|
|
 | | | |
- close
- close
- close
- close
| |||||||||
Glimcher Realty Trust 10-Q 2009 UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
X] QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2009
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For The
Transition Period From _____ To ______
Commission
file number 001-12482
GLIMCHER
REALTY TRUST
(Exact
Name of Registrant as Specified in Its Charter)
Registrant's
telephone number, including area code: (614) 621-9000
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
[X] No [ ]>
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
[ ] No [ ]>
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
(Check
One): Large accelerated filer
[ ] Accelerated filer
[X] Non-accelerated filer
[ ] (Do not check if a smaller reporting
company) Smaller reporting company
[ ]
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
[ ] No [X]
As of
October 29, 2009, there were 68,715,033 Common Shares of Beneficial Interest
outstanding, par value $0.01 per share.
1 of 49
pages
GLIMCHER
REALTY TRUST
FORM
10-Q
INDEX
2
PART
1
FINANCIAL
INFORMATION
Item
1. FINANCIAL STATEMENTS
GLIMCHER
REALTY TRUST
CONSOLIDATED
BALANCE SHEETS
(unaudited)
(dollars
in thousands, except per share, par value and unit amounts)
ASSETS
LIABILITIES
AND EQUITY
The
accompanying notes are an integral part of these consolidated financial
statements.
3
GLIMCHER
REALTY TRUST
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
(dollars
and shares in thousands, except per share and unit amounts)
The
accompanying notes are an integral part of these consolidated financial
statements.
4
GLIMCHER
REALTY TRUST
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
(dollars
and shares in thousands, except per share and unit amounts)
The
accompanying notes are an integral part of these consolidated financial
statements.
5
GLIMCHER
REALTY TRUST
The
accompanying notes are an integral part of these consolidated financial
statements.
6
GLIMCHER
REALTY TRUST
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
(dollars
in thousands)
The
accompanying notes are an integral part of these consolidated financial
statements.
7
GLIMCHER
REALTY TRUST
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
Organization
Glimcher
Realty Trust (“GRT”) is a fully-integrated, self-administered and self-managed
Maryland real estate investment trust (“REIT”), which owns, leases, manages and
develops a portfolio of retail properties (the “Property” or “Properties”)
consisting of enclosed regional malls and open-air lifestyle centers (“Malls”),
and community shopping centers (“Community Centers”). At September
30, 2009, GRT both owned interests in and managed 26 Properties, consisting of
22 Malls (19 wholly owned and 3 partially owned through joint ventures) and 4
Community Centers (three wholly owned and one partially owned through a joint
venture). The “Company” refers to GRT and Glimcher Properties Limited
Partnership, a Delaware limited partnership, as well as entities in which the
Company has an interest, collectively.
Basis
of Presentation
The
consolidated financial statements include the accounts of GRT, Glimcher
Properties Limited Partnership (the “Operating Partnership,” “OP” or “GPLP”) and
Glimcher Development Corporation (“GDC”). As of September 30, 2009, GRT was a
limited partner in GPLP with a 95.5% ownership interest and GRT’s wholly owned
subsidiary, Glimcher Properties Corporation (“GPC”), was GPLP’s sole general
partner, with a 0.3% interest in GPLP. GDC, a wholly owned subsidiary of GPLP,
provides development, construction, leasing and legal services to the Company’s
affiliates and is a taxable REIT subsidiary. The equity method of accounting is
applied to entities in which the Company does not have a controlling direct or
indirect voting interest, but can exercise influence over the entity with
respect to its operations and major decisions. These entities are reflected on
the Company’s consolidated financial statements as “Investment in and advances
to unconsolidated real estate entities.” All significant intercompany accounts
and transactions have been eliminated in the consolidated financial
statements.
The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (“GAAP”) for interim financial
information and in accordance with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements. The information furnished in the accompanying
consolidated balance sheets, statements of operations and comprehensive income,
statements of equity, and statements of cash flows reflect all adjustments which
are, in the opinion of management, recurring and necessary for a fair statement
of the aforementioned financial statements for the interim
period. Operating results for the three and nine months ended
September 30, 2009 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2009.
The
December 31, 2008 balance sheet data was derived from audited financial
statements, but does not include all disclosures required by accounting
principles generally accepted in the United States of America (“U.S.”). The
consolidated financial statements should be read in conjunction with the notes
to the consolidated financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company’s Form 10-K for the year ended December 31, 2008.
We have
evaluated subsequent events through the time of filing this Form 10-Q with the
Securities & Exchange Commission (“SEC”) on October 30, 2009. No
material subsequent events have occurred since September 30, 2009 that
required recognition or disclosure in these financial statements.
Revenue
Recognition
Minimum rents are recognized on an
accrual basis over the terms of the related leases on a straight-line
basis. Percentage rents, which are based on tenants’ sales as
reported to the Company, are recognized once the sales reported by such tenants
exceed any applicable breakpoints as specified in the tenants’
leases. The percentage rents are recognized based upon the
measurement dates specified in the leases which indicate when the percentage
rent is due.
8
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
Recoveries
from tenants for real estate taxes, insurance and other shopping center
operating expenses are recognized as revenues in the period that the applicable
costs are incurred. The Company recognizes differences between estimated
recoveries and the final billed amounts in the subsequent year. Other
revenues primarily consist of fee income which relates to property management
services and other related services and is recognized in the period in which the
service is performed, licensing agreement revenues which are recognized as
earned, and the proceeds from sales of development land which are generally
recognized at the closing date.
Tenant
Accounts Receivable
The
allowance for doubtful accounts reflects the Company’s estimate of the amount of
the recorded accounts receivable at the balance sheet date that will not be
recovered from cash receipts in subsequent periods. The Company’s
policy is to record a periodic provision for doubtful accounts based on total
revenues. The Company also periodically reviews specific tenant
balances and determines whether an additional allowance is
necessary. In recording such a provision, the Company considers a
tenant’s creditworthiness, ability to pay, probability of collections and
consideration of the retail sector in which the tenant operates. The
allowance for doubtful accounts is reviewed and adjusted periodically based upon
the Company’s historical experience.
Investment
in Real Estate – Carrying Value of Assets
The
Company maintains a diverse portfolio of real estate assets. The
portfolio holdings have increased as a result of both acquisitions and the
development of Properties and have been reduced by selected sales of
assets. The amounts to be capitalized as a result of acquisitions and
developments and the periods over which the assets are depreciated or amortized
are determined based on the application of accounting standards that may require
estimates as to fair value and the allocation of various costs to the individual
assets. The Company allocates the cost of the acquisition based upon
the estimated fair value of the net assets acquired. The Company also
estimates the fair value of intangibles related to its
acquisitions. The valuation of the fair value of the intangibles
involves estimates related to market conditions, probability of lease renewals
and the current market value of in-place leases. This market value is
determined by considering factors such as the tenant’s industry, location within
the Property, and competition in the specific market in which the Property
operates. Differences in the amount attributed to the fair value estimate for
intangible assets can be significant based upon the assumptions made in
calculating these estimates.
Depreciation
and Amortization
Depreciation
expense for real estate assets is computed using a straight-line method and
estimated useful lives for buildings and improvements using a weighted average
composite life of forty years and three to ten years for equipment and
fixtures. Expenditures for leasehold improvements and construction
allowances paid to tenants are capitalized and amortized over the initial term
of each lease. Cash allowances paid to tenants that are used for
purposes other than improvements to the real estate are amortized as a reduction
to minimum rents over the initial lease term. Maintenance and repairs
are charged to expense as incurred. Cash allowances paid in return
for operating covenants from retailers who own their real estate are capitalized
as contract intangibles. These intangibles are amortized over the
period the retailer is required to operate their store.
Investment
in Real Estate – Impairment Evaluation
Management
evaluates the recoverability of its investments in real estate assets.
Long-lived assets are tested for recoverability whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. An
impairment loss is recognized only if the carrying amounts of a long-lived asset
is not recoverable and exceeds its fair value.
The
Company evaluates the recoverability of its investments in real estate assets to
be held and used each quarter and records an impairment charge when there is an
indicator of impairment and the undiscounted projected cash flows are less than
the carrying amount for a particular property. The estimated cash
flows used for the impairment analysis and the determination of estimated fair
value are based on the Company’s plans for the respective assets and the
Company’s views of market and economic conditions. The estimates
consider matters such as current and historical rental rates, occupancies for
the respective properties and comparable properties, sales contracts for certain
land parcels and recent sales data for comparable properties. Changes
in estimated future cash flows due to changes in the Company’s plans or its
views of market and economic conditions could result in recognition of
impairment losses, which, under the applicable accounting guidance, could be
substantial.
9
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
Sale
of Real Estate Assets
The
Company records sales of operating properties and outparcels using the full
accrual method at closing when both of the following conditions are met: 1) the
profit is determinable, meaning that, the collectability of the sales price is
reasonably assured or the amount that will not be collectible can be estimated;
and 2) the earnings process is virtually complete, meaning that, the seller is
not obligated to perform significant activities after the sale to earn the
profit. Sales not qualifying for full recognition at the time of sale are
accounted for under other appropriate deferral methods.
Investment
in Real Estate – Held-for-Sale
The
Company evaluates the held-for-sale classification of its real estate each
quarter. Assets that are classified as held-for-sale are recorded at
the lower of their carrying amount or fair value less cost to
sell. Management evaluates the fair value less cost to sell each
quarter and records impairment charges as required. An asset is
generally classified as held-for-sale once management commits to a plan to sell
its entire interest in a particular Property which results in no continuing
involvement in the asset as well as initiates an active program to market the
asset for sale. In instances where the Company may sell either a
partial or entire interest in a Property and has commenced marketing of the
Property, the Company evaluates the facts and circumstances of the potential
sale to determine the appropriate classification for the reporting
period. Based upon management’s evaluation, if it is expected that
the sale will be for a partial interest, the asset is classified as held for
investment. If during the marketing process it is determined the asset will be
sold in its entirety, the period of that determination is the period the asset
would be reclassified as held-for-sale. The results of operations of these real
estate Properties that are classified as held-for-sale are reflected as
discontinued operations in all periods reported.
On
occasion, the Company will receive unsolicited offers from third parties to buy
individual Properties. Under these circumstances, the Company will
classify the particular Property as held-for-sale when a sales contract is
executed with no contingencies and the prospective buyer has funds at risk to
ensure performance.
Accounting
for Acquisitions
The fair
value of the real estate acquired is allocated to acquired tangible assets,
consisting of land, building and tenant improvements, and identified intangible
assets and liabilities, consisting of the value of above-market and below-market
leases, acquired in-place leases and the value of tenant relationships, based in
each case on their fair values. Purchase accounting is applied to
assets and liabilities related to real estate entities acquired based upon the
percentage of interest acquired.
The fair
value of the tangible assets of an acquired property (which includes land,
building and tenant improvements) is determined by valuing the property as if it
were vacant, based on management’s determination of the relative fair values of
these assets. Management determines the as-if-vacant fair value of an
acquired property using methods to determine the replacement cost of the
tangible assets.
In
determining the fair value of the identified intangible assets and liabilities
of an acquired property, above-market and below-market lease values are recorded
based on the present value (using an interest rate which reflects the risks
associated with the leases acquired) of the difference between (a) the
contractual amounts to be paid pursuant to the in-place leases and (b)
management’s estimate of fair market lease rates for the corresponding in-place
leases, measured over a period equal to the remaining non-cancelable term of the
lease. The capitalized above-market lease values and the capitalized
below-market lease values are amortized as an adjustment to rental income over
the initial lease term.
The
aggregate value of in-place leases is determined by evaluating various factors,
including an estimate of carrying costs during the expected lease-up periods,
current market conditions, and similar leases. In estimating carrying
costs, management includes real estate taxes, insurance and other operating
expenses, and estimates of lost rental revenue during the expected lease-up
periods based on current market demand. Management also estimates
costs to execute similar leases including leasing commissions, legal and other
related costs. The value assigned to this intangible asset is
amortized over the remaining lease term plus an assumed renewal period that is
reasonably assured.
10
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
The
aggregate value of other acquired intangible assets includes tenant
relationships. Factors considered by management in assigning a value
to these relationships include: assumptions of probability of lease renewals,
investment in tenant improvements, leasing commissions, and an approximate time
lapse in rental income while a new tenant is located. The value
assigned to this intangible asset is amortized over the average life of the
relationship.
Deferred
Costs
The
Company capitalizes initial direct costs of leases and amortizes these costs
over the initial lease term. The costs are capitalized upon the
execution of the lease and the amortization period begins the earlier of the
store opening date or the date the tenant’s lease obligation
begins.
Stock-Based
Compensation
The
Company expenses the fair value of stock awards in accordance with the fair
value recognition as required by Topic 718 - “Compensation-Stock
Compensation” in the Accounting Standards Codification (“ASC”). It requires
companies to measure the cost of employee services received in exchange for an
award of an equity instrument based on the grant-date fair value of the award.
Accordingly, the cost of the stock award is expensed over the requisite service
period (usually the vesting period).
Cash
and Cash Equivalents
For
purposes of the statements of cash flows, all highly liquid investments
purchased with original maturities of three months or less are considered to be
cash equivalents. At September 30, 2009 and December 31, 2008, cash
and cash equivalents primarily consisted of short term securities and overnight
purchases of debt securities. The carrying amounts approximate
fair value.
Derivative
Instruments and Hedging Activities
The
Company accounts for derivative instruments and hedging activities by following
Topic 815 - “Derivative and Hedging” in the ASC. The objective is to provide
users of financial statements with an enhanced understanding of: (a) how and why
an entity uses derivative instruments; (b) how derivative instruments and
related hedged items are accounted for under this guidance; and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. It also requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about the fair value of gains and losses on derivative instruments,
and disclosures about credit-risk-related contingent features in derivative
instruments.
The
Company records all derivatives on the balance sheet at fair
value. The accounting for changes in the fair value of derivatives
depends on the intended use of the derivative, whether the Company has elected
to designate a derivative in a hedging relationship and apply hedge accounting
and whether the hedging relationship has satisfied the criteria necessary to
apply hedge accounting. Derivatives designated and qualifying as a
hedge of the exposure to changes in the fair value of an asset, liability, or
firm commitment attributable to a particular risk, such as interest rate risk,
are considered fair value hedges. Also, derivatives designated and
qualifying as a hedge of the exposure to variability in expected future cash
flows, or other types of forecasted transactions, are considered cash flow
hedges. Hedge accounting generally provides for the matching of the
timing of gain or loss recognition on the hedging instrument with the
recognition of the changes in the fair value of the hedged asset or liability
that are attributable to the hedged risk in a fair value hedge or the earnings
effect of the hedged forecasted transactions in a cash flow
hedge. The Company may enter into derivative contracts that are
intended to economically hedge certain of its risks, even though hedge
accounting does not apply or the Company elects not to apply hedge accounting
under the Topic 815 - “Derivatives and Hedging” in the ASC.
11
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
Investment
in Unconsolidated Real Estate Entities
The
Company evaluates all joint venture arrangements for
consolidation. The percentage interest in the joint venture,
evaluation of control and whether a variable interest entity (“VIE”) exists are
all considered in determining if the arrangement qualifies for
consolidation.
The
Company accounts for its investments in unconsolidated real estate entities
using the equity method of accounting whereby the cost of an investment is
adjusted for the Company’s share of equity in net income or loss beginning on
the date of acquisition and reduced by distributions received. The
income or loss of each joint venture investor is allocated in accordance with
the provisions of the applicable operating agreements. The allocation
provisions in these agreements may differ from the ownership interest held by
each investor. Differences between the carrying amount of the
Company’s investment in the respective joint venture and the Company’s share of
the underlying equity of such unconsolidated entities are amortized over the
respective lives of the underlying assets as applicable.
The
Company periodically reviews its investment in unconsolidated real estate
entities for other than temporary declines in market value. Any
decline that is not considered temporary will result in the recording of an
impairment charge to the investment.
Noncontrolling
Interests
Noncontrolling
interests represent the aggregate partnership interest in the Operating
Partnership held by the Operating Partnership limited partner unit holders (the
“Unit Holders”). Income allocated to noncontrolling interest is based
on the Unit Holders ownership percentage of the Operating
Partnership. The ownership percentage is determined by dividing the
number of Operating Partnership Units (“OP Units”) held by the Unit Holders by
the total number of OP Units outstanding at the time of the
determination. The issuance of additional shares of beneficial
interest of GRT (the “Common Shares,” “Shares” or “Share”) or OP Units changes
the percentage ownership in the OP Units of both the Unit Holders and the
Company. Because an OP Unit is generally redeemable for cash or
Shares at the option of the Company, it is deemed to be equivalent to a
Share. Therefore, such transactions are treated as capital
transactions and result in an allocation between shareholders’ equity and
noncontrolling interest in the accompanying balance sheets to account for the
change in the ownership of the underlying equity in the Operating
Partnership.
Supplemental
Disclosure of Non-Cash Financing and Investing Activities
Non-cash
transactions resulting from other accounts payable and accrued expenses for
ongoing operations such as real estate improvements and other assets were $764
and $6,857 as of September 30, 2009 and December 31, 2008,
respectively.
During
the third quarter of 2009, the Company conveyed its interest in Eastland Mall in
Charlotte, North Carolina (“Eastland Charlotte”) to the lender without penalty.
In connection with this transfer the Company disposed of assets totaling
$42,853. The Company also was relieved of $42,565 of liabilities which included
the Company’s $42,229 mortgage loan.
Share
distributions of $6,870 and $12,099 and Operating Partnership distributions of
$299 and $956 were declared, but not paid as of September 30, 2009 and December
31, 2008, respectively. Distributions for GRT’s 8.75% Series F
Cumulative Preferred Shares of Beneficial Interest of $1,313 were declared, but
not paid as of September 30, 2009 and December 31,
2008. Distributions for GRT’s 8.125% Series G Cumulative Preferred
Shares of Beneficial Interest of $3,047 and $3,046 were declared, but not paid
as of September 30, 2009 and December 31, 2008, respectively.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP in the U.S. requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ
from those estimates.
12
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
New
Accounting Pronouncements
In late
2007, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 141R, a revision of SFAS No. 141,
“Accounting for Business Combinations,” which was primarily codified into Topic
805 – “Business Combinations” in the ASC. This standard expands the use of
fair value principles as well as the treatment of pre-acquisition
costs. This guidance is effective for fiscal years beginning after
December 15, 2008 (and thus acquisitions after December 31,
2008). The Company adopted this guidance and its impact can not be
determined until an acquisition is consummated.
In late
2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements” which was primarily codified into Topic 810 -
“Consolidation” in the ASC. Previously, minority interest was not
part of equity. Under this new standard, minority interest is part of equity.
This change affected key financial ratios, such as debt to equity
ratios. This guidance was effective no later than for fiscal years
beginning after December 15, 2008. Effective January 1, 2009, the
Company began reporting the noncontrolling interests in the Operating
Partnership in the equity section of the Company’s balance sheet. The
income or loss allocated to these noncontrolling interests has been affected by
their proportionate ownership percentage of the Operating
Partnership.
In
February 2008, the FASB issued Staff Position No. FAS 157-2 which provides for a
one-year deferral of the effective date of SFAS No. 157, “Fair Value
Measurements,” which was primarily codified into Topic 820 - “Fair
Value Measurements and Disclosures” in the ASC. This guidance is for
non-financial assets and liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis. The Company adopted this guidance and it did not have a
material impact to the Company’s financial position or results of
operations.
In
March 2008, the FASB issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities,” which was primarily
codified into Topic 815 - “Derivatives and Hedging” in the ASC. This
statement amends SFAS No. 133 to provide additional information about how
derivative and hedging activities affect an entity’s financial position,
financial performance, and cash flows. This guidance requires
enhanced disclosures about an entity’s derivatives and hedging
activities. This guidance is effective for financial statements
issued for fiscal years beginning after November 15, 2008. The
Company adopted the application of this statement and has provided the new
disclosures as required.
In
October 2008, the FASB issued Staff Position No. SFAS 157-3, which clarifies the
application of SFAS No. 157 “Fair Value Measurements,” which was primarily
codified into Topic 820 – “Fair Value Measurements and Disclosures” in the
ASC. It provides guidance in determining the fair value of a
financial asset when the market for that financial asset is not
active. The Company adopted this guidance and it did not have a
material impact to the Company’s financial position or results of
operations.
Effective
January 1, 2009, the Company adopted FASB Staff Position Emerging Issues Task
Force (“EITF”) 03-6-1, “Determining Whether Instruments Granted in Share-Based
Payment Transactions Are Participating Securities” which was primarily codified
into Topic 260 - “Earnings Per Share” in the ASC. This guidance
requires that all outstanding unvested share-based payment awards that contain
rights to non-forfeitable dividends or dividend equivalents (such as restricted
stock units granted by the Company) be considered participating securities. The
Company has outstanding unvested restricted stock which does include rights to
non-forfeitable dividends. The adoption did not have a material
impact on the Company’s earnings per share.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events,” which was primarily
codified into Topic 855 - “Subsequent Events” in the ASC. It establishes general
standards of accounting and disclosure for events that occur after the balance
sheet date but before the financial statements are issued. This new standard was
effective for interim or annual periods beginning after June 15,
2009. The Company adopted this guidance and has provided the new
disclosures as required.
13
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R),” which changes the approach to determining the primary
beneficiary of a VIE and requires companies to more frequently assess whether
they must consolidate a VIE. This new standard is effective on the first annual
reporting period that begins after November 15, 2009. We are currently assessing
the potential impacts, if any, on our consolidated financial
statements.
In June
2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles", which was
primarily codified into Topic 105 - "Generally Accepted Accounting Standards" in
the ASC. This standard will become the single source of authoritative
nongovernmental U.S. GAAP, superseding existing FASB, American Institute of
Certified Public Accountants, EITF, and other related accounting literature.
This standard condenses the thousands of GAAP pronouncements into approximately
90 accounting topics and displays them using a consistent structure. Also
included is relevant Securities and Exchange Commission guidance organized using
the same topical structure in separate sections. This guidance became effective
for financial statements issued for reporting periods that ended after September
15, 2009. Beginning in the third quarter of 2009, this guidance impacts the
Company's financial statements and related disclosures as all references to
authoritative accounting literature reflect the newly adopted
codification.
Reclassifications
Certain reclassifications of prior
period amounts, including the presentation of the Statement of Operations
required by Topic 205 - “Presentation of Financial Statements” in the ASC have
been made in the financial statements in order to conform to the 2009
presentation.
As required by Topic 360 - “Property,
Plant and Equipment” in the ASC, long-lived assets to be disposed of by sale are
measured at the lower of the carrying amount for such assets or fair value less
cost to sell. During the nine months ended September 30, 2009, the
Company sold one Property, The Great Mall of the Great Plains (“Great Mall”),
for $20,500 and conveyed one Property, Eastland Charlotte, to the lender during
September of 2009. During the nine months ended September 30, 2008,
the Company sold one property, Knox Village Square. As of September
30, 2009, the Company classified one Community Center, Ohio River Plaza, as
held-for-sale. The financial results, including any impairment charges for this
Property, are reported as discontinued operations in the consolidated statements
of operations and the net book value of the assets are reflected as
held-for-sale on the balance sheet. The table below provides
information on the held-for-sale assets.
Investment in unconsolidated real
estate entities as of September 30, 2009 consisted of an investment in three
separate joint venture arrangements (the “Ventures”). The Company
evaluated each of the Ventures individually to determine whether consolidation
was required. For each of the Ventures listed below, it was
determined that each qualified for treatment as an unconsolidated joint venture
and are accounted for under the equity method of accounting. A
description of each of the Ventures is provided below:
Consists
of a 52% interest held by GPLP in a joint venture (the “ORC Venture”) with an
affiliate of Oxford Properties Group (“Oxford”), which is the global real estate
platform for the Ontario (Canada) Municipal Employees Retirement System, a
Canadian pension plan. The ORC Venture acquired two of the Company’s
joint venture Mall Properties, Puente Hills Mall (“Puente”) and Tulsa Promenade
(“Tulsa”). The ORC Venture acquired Puente from an independent third
party in December 2005 and acquired Tulsa from GPLP in March 2006.
14
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
Consists
of a 50% common interest held by a GPLP subsidiary in a joint venture (the
“Scottsdale Venture”) formed in May 2006 with an affiliate of the Wolff Company
(“Wolff”). The purpose of the venture is to build a premium retail
and office complex consisting of approximately 620,000 square feet of gross
leasable space in Scottsdale, Arizona (the “Scottsdale Quarter”). The
Scottsdale Venture was determined to be a VIE in accordance with Topic 810 -
“Consolidation” in the ASC. The Company determined that it was not
the primary beneficiary of the Scottsdale Venture by using a quantitative
approach consistent with Topic 810. The Company performed a
probability cash flow weighting analysis utilizing different market based
assumptions, including varying capitalization rates and changes in expected
financial performance to make the conclusion. Accordingly, the
Company’s interest in this venture is accounted for using the equity method of
accounting in accordance with Topic 323 - “Investments-Equity Method and Joint
Ventures” in the ASC. The Company and Wolff each contributed an initial
investment of $10,750 to the Scottsdale Venture, which represents common equity
contributions of each party. As of December 31, 2008, the Company had
$24,500 cumulative preferred investments outstanding in the Scottsdale
Venture (with no corresponding investment by Wolff). During the first
nine months of 2009, the Company made additional cumulative preferred
investments in the Scottsdale Venture in the amount of $20,000 (with no
corresponding investment by Wolff). The Company received payments
from the Scottsdale Venture in the amount of $5,200 and $3,500 on March 4, 2009
and May 1, 2009, respectively, representing a partial return of its preferred
investment. As of September 30, 2009, our preferred investment in the
Scottsdale Venture is $35,800 and is eligible to receive a weighted average
preferred return of up to 21.0%. The Company’s total investment in
the Scottsdale Venture is $46,550 at September 30, 2009.
GPLP has
made certain guarantees and provided letters of credit to ensure performance and
to ensure that the Scottsdale Venture completes construction. The
amount and nature of the guarantees are listed below:
15
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
Consists
of a 50% interest held by a GPLP subsidiary in a joint venture (the “Surprise
Venture”) formed in September 2006 with the former landowner of the Property
that was developed. The Surprise Venture constructed 25,000 square
feet of retail space on a five-acre site located in an area northwest of
Phoenix, Arizona.
The
Company may provide management, development, construction, leasing and legal
services for a fee to each of the Ventures described above. Each
individual agreement specifies which services the Company is to provide. The
Company recognized fee income of $899 and $1,005 for these services for the
three months ended September 30, 2009 and 2008, respectively, and fee income of
$3,055 and $3,049 for the nine months ended September 30, 2009 and 2008,
respectively.
The net
income or loss for each joint venture entity is allocated in accordance with the
provisions of the applicable operating agreements. The summary
financial information for the Company’s investment in unconsolidated entities,
accounted for using the equity method, is presented below:
16
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
On
October 5, 2007, an affiliate of the Company entered into an agreement with Vero
Venture I, LLC to form Vero Beach Fountains, LLC (the “VBF
Venture”). The purpose of the VBF Venture is to evaluate a potential
retail development in Vero Beach, Florida. The Company has
contributed $5,000 in cash for a 50% interest in the VBF Venture. The
economics of the VBF Venture require the Company to receive a preferred return
and 75% of the distributions from the VBF Venture until such time as the capital
contributed by the Company is returned. The Company utilized a
qualitative approach to determine that the Company receives substantially all of
the economics and provides the majority of the financial support related to the
VBF Venture. In accordance with Topic 810 – “Consolidations” in the
ASC, the Company is the primary beneficiary of the VBF Venture and therefore it
is consolidated in the Company's consolidated financial statements. The VBF
Venture is carried on the Company’s consolidated balance sheets as “Developments
in progress” in the amount of $7,079 as of September 30, 2009 and December 31,
2008.
17
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
The
Company’s accounts receivable is comprised of the following
components:
18
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars
in thousands, except share and unit amounts)
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||