of the Board of Trustees. Actual results may differ from these estimates under different assumptions or conditions.


Table of Contents

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that are reasonably likely to occur could materially impact the consolidated financial statements. No material changes to our critical accounting policies have occurred since the fiscal year ended December 31, 2013.

Funds From Operations

Our consolidated financial statements have been prepared in accordance with GAAP. We have indicated that FFO is a key measure of financial performance. FFO is an important and widely used financial measure of operating performance in our industry, which we believe provides important information to investors and a relevant basis for comparison among REITs.

We believe that FFO is an appropriate and valuable non-GAAP measure of our operating performance because real estate generally appreciates over time or maintains a residual value to a much greater extent than personal property and, accordingly, reductions for real estate depreciation and amortization charges are not meaningful in evaluating the operating results of the Properties.

FFO is defined by the National Association of Real Estate Investment Trusts, or "NAREIT," as net income (or loss) available to common shareholders computed in accordance with GAAP, excluding gains or losses from sales of depreciable property, impairment adjustments associated with depreciable real estate, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. The Company's FFO may not be directly comparable to similarly titled measures reported by other real estate investment trusts. FFO does not represent cash flow from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, or to cash flow from operating activities (determined in accordance with GAAP), as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

The following tables illustrate the calculation of FFO and the reconciliation of FFO to net loss to common shareholders for the three months ended March 31, 2014 and 2013 (in thousands):

                                                             For the Three Months Ended
                                                                      March 31,
                                                              2014                2013
Net loss to common shareholders                          $     (7,544 )     $      (13,911 )
Add back (less):
Real estate depreciation and amortization                      30,869               26,239
Pro-rata share of joint venture depreciation                      410                2,223
Pro-rata share of gain on sale of consolidated joint
venture asset                                                    (502 )                  -
Noncontrolling interests in operating partnership                (128 )               (222 )
Funds From Operations                                    $     23,105       $       14,329

FFO increased by $8.8 million, or 61.2%, for the three months ended March 31, 2014, as compared to the three months ended March 31, 2013. We experienced an increase in operating income as adjusted for real estate depreciation and general and administrative expenses ("Property Operating Income") of $5.0 million. Acquisitions we made during 2013 and 2014, which include, University Park Village ("University Park"), an open-air center located in Fort Worth, Texas, which we purchased in January 2013, WestShore Plaza ("WestShore"), an enclosed regional mall located in Tampa, Florida, of which we acquired the remaining 60% joint venture interest from our partner in June 2013 (the "WestShore Acquisition"), Arbor Hills, an open-air center located in Ann Arbor, Michigan, which we purchased in December 2013, and the February 2014 purchase (the "OKC Purchase") of open-air centers Classen Curve, The Triangle @ Classen Curve, and Nichols Hills Plaza (collectively "OKC Properties"), which are located in the Oklahoma City, Oklahoma area (collectively the "Acquisitions"), contributed an additional $4.0 million in Property Operating Income when comparing the three months ended March 31, 2014 to the same period ending in 2013. Also, we experienced an increase in minimum rents of $1.2 million from our comparable mall properties. Lastly, during the three months ended March 31, 2013, we announced that we would redeem 3.6 million shares of our 8.125% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest ("Series G Preferred Shares"). In connection with this announcement, we wrote off the issuance costs and related discount of the Series G Preferred Shares, resulting in a charge of $9.3 million.


Table of Contents

Offsetting these increases to FFO, we incurred $2.4 million more in interest costs. Interest costs increased primarily due to the acquisitions of WestShore and Arbor Hills in 2013 and new mortgage loans placed on The Outlet Collectionฎ|Jersey Gardens ("Jersey Gardens"), located in Elizabeth, New Jersey, and Polaris Fashion Place ("Polaris"), located in Columbus, Ohio, during 2013. Also, we received $1.9 million less in FFO from our unconsolidated real estate entities. This decrease can be primarily attributed to the WestShore Acquisition and the sale of Lloyd Center ("Lloyd"), an enclosed regional mall located in Portland, Oregon, which was previously owned through a joint venture. Lastly, general and administrative expenses were $915,000 higher for the three months ended March 31, 2014 as compared to the same period in 2013. The increase in general and administrative expenses can be attributed primarily to increased costs relating to stock-based executive compensation, travel, legal costs, as well as acquisition costs associated with the OKC Purchase.

Comparable Net Operating Income (NOI)

Management considers comparable NOI to be a relevant indicator of property performance, and NOI is also used by industry analysts and investors. A core Property is considered comparable if held in each period being compared. A Property may be included whether or not it is reported in discontinued operations if it is owned by the Company during the entire reporting periods that are being compared, and when the Company files the financial reports. For the three months ended March 31, 2014, there were discontinued operations that were comparable. The comparable property NOI reported in discontinued operations is reflected as a separate line item within the comparable NOI reconciliation below. NOI represents total property revenues less property operating and maintenance expenses. Accordingly, NOI excludes certain expenses included in the determination of net income such as corporate general and administrative expenses and other indirect operating expenses, interest expense, impairment charges, depreciation and amortization expense. These items are excluded from NOI in order to provide results that are more closely related to a property's results of operations. In addition, the Company's computation of same mall NOI excludes property straight-line adjustments of minimum rents and ground lease payments, amortization of above/below-market intangibles, termination income, and net income from outparcel sales. The Company also adjusts for other miscellaneous items in order to enhance the comparability of results from one period to another. The reconciliation of the Company's NOI to GAAP operating income is provided in the table below (in thousands):

                   Net Operating Income Growth for Comparable Properties
           (including pro-rata share of unconsolidated joint venture properties)

                                                      For the Three Months Ended
                                                              March 31,
                                                2014             2013           Variance
Operating income (continuing operations)   $     17,791     $     18,823     $     (1,032 )

Depreciation and amortization                    31,480           26,379            5,101
General and administrative                        7,753            6,838              915
Proportionate share of unconsolidated
joint venture comparable NOI                        914              848               66
Non-comparable Properties (1)                    (2,726 )            988           (3,714 )
Comparable Properties in discontinued
operations (2)                                      690              755              (65 )
Termination income                                   12              (31 )             43
Straight-line rents                                (473 )         (1,300 )            827
Non-cash ground lease adjustments                   664              860             (196 )
Above/below-market lease amortization            (2,297 )         (1,342 )           (955 )
Fee income                                         (249 )           (905 )            656
Other (3)                                           264              547             (283 )
Comparable NOI                             $     53,823     $     52,460     $      1,363

Comparable NOI percentage change                                                      2.6 %

(1) Amounts include community centers, Arbor Hills, OKC Properties, and the pro-rata share of WestShore.

(2) Amounts include Eastland Mall in Columbus, Ohio and an outparcel building located at River Valley Mall in Lancaster, Ohio.

(3) Other adjustments include discontinued developments costs, non-property income and expenses, and other non-recurring income or expenses.


Table of Contents

Results of Operations - Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013

Revenues

Total revenues increased 8.2%, or $7.1 million, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. Of this amount, minimum rents increased $5.2 million, percentage rents increased $90,000, tenant reimbursements increased $3.4 million, and other revenues decreased $1.6 million.

Minimum Rents

Minimum rents increased 9.6%, or $5.2 million, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. This increase is primarily attributable to the $4.0 million increase in minimum rents from the Acquisitions. The remaining $1.2 million increase can be attributed to minimum rents from various Properties throughout our portfolio.

Percentage Rents

Percentage rents increased 4.9%, or $90,000, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. This increase is primarily the result of increased sales productivity from certain tenants whose sales exceeded their respective lease breakpoints.

Tenant Reimbursements

Tenant reimbursements increased 13.5%, or $3.4 million, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. Of this increase, $1.2 million can be attributed to the Acquisitions. The remaining Properties experienced an increase of $2.2 million. This increase can be attributed to higher recoverable operating expenses, primarily related to snow removal costs, associated with comparable Properties when comparing the three months ended March 31, 2014 to the same period ended March 31, 2013.

Other Revenues

Other revenues decreased 32.5%, or $1.6 million, for the three months ended
March 31, 2014 compared to the three months ended March 31, 2013. The components
of other revenues are shown below (in thousands):

                                  For the Three Months Ended March 31,
                                    2014                 2013      Inc. (Dec.)
License agreement income $      1,972                  $ 1,837    $        135
Sponsorship income                573                      397             176
Fee and service income            249                    1,827          (1,578 )
Other                             599                      969            (370 )
Total                    $      3,393                  $ 5,030    $     (1,637 )

License agreement income relates to our tenants with rental agreement terms of less than thirteen months. Fee and service income primarily relates to fee and service income earned from our joint ventures. These fees are calculated in accordance with each specific joint venture arrangement. The decrease in fee and service income can be attributed to the sale of Lloyd, the sale of Tulsa Promenade ("Tulsa"), located in Tulsa, Oklahoma, and the WestShore Acquisition, all of which occurred during June 2013.

Expenses

Total expenses increased 12.0%, or $8.1 million, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. Property operating expenses increased $3.4 million, real estate taxes increased $662,000, the provision for doubtful accounts decreased $701,000, other operating expenses decreased $1.3 million, depreciation and amortization increased $5.1 million, and general and administrative costs increased $915,000.


Table of Contents

Property Operating Expenses

Property operating expenses are expenses directly related to the operations of the Properties. The expenses include, but are not limited to: wages and benefits for Property personnel, utilities, marketing, and insurance. Numerous leases with our tenants contain provisions that permit the Company to be reimbursed for these expenses.

Property operating expenses increased $3.4 million, or 18.7%, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. Of this increase, $1.2 million can be attributed to the Acquisitions. Additionally, certain Properties experienced an increase in snow removal costs of $1.5 million when comparing the three months ended March 31, 2014 to March 31, 2013.

Real Estate Taxes

Real estate taxes increased $662,000, or 6.6%, for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. Properties located in Ohio experienced $407,000 of this increase.

Provision for Doubtful Accounts

The provision for doubtful accounts was $258,000 for the three months ended March 31, 2014 compared to $959,000 for the three months ended March 31, 2013. The provision represented 0.3% and 1.1% of revenue for the three months ended March 31, 2014 and 2013, respectively.

Other Operating Expenses

Other operating expenses are costs that relate indirectly to the operations of the Properties. These expenses include, but are not limited to: costs related to providing services to our unconsolidated real estate entities, expenses incurred by the Company for vacant spaces, legal fees related to tenant collection matters or other tenant related litigation, rental expense associated with various Properties subject to a ground lease, and costs associated with wages and benefits related to short-term leasing. These expenses may also include costs associated with discontinued projects or sales of outparcels, as applicable.

Other operating expenses decreased $1.3 million or 28.6%, for the three months ended March 31, 2014, as compared to the three months ended March 31, 2013. This decrease can be primarily attributed to a decrease in costs of providing services to our unconsolidated real estate entities.

Depreciation and Amortization

Depreciation and amortization expense increased by $5.1 million, or 19.3%, for the three months ended March 31, 2014, compared to the three months ended March 31, 2013. Of this increase, $3.5 million can be attributed to the Acquisitions. The remaining $1.6 million increase can be attributed to various Properties throughout our portfolio.

General and Administrative

General and administrative expenses relate primarily to the corporate costs of the Company. These costs include, but are not limited to, wages and benefits, travel, third party professional fees, and occupancy costs that relate to our executive, legal, leasing, accounting, and information technology departments.

General and administrative expenses were $7.8 million and $6.8 million for the three months ended March 31, 2014 and 2013, respectively. The increase in general and administrative expenses can be attributed primarily to increased costs relating to stock-based executive compensation, travel, legal costs, as well as acquisition costs associated with the OKC Purchase.

Interest Income

Interest income was $74,000 for the three months ended March 31, 2014 compared with interest income of $4,000 for the three months ended March 31, 2013.


Table of Contents

Interest expense

Interest expense increased 13.3%, or $2.4 million, for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013. The summary below identifies the net increase by its various components (dollars in thousands).

                               For the Three Months Ended March 31,
                               2014             2013         Inc. (Dec.)
Average loan balance      $   1,784,717     $ 1,534,959     $  249,758
Average rate                       4.59 %          4.71 %        (0.12 )%

Total interest            $      20,480     $    18,074     $    2,406
Amortization of loan fees           845           1,047           (202 )
Capitalized interest               (688 )          (825 )          137
Fair value adjustments             (348 )          (348 )            -
Other                               225             159             66
Interest expense          $      20,514     $    18,107     $    2,407

The increase in interest expense was primarily due to an increase in the average loan balance. The average loan balance increased primarily due to the . . .

  Add GRT to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for GRT - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.