Item 1. Business
Background
CV Reit, Inc., together with its subsidiaries, has operated as a real estate investment trust (REIT) under Sections 856 through 860 of the Internal Revenue Code since January 1, 1982. A company that qualifies as a REIT may, if it distributes at least 95% of its ordinary taxable income (90% effective in 2001) for a taxable year, deduct dividends paid to stockholders with respect to such taxable year from taxable income. We intend to operate in such a manner that we will continue to qualify as a REIT. In any year in which we qualify, we will not be taxed under the Code on income distributed to our stockholders attributable to that year.
After our qualification as a REIT in 1982, our operating strategy consisted of investing in real estate mortgage notes receivable, primarily loans to developers. Due to economic conditions in the real estate market and the economy in general, in the early 1990's we decided to limit new loan commitments, repaid all of our outstanding borrowings (other than our long-term collateralized mortgage obligations) and began to seek alternative real estate investments with proven and experienced personnel to manage and enhance such a portfolio.
Effective December 31, 1997, we acquired a number of shopping centers and an interest in Drexel Realty, Inc., a real estate management and leasing company. In connection with this transaction, we created an Umbrella Partnership REIT (UPREIT) structure by forming an Operating Partnership, Montgomery CV Realty L.P. (we refer to the Operating Partnership, together with its wholly owned subsidiaries as the OP). The OP then acquired 100% of the ownership interests in nine shopping centers and an office building, located in Pennsylvania and New Jersey, and a 95% economic interest in Drexel from Louis P. Meshon, Sr.. In addition, we transferred substantially all of our net assets (or the economic benefit) to the OP. As a result, we indirectly currently own 84.5% of the OP, are its sole general partner and operate as a self-administered, self-managed equity REIT with Mr. Meshon as President and Chief Executive Officer. As of December 31, 1999, the OP owned twenty neighborhood or community shopping centers and two office buildings, located in Pennsylvania, New Jersey and Florida, comprising approximately 1.9 million square feet.
Recent Development - Proposed Merger
On December 10, 1999, we signed a definitive merger agreement and reorganization plan with Kranzco Realty Trust, a shopping center REIT, to merge our operations and create a new community shopping center UPREIT to be called Kramont Realty Trust. Terms of the merger call for common shareholders of both companies to each receive one share of Kramont common stock for each outstanding share of CV Reit and Kranzco common stock on a tax-free basis. The merger agreement is subject to approval by shareholders of both companies and certain other conditions.
Mr. Meshon will assume the same titles and responsibilities at the newly created Kramont and our designees will hold the majority of the board seats. Corporate headquarters will be located at the OP's existing facilities, in Plymouth Meeting, Pennsylvania.
Kramont is expected to own 84 properties, substantially comprising neighborhood and community shopping centers, encompassing approximately 11 million square feet in 16 states with an asset base of approximately $800 million.
The merger will be accounted for as a purchase by CV Reit of Kranzco. Accordingly, Kranzco's assets and liabilities will be recorded at their estimated fair values based on the consideration given by CV Reit.
Operating Strategies
Our primary business objectives are to increase Funds From Operations (please refer to Management's Discussion and Analysis of Results of Operations and Financial Condition for a definition of Funds From Operations) and to enhance the value of our properties. It has been our operating strategy to achieve these objectives through:
Efficient operation of our properties including active leasing and property management, maintenance of high occupancy levels, increasing rental rates and controlling operating and capital costs.
Acquisition of additional properties which satisfy our criteria, at favorable prices, including properties requiring renovation or re-leasing.
Completion of strategic renovations and expansions to further maximize operating cash flow.
Attainment of greater access to financing sources.
Assets
At December 31, 1999, the book value of our assets amounted to $257.8 million, including $173.1 million in income producing real estate and $63.4 million in real estate mortgage notes receivable. A description of our principal assets follows:
Real Estate - Income Producing
The OP, directly or indirectly, owns 100% of twenty neighborhood or community shopping centers and two office buildings, located in Pennsylvania, New Jersey and Florida, comprising 1,891,000 square feet. The properties are diverse in size, ranging from 8,000 square feet to 202,000 square feet of gross leasable area and average 86,000 square feet. The shopping centers generally attract local area customers and are typically anchored by a supermarket, drugstore and/or discount stores. The centers are smaller than regional malls and do not depend on customers who travel long distances. The tenant base generally concentrates on everyday purchases from local customers. Anchors attract shoppers who then also often patronize the smaller shops. At December 31, 1999, 97.6% of our gross leasable area was leased to tenants under operating leases. Substantially all of our income producing real estate is pledged as collateral for borrowings.
The following table sets forth certain pertinent information, as of December 31, 1999, regarding these properties. Except for Century Plaza and the Century Village Administration Building, which we built, each of the properties were acquired by the OP on December 31, 1997, or during 1998 and 1999:
Year of Latest Lease Year Renovation Leasable Occupancy Expiration/ Originally or Square Rate as of Principal Option Built Expansion Footage 12/31/99 Tenants Expiration ________________________________________________________________________________ Shopping Centers Century Plaza Deerfield Beach, FL 1976 1991 85,151 96.7% Broward 2001 County Library Chalfont Village Shopping Center 1968 N/A 46,051 83.6% Better Bodies 2005/2010 New Britain, PA
Cherry Square Shopping Center 1991 N/A 75,005 100.0% Redners 2016/2021 Northampton, PA Supermarket
Chesterbrook Village Center 1980 1995 122,316 95.9% Genuardi 2010/2030 Wayne, PA Markets
Collegeville Shopping Center 1978 1994 110,518 100.0% Acme 2003/2038 Collegeville, PA
County Line Plaza 1970 1998 175,023 100.0% Ames 2002/2017 Souderton, PA Clemens 2007/2027 Markets Danville Plaza 1971 1987 24,052 96.4% CVS Pharmacy 2007/2027 Danville, PA
Dickson City Center 1972 1990 47,224 100.0% Office Max 2006/2016 Dickson City, PA
Gilbertsville Shopping Center 1974 N/A 85,748 97.7% Weis Markets 2004/2014 Gilbertsville, PA
Lakewood Plaza Shopping Center 1962 N/A 202,499 99.7% Shop Rite 2010/2030 Lakewood, PA Supermarkets
Marlton Shopping Center-Phase II 1986 N/A 155,587 95.6% Burlington 2002/2030 Evesham, NJ Coat Factory T.J. Maxx 2001/2011 Marlton Shopping Center-Phase I 1985 N/A 146,542 100.0% Super Fresh 2007/2047 Evesham, NJ Markets
Mount Carmel Plaza 1988 N/A 14,504 90.3% CVS Pharmacy 2002/2012 Glenside, PA
New Holland Plaza 1977 N/A 65,730 85.7% Weis Markets 2000/2015 New Holland, PA
North Penn Marketplace 1983 N/A 57,898 100.0% Eckerd Drugs 2003/2018 Upper Gwynedd, PA
Rio Grande Plaza 1991 1997 138,747 100.0% JC Penney 2012/2042 Rio Grande, NJ Peebles 2012/2022 Sears 2006/2026 Village at Newtown 1989 N/A 177,032 96.2% Genuardi 2008/2018 Newtown, PA Markets
Whitemarsh Shopping Center 1969 1996 67,546 100.0% Clemens 2017/2027 Conshohocken, PA Markets
Woodbourne Square 1985 N/A 29,976 93.6% Rehab Place 2000 Langhorne, PA at Oxford Valley
555 Scott Street Center 1961 N/A 8,400 100.0% Pet Supplies 2000/2005 Wilkes-Barre, PA Plus
Office Buildings Century Village Administration Building 1970 1995 25,100 100.0% First Choice 2000 W. Palm Beach, FL Health Care Services
Plymouth Plaza 1974 1994 30,026 97.5% Drexel Realty 2004 Plymouth Meeting, PA --------- ------ Totals 1,890,675 97.6% ========= ======
Mortgage Notes Receivable
At December 31, 1999, our mortgage notes receivable amounted to $63.4 million, collateralized by first mortgages on the recreation facilities at the four completed Century Village adult condominium communities in southeast Florida, including an aggregate of $35 million due from H. Irwin Levy, Chairman of the Board and a principal stockholder of our company, or Hilcoast Development Corp., of which Mr. Levy is Chairman of the Board, Chief Executive Officer and a majority stockholder. As of December 31, 1999, none of the mortgage notes were delinquent.
The notes provide for self-amortizing equal monthly principal and interest payments in the aggregate amount of $9.5 million per annum, through January 2012 and $2.9 million thereafter through 2023, and bear interest at annual rates principally ranging from 11% to 13.5%. The notes are pledged as collateral for certain borrowings. Please refer to Item 13. Certain Relationships and Related Transactions regarding related party transactions with Hilcoast and Mr. Levy.
Investments in Unconsolidated Affiliates
Self-Storage Warehouse Partnerships
We own 45%-50% general and limited partnership interests in three partnerships whose principal assets consist of self-storage warehouses located in southeast Florida, with an aggregate of approximately 2,800 units and 320,000 square feet, managed by independent parties. Our partners in these partnerships are certain members of the Granados family. We have no financial obligation with respect to such partnerships except under state law, as general partners. We receive monthly distributions from each of the partnerships based on cash flows.
Drexel
Effective December 31, 1997, we acquired a 95% economic interest in Drexel, which for over 25 years has been engaged in the development, brokerage, construction, leasing and management of real estate. In addition to managing our properties, Drexel currently manages seven other properties located in Pennsylvania and New Jersey. During 1999 and 1998, management contracts for 19 additional properties were terminated, primarily as a result of Drexel's decision to concentrate mainly on management, leasing and renovation of our own properties. It is not contemplated that Drexel will seek any additional third party management contracts in the future. Currently, 99% of the voting stock of Drexel is beneficially owned by Mr. Meshon and held in a voting trust and 100% of the non-voting stock is owned by the OP. Mr. Meshon currently serves as President of Drexel.
Other Real Estate
We own certain real estate acquired by deed in lieu of foreclosure and held for resale, consisting of three parcels of unimproved commercial land, totaling 38 acres located in southeast Florida, with a book value of $5.5 million at December 31, 1999, net of a $2.4 million allowance for losses.
Industry Factors
Ownership of commercial real estate involves risks arising from changes in economic conditions generally and in the commercial real estate market specifically, as well as risks which result from property-specific factors such as the failure or inability to make needed capital improvements, competition, reductions in revenue arising from decreased occupancy or reductions in the level of rents obtainable, and factors which increase the cost of operating, financing and refinancing properties such as escalating interest rates and wage rates, increased taxes, fuel costs and other operating expenses and casualties. All of these kinds of risks can result in reduced net operating revenues available for distribution. Our ability to manage the properties effectively notwithstanding such risks and economic conditions will affect the funds available for distribution.
The results of operations of our company also depend upon the availability of suitable opportunities for investment and reinvestment of our funds and on the yields available from time to time on real estate investments, which in turn depend to a large extent on the type of investment involved, prevailing interest rates, the nature and geographical location of the property, competition and other factors, none of which can be predicted with certainty. Our competitors for acceptable investments include insurance companies, pension funds, and other REIT's which may have investment objectives similar to ours and some of which may have greater financial resources than ours. We are not aware of statistics which would allow us to determine our position with respect to all of our competitors in the commercial real estate investment industry.
Employees
On December 31, 1999, we employed 71 persons, substantially all of whom were employed by Drexel or a wholly owned subsidiary of Drexel.
Item 2.
Item 2. Properties
Please refer to Item 1. Business - Real Estate - Income Producing, Investments in Unconsolidated Affiliates and Other Real Estate.
Item 3.
Item 3. Legal Proceedings
We are subject to various claims and complaints relative to our business activities. In our opinion, the ultimate disposition of these matters will not have a material adverse effect on our financial position.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth quarter of 1999.
PART II
Item 5.
Item 5. Market for Our Common Stock and Related Security Holders Matters
Our common stock is listed for trading on the New York Stock Exchange under the symbol CVI. The following table sets forth the high and low sales prices per share and the dividends per share which we declared on our common stock, for each quarter during the past two years.
Market Price Range ____________________ Dividends High Low Declared _______ ________ _________
First Quarter 12.69 11.25 $ .29 Second Quarter 13.63 10.38 .29 Third Quarter 13.06 11.75 .29 Fourth Quarter 12.56 9.00 .29 ______ $ 1.16 ====== First Quarter 15.25 13.25 $ .29 Second Quarter 14.31 13.00 .29 Third Quarter 13.63 12.00 .29 Fourth Quarter 13.00 11.50 .29 ______ $ 1.16 ======
As of March 7, 2000 there were 7,966,621 shares of common stock outstanding and approximately 1,700 holders of record.
Through our wholly owned subsidiary, Montgomery CV Realty Trust (the Trust), we indirectly own 7,966,621 OP units (representing the sole general partnership interest and 84.5% of the limited partnership interest in the OP). The holders of substantially all of the remaining 15.5%, or 1,462,406 OP units, have the right to require the OP to redeem their OP units for cash at any time. However, upon a holder giving notice of the exercise of this right, the Trust has the right to acquire such holder's OP units in exchange for cash or, if certain conditions are satisfied, an equal number of shares of our common stock.
We expect to continue to qualify as a REIT. A corporation, which qualifies as a REIT may, if it distributes at least 95% of ordinary taxable income (90% effective in 2001) for a taxable year, deduct dividends paid to stockholders with respect to such taxable year from taxable income.
A REIT is not required to distribute capital gain income but to the extent it does not, it must pay the applicable capital gain income tax unless it has ordinary losses to offset such capital gain income. We have historically distributed to our stockholders capital gain income arising from principal repayments on our mortgage notes receivable (please refer to Item 1. Business - Mortgage Notes Receivable) which are being reported on the installment method for tax purposes.
Item 6.
Item 6. Selected Financial Data (dollars in millions, except share data)
Year Ended December 31, ________________________________________________________________________________ 1999 1998 1997 1996 1995 ________________________________________________________________________________ Revenues: Rent $25.6 $17.2 $ 2.7 $ 1.1 $ .7 Interest and other 8.0 8.8 10.6 11.7 12.2 _____ _____ _____ _____ _____ Total revenues $33.6 $26.0 $13.3 $12.8 $12.9 ===== ===== ===== ===== ===== Income before income taxes $ 7.2 $ 8.8 $ 8.5 $ 9.4 $ 8.4 ===== ===== ===== ===== ===== Net income $ 7.2 $15.9(b) $ 8.5 $ 9.6 $ 9.4 ===== ===== ===== ===== ===== Funds From Operations (FFO) (a) $10.8 $ 9.5 $ 9.1 $ 9.0 $ 8.7 ===== ===== ===== ===== ===== Per common share: Net income, basic and diluted $ .91 $1.99 $1.07 $1.20 $1.18 ===== ===== ===== ===== ===== Dividends declared $1.16 $1.16 $1.16 $1.14 $1.08 ===== ===== ===== ===== ===== Average common shares outstanding, basic and diluted 7,966,621 7,966,621 7,966,621 7,966,621 7,966,621 ========= ========= ========= ========= ========= At Year End: Total assets $257.8 $225.4 $171.9 $118.9 $120.0 ====== ====== ====== ====== ====== Borrowings $156.3 $121.9 $66.3 $35.1 $37.1 ====== ====== ====== ====== ====== Stockholders' equity: Total $77.6 $79.6 $72.9 $73.7 $73.2 ===== ===== ===== ===== ===== Per common share $9.74 $9.99 $9.16 $9.25 $9.19 ===== ===== ===== ===== ===== ___________ (a) Please refer to Item 7.
Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition
Results of Operations
Net Income
1999 Compared to 1998
For the year ended December 31, 1999, net income was $7,247,000 or $.91 per share compared to $15,850,000 or $1.99 per share for the same period of 1998.
Net income for 1998 includes a $2,347,000 gain from the sale of real estate, a $7,041,000 deferred income tax benefit (please refer to Note 1 to Consolidated Financial Statements) and $300,000 of non-recurring expenses, principally in connection with the settlement of litigation. In addition, depreciation and amortization increased by $1,371,000 in 1999 due to shopping center acquisitions. Excluding these non-operational items, net income increased by $1,856,000. The discussion below highlights the major components which caused this increase.
During 1999, rent revenue and operating expenses increased by $8,400,000 and $2,437,000, respectively (a net rental income increase of $5,963,000), primarily due to the acquisition of ten shopping centers since the beginning of 1998. The increase also reflects improved operating results from income producing properties owned as of December 31, 1997.
Interest income decreased by $846,000 during 1999, attributable to a reduction in the average balance of mortgage notes receivable and cash. The reduction in the average balance outstanding principally results from repayments by Hilcoast of a line of credit and other notes in 1998. Those repayments as well as available cash balances have generally been utilized to acquire shopping centers. The Company's remaining mortgage notes receivable are long term and require self-amortizing payments through 2023.
Interest expense increased by $3,388,000 in 1999 principally as a result of increased borrowings to finance shopping center acquisitions.
General and administrative expenses increased by $75,000 during 1999 primarily due to higher professional fees and performance related bonuses.
Equity in income of unconsolidated affiliates decreased by $309,000 principally due to the decision by our management company (Drexel) to concentrate mainly on management, leasing and renovation of our own income producing properties and acquisitions of additional shopping centers. As a result, Drexel has terminated various management contracts for properties owned by third parties.
Minority interests in income of OP decreased by $511,000 during 1999. The decrease was due to a $2,073,000 reduction in income attributable to the OP (which reflects the aforementioned $2,347,000 gain on sale of real estate in 1998) and a reduction in minority interests, due to redemptions, from an average of 17.4% in 1998 to an average of 15.6% in 1999.
1998 Compared to 1997
Net income for the year ended December 31, 1998 was $15,850,000 or $1.99 per share compared to $8,515,000 or $1.07 per share for 1997.
Net income for 1998 includes a $2,347,000 gain from the sale of real estate, a $7,041,000 deferred income tax benefit and $300,000 of non-recurring expenses, principally in connection with the settlement of litigation. In addition, depreciation and amortization increased by $2,298,000 due to shopping center acquisitions. Excluding these non-operational items, net income increased by $545,000. The discussion below highlights the major components which caused this increase.
During 1998, rent revenue, operating expenses and interest expense increased by $14,452,000, $4,314,000 and $5,049,000, respectively, primarily due to the acquisition of nine shopping centers and an office building on December 31, 1997 and seven additional shopping centers in 1998.
Interest income decreased by $1,758,000 during 1998, primarily attributable to an approximately $11.2 million reduction in the average balance of our mortgage notes receivable. These notes principally consisted of a line of credit and certain other loans to Hilcoast, which were repaid during 1998. The average interest rate on these notes approximated 10.9% and the repayments as well as a substantial portion of our cash balances were generally utilized to acquire shopping centers in 1998 or reinvested in lower yielding short-term investments (averaging approximately 5% during 1998), pending the completion of certain planned acquisitions.
General and administrative expenses increased by $1,039,000 during 1998, reflecting increases in personnel and other costs due to the 1997 acquisition, and in legal fees primarily in connection with certain litigation which has been settled.
Minority interests in income of OP amounted to $1,855,000, representing an average of 17.4% of the income attributable to the OP. There were no minority interests prior to December 31, 1997.
Funds From Operations (FFO)
FFO, as defined by the National Association of Real Estate Investment Trusts, consists of net income (computed in accordance with generally accepted accounting principles) before depreciation and amortization of real property, certain non-recurring items, extraordinary items, gains and losses on sales of real estate and income taxes.
The following schedule reconciles FFO to net income for the years presented (in thousands):
1999 1998 1997 _______________________________
Net income ................................... $ 7,247 $ 15,850 $ 8,515 Deferred income tax benefit .................. -- (7,041) -- Depreciation and amortization of real property (including unconsolidated affiliates)* ..... 3,576 2,391 573 Gain on sale of real estate* ................. -- (1,917) -- Non-recurring items, principally settlement of litigation ................... -- 252 -- ________ ________ ________ FFO .......................................... $ 10,823 $ 9,535 $ 9,088 ======== ======== ========
*Net of amounts attributable to minority interests.
We believe that FFO is an appropriate measure of operating performance because real estate depreciation and amortization charges are not meaningful in evaluating the operating results of our properties and certain non-recurring items, such as the gain on the sale of real estate and deferred income tax benefit, would distort the comparative measurement of performance and are not relevant to ongoing operations. However, FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to either net income as a measure of our operating performance or to cash flows from operating activities as an indicator of liquidity or cash available to fund all cash flow needs. In addition, since other REITs may not calculate FFO in the same manner, FFO presented may not be comparable to that reported by other REITs.
Liquidity and Capital Resources
Consolidated Statements of Cash Flows
As of December 31, 1999, unrestricted cash and cash equivalents decreased to $3.5 million from $3.8 million and $12 million at December 31, 1998 and 1997, respectively.
Net cash provided by operating activities, as reported in the Consolidated Statements of Cash Flows, increased to $11 million in 1999 from $9.9 million in 1998 and $8.9 million in 1997. These amounts generally reflect the OP's FFO and net changes in other assets and liabilities.
Net cash used by investing activities amounted to $1.4 million in 1999, and $6.8 million in 1998. In 1997, investing activities provided $7.8 million of net cash. The 1999 amounts reflect $1.6 million of capital improvements and $1.2 million of cash required in connection with the acquisitions of three shopping centers, partially offset by $1.6 million of collections on mortgage notes receivable. The 1998 amounts principally consist of $21.4 million of cash required in connection with the acquisitions of seven shopping centers and $2.1 million of capital improvements, partially offset by $12.7 million of net collections on mortgage notes receivable and $4.2 million received from the sale of real estate. The 1997 amounts principally consist of $7.2 million of net collections on mortgage notes receivable and the maturity of $6.4 million of short-term investments, partially offset by $5.6 million of cash required in connection with the acquisition of nine shopping centers and an office building.
Net cash used in financing activities decreased to $9.9 million in 1999 from $11.2 million in 1998 and $11.4 million in 1997. In each of the three years, cash dividends declared amounted to $1.16 per share, or $9.2 million. The 1999 amounts also include cash distributions of $1.7 million to minority interests, partially offset by $1.6 million of net proceeds from borrowings. The 1998 amounts include cash distributions of $1.5 million to minority interests and $3.7 million for the redemption of approximately 300,000 OP units, partially offset by $3.2 million of net borrowings. The 1997 amounts include $2.2 million of repayments of borrowings. There were no minority interests prior to 1998.
Borrowings
At December 31, 1999, our borrowings increased to $156.3 million from $121.9 million at December 31, 1998. The $34.4 million increase included $32.1 million borrowed under our line of credit (see below) to finance three shopping center acquisitions in 1999 and $5.2 million in connection with refinancings. Scheduled principal payments over the next five years are $117 million with $39.3 million due thereafter.
Our borrowings are collateralized by a substantial portion of our income producing real estate and our mortgage notes receivable. We expect to refinance certain of these borrowings, at or prior to maturity, through new mortgage loans on our real estate. The ability to do so, however, is dependent upon various factors, including the income level of the properties, interest rates and credit conditions within the commercial real estate market. Accordingly, there can be no assurance that such refinancing can be achieved.
At December 31, 1999, borrowings consisted of $106.5 million of fixed rate indebtedness, with a weighted average interest rate of 7.70% and $49.8 million of variable rate indebtedness, principally under our line of credit, with a weighted average interest rate of 8.23%. At December 31, 1998, our fixed rate indebtedness was $105 million, with a weighted average interest rate of 7.97% and our variable rate indebtedness was $16.9 million with a weighted average interest rate of 7.37%. Continued interest rate increases on our variable rate indebtedness could have an adverse effect on our future operating results and cash flow.
Under our three-year non-revolving line of credit, we can borrow up to $100 million. Advances under the line of credit: (1) must be secured by assets based on specified aggregate loan to value and debt service coverage ratios, (2) bear interest at an annual rate of one month LIBOR plus 1.75% and (3) may be drawn through March 31, 2000 and must be repaid by certain dates during the twelve months ended March 31, 2001. Additional provisions include a 1% commitment fee (which has been paid), a minimum net worth covenant and cross-default and cross-collateralization requirements. Advances under the line of credit are used to fund acquisitions, expansions, renovations, financing and refinancing of real estate, including reimbursement of equity advances, and require certain performance covenants. As of December 31, 1999, the unused facility amounted to $51 million of which $10.3 million was available to be borrowed based on collateral already pledged under the line of credit. We are currently negotiating an extension of our line of credit and we expect to be able to extend the dates through which advances may be drawn and repaid. There is no assurance, however, that we will be successful in doing so. We have an additional $1.2 million available principally under an unsecured credit facility.
Capital Resources
Our operating funds are generated from rent revenue from income producing properties and, to a much lesser extent, interest income on our mortgage notes receivable. We believe that our operating funds will be sufficient in the foreseeable future to fund operating and administrative expenses, interest expense, recurring capital expenditures and distributions to stockholders in accordance with REIT requirements. Sources of capital for non-recurring capital expenditures and scheduled principal payments, including balloon payments, on outstanding borrowings are expected to be obtained from property refinancing, scheduled principal repayments on our mortgage notes receivable, sales of non-strategic other real estate, our line of credit and/or potential debt or equity financing in the public or private markets.
Acquisitions
During 1999, we completed the acquisition of three shopping centers for an aggregate purchase price of $33.3 million, including transaction costs, substantially all of which was financed by mortgage debt. In connection with one of the acquisitions, we were required to deposit an additional $1 million with the lender for future capital improvements.
During 1998, we acquired seven shopping centers for purchase prices aggregating $74.6 million, including transaction costs, which consisted of $21.4 million of cash and the incurrence or assumption of $53.2 million of liabilities, principally mortgage debt.
On December 31, 1997, we completed the acquisition of nine shopping centers and an office building and a 95% economic interest in Drexel. The purchase price amounted to $61.7 million (net of cash acquired), consisting of 1,787,010 OP units, valued at $21.2 million; the assumption of $34.9 million of liabilities, principally mortgage debt; and, cash in the amount of $5.6 million, including transaction costs.
Our policy has been to acquire additional properties only if they are income producing and any proposed acquisition requires a resolution by a majority of our Board of Directors that the acquisition will not adversely affect our ability to pay a quarterly dividend of at least 29 cents per share. Under the OP agreement, all of the activities of the OP must generally be conducted with a view toward enabling the OP to make quarterly distributions to all partners of at least 29 cents per OP unit and such additional amount, if required, to enable us to pay a regular quarterly dividend of at least 29 cents per share to our stockholders. As of December 31, 1999, there were 1,462,406 OP units held by minority interests.
As discussed under Item 1. Business - Recent Development - Proposed Merger, on December 10, 1999, we signed a definitive merger agreement and reorganization plan with Kranzco to merge our operations and create Kramont. Terms of the merger call for common shareholders of both companies to each receive one share of Kramont common stock for each outstanding share of CV Reit and Kranzco common stock on a tax-free basis. The merger agreement is subject to approval by shareholders of both companies and certain other conditions.
Mr. Meshon will assume the same titles and responsibilities at the newly created Kramont and our designees will hold the majority of the board seats. Corporate headquarters will be located at the OP's existing facilities, in Plymouth Meeting, Pennsylvania.
Kramont is expected to own 84 properties, substantially comprising neighborhood and community shopping centers, encompassing approximately 11 million square feet in 16 states with an asset base of approximately $800 million.
We believe the merger will provide benefits to our shareholders. However, there may be certain disadvantages, including but not limited to the following:
If the merger is completed, certain common stock dividend protections that currently exist in our certificate of incorporation and by laws will be terminated. Our common shareholders are currently not subject to the rights of any preferred shareholders. Upon completion of the merger, the rights of our common shareholders will be subject to the rights of Kramont's preferred shareholders. In addition, certain holders of Kranzco preferred shares will have appraisal rights in connection with the merger. Assertion of appraisal rights by a significant number of those holders may have a material adverse effect on Kramont's cash flow. Kramont may be required to incur costs in connection with obtaining consents from lenders. The inability to obtain certain material consents may have a material adverse effect on Kramont's cash flow. Kramont will have operations in a number of different states. There is no assurance that costs, management's time and effort, or other factors associated with the integration of our company and Kranzco would not adversely affect future combined results of operations or the benefits of expected cost savings.
In the event the merger is terminated, depending on the reason for such termination, we may be required to pay Kranzco a break-up fee of $5 million or an expense fee of up to $1.5 million or both. The obligation to pay such fees may deter others from offering to engage in a different transaction with us in the event the merger is not consummated.
Inflation
During recent years, the rate of inflation has remained at a low level and had minimal impact on our operating results.
Most of the tenant leases contain provisions designed to lessen the impact of inflation. These provisions include escalation clauses, which generally increase rental rates annually based on cost of living indexes (or based on stated rental increases which are currently higher than recent cost of living increases), and percentage rentals based on tenants' gross sales, which generally increase as prices rise. Many of the leases are for terms of less than ten years, which increases our ability to replace those leases, which are below market rates with new leases at higher base and/or percentage rentals. In addition, most of the leases require the tenants to pay their proportionate share of increases in operating expenses, including common area maintenance, real estate taxes and insurance.
However, in the event of significant inflation, our operating results could be adversely affected if general and administrative expenses and interest expense increase at a rate higher than rent income or if the increase in inflation exceeds rent increases for certain tenant leases which provide for stated rent increases (rather than based on cost of living indexes).
Year 2000 Issue
As many computer systems, software programs and other equipment with embedded chips or processors (collectively referred to as information systems) use only two digits rather than four to define the applicable year, they may be unable to process accurately certain data, during or after the year 2000. As a result, business and governmental entities are at risk for possible miscalculations or systems failures causing disruptions in their business operations. This is commonly known as the Year 2000 ("Y2K") issue. The Y2K issue concerns not only information systems used solely within a company but also concerns third parties, such as customers, vendors and creditors, using information systems that may interact with or affect a company's operations.
We have not experienced any material disruption in our business or operations as a result of Y2K issues. However, there is no assurance that we will not experience interruptions in the future.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No.133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133 requires companies to recognize all derivative contracts as either assets or liabilities in the balance sheet and to measure them at fair value. SFAS 133 was to become effective for periods beginning after June 15, 1999; however, SFAS 133 has been amended by SFAS 137, which delayed the effective date to periods beginning after June 15, 2000. The adoption of this pronouncement is not expected to have a material impact on our financial statements or disclosures.
Forward Looking Information: Certain Cautionary Statements
Certain statements contained in "Management's Discussion and Analysis of Results of Operations and Financial Condition" and elsewhere in this Form 10-K, that are not related to historical results, are forward looking statements, such as anticipated liquidity and capital resources, completion of potential acquisitions and collectibility of real estate mortgage notes receivable. The matters referred to in forward looking statements are based on assumptions of future events which may not prove to be accurate and which could be affected by the risks and uncertainties involved in our business; accordingly, actual results may differ materially from those projected and implied in the forward looking statements. These risks and uncertainties include, but are not limited to, the effect of conditions in the commercial real estate market and the economy in general, the level and volatility of interest rates, the impact of current or pending legislation and regulation, as well as certain other risks described in the Form 10-K. Subsequent written and oral forward looking statements attributable to our company or persons acting on its behalf are expressly qualified in their entirety by cautionary statements in this paragraph and elsewhere described in this Form 10-K and in other reports we filed with the Securities and Exchange Commission.
Item 8.
Item 8. Financial Statements and Supplementary Data
Table of Contents to Consolidated Financial Statements
Page ------
Report of Independent Certified Public Accountants 16
Consolidated Financial Statements:
Balance Sheets - December 31, 1999 and 1998 17 Statements of Income - Years Ended December 31, 1999, 1998 and 1997 18 Statements of Stockholders'Equity - Years Ended December 31, 1999, 1998 and 1997 19 Statements of Cash Flows - Years Ended December 31, 1999, 1998 and 1997 20 Notes to Consolidated Financial Statements 21-31
Consolidated Financial Statements Schedules:
Schedule III - Real Estate and Accumulated Depreciation 32-33 Schedule IV - Mortgage Loans on Real Estate 34
Schedules, other than those listed above, are omitted because they are not required, or because the information required is included in the consolidated financial statements or the notes thereto.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of CV Reit, Inc. West Palm Beach, Florida
We have audited the accompanying consolidated balance sheets of CV Reit, Inc. and subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. We have also audited the schedules listed in the accompanying index. These financial statements and the schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedules 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CV Reit, Inc. and subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles.
Also, in our opinion, the schedules present fairly, in all material respects, the information set forth therein.
New York, New York BDO SEIDMAN, LLP March 3, 2000
CV REIT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31, 1999 1998 ____________________ ASSETS ______ Real estate - income producing, net of accumulated depreciation (Notes 2, 4, 6 and 8) Land ................................................. $ 18,302 $ 14,980 Buildings ............................................ 154,774 127,428 ________ ________ 173,076 142,408 Mortgage notes receivable (Notes 5 and 8) ................ 63,385 64,988 Investments in unconsolidated affiliates ................. 3,390 3,323 Cash and cash equivalents (includes $890 and $930 restricted) ................................... 4,385 4,775 Other real estate (net of allowance for losses of $2,401) ...................................... 5,503 5,463 Receivables and accrued income ........................... 2,164 1,713 Prepaid expenses and other ............................... 5,858 2,752 ________ ________ $257,761 $225,422 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Borrowings (Notes 2 and 6) ............................. $156,329 $121,933 Accounts payable and other liabilities ................. 7,024 6,283 ________ ________ Total liabilities ................................... 163,353 128,216 Minority interests in Operating Partnership (Notes 2 and 12) ........................................ 16,846 17,650 ________ ________ Commitments and contingencies (Notes 6 and 7)
Stockholders' equity (Note 11): Common stock, $.01 par-shares authorized 20,000,000; outstanding 7,966,621 ..................... 80 80 Additional paid-in capital ............................. 18,490 18,490 Retained earnings ...................................... 58,992 60,986 ________ ________ Total stockholders' equity ......................... 77,562 79,556 ________ ________ $257,761 $225,422 ======== ========
See accompanying notes to consolidated financial statements.
CV REIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except share data)
Year Ended December 31, 1999 1998 1997 _________________________________ Revenues: Rent ....................................... $ 25,555 $ 17,155 $ 2,703 Interest, principally from mortgage notes (Notes 5, 8 and 10) ...................... 8,008 8,854 10,612 _________ _________ _________ 33,563 26,009 13,315 _________ _________ _________ Expenses: Interest (Note 6) ......................... 11,743 8,355 3,306 Operating .................................. 7,621 5,184 870 Depreciation and amortization .............. 4,078 2,707 409 General and administrative ................. 1,768 1,693 654 _________ _________ _________ 25,210 17,939 5,239 _________ _________ _________ 8,353 8,070 8,076
Equity in income of unconsolidated affiliates 238 547 439 Gain on sale of real estate (Note 4(d)) ...... -- 2,347 -- Non-recurring items, principally settlement of litigation .............................. -- (300) -- Minority interests in income of Operating Partnership ................................ (1,344) (1,855) -- _________ _________ _________ Income before income tax benefit ............. 7,247 8,809 8,515
Deferred income tax benefit .................. -- (7,041) -- _________ _________ _________ Net income ................................... $ 7,247 $ 15,850 $ 8,515 ========= ========= ========= Per Common Share: Net income, basic and diluted .............. $ .91 $ 1.99 $ 1.07 ========= ========= ========= Dividends declared ......................... $ 1.16 $ 1.16 $ 1.16 ========= ========= ========= Average common shares outstanding, basic and diluted ........................ 7,966,621 7,966,621 7,966,621 ========= ========= =========
See accompanying notes to consolidated financial statements.
CV REIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in thousands)
Additional Common Paid in Retained Stock Capital Earnings Total _________________________________________________
Balance at December 31, 1996 ... $ 80 $ 18,490 $ 55,103 $ 73,673 Net income for the year ...... -- -- 8,515 8,515 Cash dividends declared ...... -- -- (9,241) (9,241) _____ ________ ________ _________ Balance at December 31, 1997 ... 80 18,490 54,377 72,947 Net income for the year ...... -- -- 15,850 15,850 Cash dividends declared ...... -- -- (9,241) (9,241) _____ ________ ________ _________ Balance at December 31, 1998 ... 80 18,490 60,986 79,556 Net income for the year ...... -- -- 7,247 7,247 Cash dividends declared ...... -- -- (9,241) (9,241) _____ ________ ________ _________ Balance at December 31, 1999 ... $ 80 $ 18,490 $ 58,992 $ 77,562 ===== ======== ======== =========
See accompanying notes to consolidated financial statements.
CV REIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31, 1999 1998 1997 ________________________________ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 7,247 $ 15,850 $ 8,515 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,078 2,707 409 Equity in depreciation and amortization of unconsolidated affiliates 176 171 175 Minority interests in income of Operating Partnership 1,344 1,855 - Gain on sale of real estate - (2,347) - Deferred income tax benefit - (7,041) - Changes in assets and liabilities, net of effects from acquisitions: (Increase) decrease in receivables and accrued income (451) (1,073) 36 (Increase) decrease in prepaid expenses and other (1,953) (996) 11 Increase (decrease) in accounts payable and other liabilities 565 743 (242) ________ ________ ________ Net cash provided by operating activities 11,006 9,869 8,904 ________ ________ ________ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of real estate (1,173) (21,364) (5,577) Capital improvements (1,635) (2,069) (59) Fundings on mortgage notes receivable - (5,190) (16,112) Collections on mortgage notes receivable 1,603 17,854 23,268 Proceeds from the sale of real estate - 4,151 - Maturity of short-term investments - - 6,436 Other (243) (146) (162) ________ ________ ________ Net cash (used) provided by investing activities (1,448) (6,764) 7,794 ________ ________ ________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 24,858 8,366 - Repayments of borrowings (23,298) (5,196) (2,201) Cash dividends paid (9,204) (9,249) (9,209) Distributions to minority interests (1,718) (1,470) - Redemption of Operating Partnership units (546) (3,665) - ________ ________ ________ Net cash used in financing activities (9,908) (11,214) (11,410) ________ ________ ________ Net (decrease) increase in unrestricted cash and cash equivalents (350) (8,109) 5,288 Unrestricted cash and cash equivalents at the beginning of the period 3,845 11,954 6,666 ________ ________ ________ Unrestricted cash and cash equivalents at the end of the period $ 3,495 $ 3,845 $ 11,954 ======== ======== ======== Supplemental disclosure of cash flow information: Cash paid for interest $ 11,038 $ 7,542 $ 3,296 ======== ======== ======== Acquisitions of real estate: Fair value of assets acquired $(34,264) $(74,561) $(61,711) Liabilities assumed or incurred 33,091 53,047 34,913 Operating Partnership units issued - 150 21,221 _______ ________ _______ Cash paid for acquisitions, net of cash acquired (Note 2) $(1,173) $(21,364) $ (5,577) ======== ======== ========
See accompanying notes to consolidated financial statements
CV REIT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Organization and Business
CV Reit, Inc. ("CV Reit") is a real estate investment trust ("REIT") which until December 31, 1997, was principally engaged in investing in mortgage notes receivable. Effective December 31, 1997, CV Reit and its subsidiaries converted to an Umbrella Partnership REIT (UPREIT) structure as part of a series of transactions which closed on that date and which included the following: (1) a newly created Operating Partnership, Montgomery CV Realty L.P. (together with its wholly-owned subsidiaries hereinafter collectively referred to as the "OP"), acquired 100% of the ownership interests in nine shopping centers and an office building, and a 95% economic interest in Drexel Realty, Inc. ("Drexel"), a real estate management and leasing company (Note 2) and (2) CV Reit and its subsidiaries transferred substantially all of their net assets (or the economic benefit) to the OP. As a result, CV Reit indirectly currently owns 84.5% of the OP, is the OP's sole general partner and operates as a self-administered, self-managed equity REIT. As of December 31, 1999, the OP owned twenty neighborhood or community shopping centers and two office buildings, located in Pennsylvania, New Jersey and Florida, comprising approximately $1.9 million square feet (Note 3).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of CV Reit and all subsidiaries ("the Company"), including the OP. The Company owns 99% of the non-voting common stock of, and a 95% economic interest in Drexel, and owns 45%-50% interests in certain real estate partnerships, which are accounted for on the equity method. Significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates.
Real Estate - Income Producing ("Real Estate")
Real Estate is carried at cost, net of accumulated depreciation, and is subject to operating leases. Depreciation is provided over the estimated useful lives of the assets (7 to 40 years) on the straight-line method.
The Company evaluates its long-lived assets, including its Real Estate, for impairment based on the undiscounted future cash flows of the asset. If a long-lived asset is identified as impaired, the value of the asset must be reduced to its fair value.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the terms of the leases. Certain leases provide for reimbursement to the Company of the tenants' share of common area maintenance costs, insurance and real estate taxes, which are recorded on the accrual basis.
Mortgage Notes Receivable, Other Real Estate and Allowance For Losses
Mortgage notes receivable are carried at the lower of cost or estimated net realizable value. Accrual of interest is discontinued when management believes, after considering economic and business conditions and collection efforts, that timely collection is doubtful.
Other real estate principally consists of three parcels of unimproved commercial land, totaling 38 acres located in southeast Florida, acquired by deed in lieu of foreclosure and held for resale (Note 3). These properties are carried at the lower of cost or fair value less selling costs. Carrying costs and subsequent declines in net realizable value are charged to operations as incurred.
The allowance for losses is established through a provision charged to operations based upon an evaluation by management of its mortgage notes receivable and other real estate. In evaluating possible losses, management takes into consideration appropriate information which may include the borrower's cash flow projections, historical operating results and financial strength, pending sales, adverse conditions that may affect the borrower's ability to repay, appraisals and current economic conditions.
Dividends and Income Taxes
The Company has elected to qualify as a REIT under the provisions of Section 856-860 of the Internal Revenue Code. As a REIT, the Company is currently required to distribute at least 95% of its ordinary taxable income to stockholders (90% effective in 2001) and may deduct such distributions from taxable income. A REIT is not required to distribute capital gain income but to the extent it does not, it must pay the applicable capital gain income tax unless it has ordinary losses to offset such capital gain income.
The federal income tax characteristics of dividends paid by the Company consisted of:
1999 1998 1997 ______ ______ ______ Ordinary income 88.3% 65.4% 89.1% Capital gain distribution 11.7% 34.6% 10.9%
The Company accounts for income taxes based upon SFAS No.109 "Accounting for Income Taxes", which requires, among other things, a liability approach to calculating deferred income taxes
As a result of the acquisitions described in Note 2 and the OP structure, the Company does not expect to be subject to federal income taxes in the future as it intends to distribute ordinary and capital gain income. Accordingly, during 1998, the Company reversed the existing net deferred tax liability, which arose from sales reported on the installment method for income tax purposes, and recorded a deferred tax benefit of $7,041,000.
As of December 31, 1999, the Company has aggregate net operating loss carryforwards for tax purposes of approximately $15.7 million, expiring $7.1 million in 2007 and $8.6 million in 2006
Net Income Per Common Share
Basic net income per common share is computed using net income divided by the weighted average number of common shares outstanding. Diluted net income per common share includes the effect of potentially dilutive securities. During the years presented, the Company had no dilutive securities since the exercise price of all outstanding options exceeded the average market price of the Company's common stock for the year, accordingly, basic and diluted net income per share are identical.
Statements of Cash Flows
For financial statement purposes, the Company considers all highly liquid investments with initial maturities of three months or less to be cash equivalents.
Reclassifications
Certain 1998 and 1997 amounts have been reclassified to conform to the 1999 financial statement presentation. These reclassifications had no impact on operating results previously reported.
New Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No.133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133 requires companies to recognize all derivative contracts as either assets or liabilities in the balance sheet and to measure them at fair value. SFAS 133 was to become effective for periods beginning after June 15, 1999; however, SFAS 133 has been amended by SFAS 137, which delayed the effective date to periods beginning after June 15, 2000. The adoption of this pronouncement is not expected to have a material impact on the Company's financial statements or disclosures.
(2) Acquisitions
During 1999, the OP purchased three shopping centers, aggregating 324,000 square feet, located in Pennsylvania and New Jersey. The aggregate purchase prices amounted to $33.3 million, including transaction costs, substantially all of which was financed by mortgage debt. The OP was required to deposit an additional $1 million with the lender in connection with future capital improvements.
During 1998, the OP purchased seven shopping centers, aggregating 796,000 square feet, located in Pennsylvania and New Jersey. The aggregate purchase prices amounted to $74.6 million, including transaction costs, which consisted of $21.4 million of cash and the incurrence or assumption of $53.2 million of liabilities, principally mortgage debt.
On December 31, 1997, the OP completed the acquisition of nine shopping centers and an office building, located in Pennsylvania and New Jersey, from two separate groups, the Montgomery Parties and the Levy Parties (Note 8), and a 95% economic interest in Drexel from Louis P. Meshon, Sr. Effective December 31, 1997, Mr. Meshon became President, Chief Executive Officer and a director of CV Reit. The purchase price amounted to $61.7 million (net of cash acquired), consisting of 1,787,010 OP units issued to the sellers, valued at $11.88 per OP unit, or $21.2 million, based on the closing price of the Company's common stock (into which the OP units were redeemable - Note 12) on April 28, 1997, the date the acquisition was publicly announced; the assumption of $34.9 million of liabilities, principally mortgage indebtedness; and, cash in the amount of $5.6 million, including transaction costs.
All of the acquisitions were accounted for under the purchase method; accordingly, the operating results of the net assets acquired are included in the consolidated financial statements from their respective purchase dates.
The following unaudited proforma data summarizes the consolidated results of operations for the years indicated as if the 1999 acquisitions had occurred on January 1, 1998. The proforma results do not purport to be indicative of the results of operations which would have actually been reported had the acquisitions been consummated on those dates, or which may be reported in the future (in thousands, except per share data):
1999 1998 _________ ________ Revenues ............................................... $34,959 $30,312 Net income before tax benefit .......................... $ 7,429 $ 9,167 Net income ............................................. $ 7,429 $16,208 Net income per common share, basic and diluted ......... $ .93 $ 2.03
(3) Recent Developments
Proposed Merger
On December 10, 1999, the Company signed a definitive merger agreement and reorganization plan with Kranzco Realty Trust ("Kranzco"), a shopping center REIT, to merge operations and create a new community shopping center UPREIT to be called Kramont Realty Trust ("Kramont"). Terms of the merger call for common shareholders of both companies to each receive one share of Kramont common stock for each outstanding share of CV Reit and Kranzco common stock on a tax-free basis. The merger agreement is subject to approval by shareholders of both companies and certain other conditions.
The Company's President and Chief Executive Officer will assume the same titles and responsibilities at the newly created Kramont with the Company's designees holding the majority of the board seats. Corporate headquarters will be located at the OP's existing facilities, in Plymouth Meeting, Pennsylvania.
Kramont is expected to own 84 properties, substantially comprising neighborhood and community shopping centers, encompassing approximately 11 million square feet in 16 states with an asset base of approximately $800 million.
The merger will be accounted for as a purchase by the Company of Kranzco. Accordingly, Kransco's assets and liabilities will be reocrded at their estimated fair values based on consideration given by the Company.
(4) Real Estate
(a) Real Estate is located in Pennsylvania, New Jersey and Florida and consists of (in thousands):
December 31, 1999 1998 ____________________________ Land ....................................... $ 18,302 $ 14,980 Shopping centers ........................... 156,949 125,670 Office buildings ........................... 4,933 4,900 _________ _________ Totals ..................................... 180,184 145,550 Less accumulated depreciation .............. (7,108) (3,142) _________ _________ Net Real Estate ............................ $ 173,076 $ 142,408 ========= =========
(b) Real Estate is leased to tenants under leases expiring at various dates through 2017, some of which contain renewal options of up to 30 years. Most of the leases require fixed base rentals payable monthly in advance; additional rental based on reimbursements of common area maintenance, insurance and real estate taxes and, in some leases, based on a percentage of tenants' sales; and, rent increases based on cost-of-living indexes. During 1999 and 1998, the Company recognized income from reimbursements of common area maintenance, insurance, real estate taxes and percentage rent of $6.5 million and $4.4 million, respectively. As of December 31, 1999, future minimum rental income under noncancellable operating leases, excluding rentals from the exercise of renewal options, is as follows (in thousands):
Year ending December 31,
2000 $ 19,654 2001 17,712 2002 15,006 2003 12,798 2004 10,711 Thereafter 36,866 ________ Total $112,747 ========
(c) Real Estate with a net book value of $166.1 million, at December 31, 1999, is pledged as collateral for borrowings (Note 6).
(d) On May 15, 1998, the Company sold a motel for net cash proceeds of $4.2 million and recognized a gain of $2.3 million.
(5) Mortgage Notes Receivable
At December 31, 1999, the Company's mortgage notes receivable consisted of $24.7 million due from Hilcoast Development Corp. ("Hilcoast") (the "Hilcoast Recreation Note"), collateralized by first mortgages on the recreation facilities at a Century Village adult condominium community in southeast Florida, and $38.7 million, collateralized by first mortgages on the recreation facilities at three other Century Village communities in southeast Florida (collectively, the "Recreation Notes"). The Hilcoast Recreation Note provides for self-amortizing equal monthly principal and interest payments due through July 31, 2023, bears interest at 11% per annum, and may not be prepaid by Hilcoast without a prepayment penalty. The remaining Recreation Notes principally provide for self-amortizing equal monthly principal and interest payments due through 2012, with interest rates averaging 13% per annum, and contain certain prepayment prohibitions. The Recreation Notes are pledged as collateral for certain borrowings (Note 6).
The mortgage notes receivable at December 31, 1999 mature as follows (in thousands):
One year or less $ 1,649 After one year through five years 9,746 After five years 51,990 ________ Totals $ 63,385 ========
(6) Borrowings
(a) Borrowings consist of (in thousands):
December 31, 1999 1998 _____________________ Mortgage notes payable through September 2008, interest ranging from 6.09% to 10.28%, collateralized by Real Estate (Note 4) ............................ $ 78,720 $ 74,528
Mortgage notes payable through March 2001 under $100 million credit facility, (the "Line of Credit"), interest at one month LIBOR (6.48% at December 31, 1999), plus 1.75%, collateralized by Real Estate (Note 4) and the Hilcoast Recreation Note (Note 5) ........................... 49,036 16,950
Collateralized Mortgage Obligations, net of unamortized discount of $439,000 and $553,000 based on an effective interest rate of 8.84%, collateralized by certain of the Recreation Notes (Note 5), quarterly self-amortizing principal and interest payments required through March 2007 ............... 27,823 30,455
$1 million revolving credit facility, interest at one month LIBOR plus 1.8%, maturing June 2000, collateralized by Real Estate............. 750 -- ________ ________ Totals ............................................... $156,329 $121,933 ======== ========
In March and May 1999, the Company entered into three interest rate swap contracts with an aggregate notional amount of $28.7 million, which expire in 2004. The interest rate swaps have an effective interest rate of 6.63%.
(b) Effective March 31, 1998, the Company entered into the Line of Credit with a financial institution which provides the Company with a $100 million three year non-revolving line of credit. Advances under the Line of Credit: (1) must be secured by assets based on specified aggregate loan to value and debt service coverage ratios, (2) bear interest at an annual rate of one month LIBOR plus 1.75% and (3) may be drawn through March 31, 2000 and must be repaid by certain dates during the twelve months ended March 31, 2001. Additional provisions include a 1% commitment fee, a minimum net worth covenant and cross-default and cross-collateralization requirements. Advances under the Line of Credit are used to fund acquisitions, expansions, renovations, financing and refinancing of real estate, including reimbursement of equity advances, and require certain performance covenants. As of December 31, 1999, the unused facility amounted to approximately $51 million of which $10.3 million was available to be borrowed based on collateral already pledged under the Line of Credit.
(c) The OP has agreed that it will not make certain prepayments or refinancings of certain of the mortgage notes prior to various dates not later than July 31, 2002, without the consent of certain of the limited partners of the OP.
(d) Maturities of borrowings are as follows (in thousands):
2000 $ 21,789 2001 36,474 2002 4,664 2003 18,770 2004 35,327 Thereafter 39,305 ________ Total $156,329 ========
(7) Contingencies
The Company is subject to various claims and complaints relative to its business activities. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position.
(8) Related Party Transactions
Hilcoast/H. Irwin Levy ("Mr. Levy")
(a) On July 31, 1992, Hilcoast, an affiliate of the Company on that date, acquired certain assets from a previous borrower of the Company, subject to the borrower's indebtedness to the Company, principally consisting of the Hilcoast Recreation Note (Note 5), which as of December 31, 1999, had an outstanding balance of $24.7 million. Mr. Levy, Chairman of the Board and a principal stockholder of the Company, is the Chairman of the Board, Chief Executive Officer and a majority stockholder of Hilcoast. During 1999, 1998 and 1997, the Company recognized interest income of $2.7 million, $3.1 million and $4.3 million, respectively, from Hilcoast.
(b) Effective July 31, 1992, the Company and Hilcoast entered into a consulting and advisory agreement under which Hilcoast provides certain investment advisory, consulting and administrative services to the Company, excluding matters related to the Hilcoast Recreation Note. The agreement provides for the payment of $10,000 per month to Hilcoast, plus reimbursement for reasonable out of pocket expenses. The agreement may be terminated by Hilcoast upon 180 days notice and by the Company upon 30 days notice. During 1999, 1998 and 1997, the Company paid $115,000, $110,000 and $120,000, respectively, to Hilcoast under this agreement, plus expense reimbursement.
(c) Mr. Levy owns the recreation facilities at a Century Village community, acquired from the Company in 1981, which is collateral for one of the Company's Recreation Notes, which had an outstanding balance of $10.3 million at December 31, 1999 (Note 5). The note bears interest at 13.25%, requires self-amortizing equal monthly payments of principal and interest in the aggregate amount of $1.7 million per annum through 2011 and may not be prepaid. During 1999, 1998 and 1997, the Company recognized interest income of $1.4 million, $1.4 million and $1.5 million, respectively, on this note.
(d) Companies controlled by Mr. Levy and certain members of his family lease, manage and operate the recreation facilities at four Century Village communities, which are collateral for the Company's Recreation Notes (Note 5).
(e) Two of the shopping centers purchased by the OP on December 31, 1997 (Note 2) were acquired from the Levy Parties (Mr. Levy and members of his family) in exchange for 390,717 OP units (valued at approximately $4.6 million), including 78,149 OP units (valued at approximately $900,000) issued to Mr. Levy. The economic basis used to determine the acquisition price was the same as that used for the other properties acquired on that date.
(f) The Company leases approximately 2,500 square feet of an office building, located in West Palm Beach, on a month to month basis, to a company owned by Mr. Levy and a member of his family at a monthly rental of approximately $2,100, plus an allocation of utility expenses.
Alan Shulman
On May 15, 1998, the Company sold a motel (Note 4(d)), which had been leased to a corporation controlled by Alan Shulman, a director of the Company. In 1998 and 1997, the Company recognized rent income of $223,000 and $489,000, respectively, under the lease.
Stanley S. Cohen
Stanley S. Cohen, a director of the Company, is a partner and member of the Executive Committee of the law firm of Fox, Rothschild, O'Brien & Frankel, LLP. During 1999 and 1998, we paid $487,487 and $380,093, respectively, to that firm for legal services.
(9) Major Tenants and Borrowers
During 1999, there were no tenants or borrowers who accounted for 10% or more of the Company's revenues. During 1998, interest income from one borrower (Hilcoast) provided 12% of total revenues. During 1997, interest income from four borrowers provided 33% (Hilcoast), 16%, 14% and 11% (Mr. Levy), respectively, of total revenues.
(10) Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments are as follows:
December 31, 1999 1998 _________________________________________________ Carrying Carrying Amount Fair Value Amount Fair Value _________________________________________________ Real estate mortgage notes receivable ................. $ 63,385 $ 79,238 $ 64,988 $ 90,835
Cash and cash equivalents .. 4,385 4,385 4,775 4,775
Borrowings ................. (156,329) (156,734) (121,933) (124,274)
Real estate mortgage notes receivable - The fair value of the fixed rate, Recreation Notes (Note 5) is estimated by discounting the future cash flows using the current rates at which similar loans would be made with similar credit ratings and for the same remaining maturities.
Borrowings - Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of the Company's borrowings.
(11) Stockholders' Equity
Stock Options
The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees", and related interpretations in accounting for its three stock option plans - the Montgomery CV Trust Executive Stock Option Plan (the "CV Plan"), the Drexel Realty, Inc. 1997 Stock Option Plan (the "Drexel Plan") and the CV Reit, Inc. Non-Employee Director 1998 Stock Option Plan (the "Director Plan").
Under the CV Plan, the Drexel Plan and the Director Plan, qualified and nonqualified stock options to purchase up to 150,000 shares, 400,000 shares and 150,000 shares, respectively, of the Company's common stock may be granted to certain executives, employees and non-employee directors. The maximum term of the options granted under each of the plans is ten years.
Statement of Financial Accounting Standards No.123 (SFAS 123), "Accounting for Stock-Based Compensation", requires the Company to provide pro forma information regarding net income and net income per common share as if compensation cost for stock options granted under the plans, if applicable, had been determined in accordance with the fair value based method prescribed in SFAS 123.
The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants: expected lives of ten years; dividend yield of 8.51%, volatility at 46%, risk free interest rate of 5.63% for 1999 and dividend yield of 8.44%, volatility at 46%, risk free interest rate of 5.71% for 1998.
Under accounting provisions of SFAS 123, the Company's net income and net income per share, would have been reduced to the pro forma amounts indicated below (in thousands, except per share data):
Year Ended December 31, 1999 1998 ______________________________ Net income: As reported ........................... $ 7,247 $ 15,850 Pro forma ............................. $ 7,095 $ 15,567
Net income per share: As reported ........................... $ .91 $ 1.99 Pro forma ............................. $ .89 $ 1.95
Changes in options outstanding are summarized as follows:
Weighted Weighted Average Average Fair Exercise Per Share Price Per of Options Shares Share Granted ________________________________ 1997: Granted - equal to market value ............. 225,000 $ 13.69 $ 2.94
1998: Granted - equal to market value ............. 45,000 14.14 3.02
1999: Granted - equal to market value ............. 25,000 12.50 2.08 _______ Balance December 31, 1999 ..................... 295,000 =======
At December 31, 1999, the weighted average remaining contractual life of the 295,000 options outstanding was 7.54 years. A total of 155,500 of the outstanding options were exercisable with a weighted average exercise price of $13.61 per share.
Redemption Rights
Holders of the 1,462,406 OP units at December 31, 1999 have the right to require the OP to redeem their OP units at any time. However, upon a holder giving notice of the exercise of this right, the Company has the right to acquire such holder's OP units in exchange for cash or, if certain conditions are satisfied, an equal number of shares of the Company's common stock.
During 1999, the OP redeemed 43,018 OP units for $546,000 in cash, resulting in an increase in CV Reit's indirect ownership of the OP from 84.2% to 84.5%. During 1998, the OP redeemed 302,552 OP units for $3.7 million in cash, resulting in an increase in CV Reit's indirect ownership of the OP from 81.7% to 84.2%.
(12) Segment Reporting
Effective December 31, 1997, the Company became an equity REIT engaged in the acquisition, leasing and management of neighborhood or community shopping centers, located in Pennsylvania, New Jersey and Florida. Prior to 1998, the Company's only principal business segment consisted of investments in mortgage notes receivable. Although the Company no longer invests in new mortgage notes receivable, it continues to hold its Recreation Notes (Note 5) and, as a result, the following segment disclosure includes information on those investments (in thousands):
Income Producing Real Estate Principally Mortgage Shopping Notes Centers Receivable Other Consolidated _____________________________________________ Year Ended December 31, 1999: Total revenues $ 25,480 $7,878 $ 205 $33,563 ======== ====== ====== ======= Net operating income before interest expense $ 18,020 $7,878 $ 44 $25,942 ======== ====== ====== ======= Net operating income after interest expense $ 9,685 $4,470 $ 44 $14,199 ======== ====== ====== ======= Net operating income from reportable segments $14,199 Depreciation and amortization (4,078) General, administrative and other (1,530) Minority interests in income of OP (1,344) _______ Net income $ 7,247 ======= Year Ended December 31, 1998: Total revenues $ 16,853 $8,471 $ 685 $26,009 ======== ====== ====== ======= Net operating income before interest expense $ 11,868 $8,471 $ 486 $20,825 ======== ====== ====== ======= Net operating income after interest expense $ 6,554 $5,430 $ 486 $12,470 ======== ====== ====== ======= Net operating income from reportable segments $12,470 Depreciation and amortization (2,707) General, administrative and other (1,446) Gain on sale of real estate 2,347 Minority interests in income of OP (1,855) _______ Income before income tax benefit $ 8,809 =======
Income Producing Real Estate Principally Mortgage Shopping Notes Centers Receivable Other Consolidated ______________________________________________
At December 31, 1999: Investment in real estate and mortgage notes receivable . $173,076 (a) $ 63,385 $ 8,893 $245,354 ======== ======== ======== ======== Borrowings .................. $119,520 $ 36,809 $ -- $156,326 ======== ======== ======== ======== At December 31, 1998: Investment in real estate and mortgage notes receivable . $142,708 (a) $ 64,988 $ 8,786 $216,482 ======== ======== ======== ======== Borrowings .................. $ 91,478 $ 30,455 $ -- $121,933 ======== ======== ======== ========
(a) Includes $34,634 and $75,397 of additions during the years ended December 31, 1999 and 1998, respectively.
(13) Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data follows (in thousands, except per share data):
Quarter Ended March 31, June 30, Sept. 30, Dec.31, _______________________________________________ 1999: Revenues ..................... $7,582 $8,488 $8,575 $8,917 Net income ................... 1,829 1,545 1,826 2,047 Per common share ............. .23 .19 .23 .26
1998: Revenues ..................... $5,248 $5,993 $7,226 $7,542 Net income (a) ............... 1,877 3,680 1,556 8,737 Per common share ............. .24 .46 .20 1.09
(a) The quarter ended June 30, 1998 includes the Company's share of $2.3 million gain on sale of real estate and the quarter ended December 31, 1998 includes $7 million benefit arising from reversal of net deferred tax liability.
CV Reit, Inc. and Subsidiaries Schedule III - Real Estate and Accumulated Depreciation December 31, 1999 (in thousands)
The changes in total real estate assets for the three years ended December 31, 1999, are as follows:
1999 1998 1997 _________ _________ _________
Balance, beginning of year ...... $ 145,550 $ 73,748 $ 12,423 New property acquisitions ........ 32,999 73,881 61,266 Capital improvements ............. 1,635 2,069 59 Sale of real estate .............. -- (4,148) -- _________ _________ _________
Balance, end of year ............ $ 180,184 $ 145,550 $ 73,748 ========= ========= =========
The changes in accumulated depreciation for the three years ended December 31, 1999, are as follows:
1999 1998 1997 _______ _______ ________
Balance, beginning of year ............ $ 3,142 $ 2,740 $ 2,359 Depreciation for the year .............. 3,966 2,656 381 Sale of real estate .................... -- (2,254) -- _______ _______ _______
Balance, end of year .................. $ 7,108 $ 3,142 $ 2,740 ======= ======= =======
Item 9.
Item 9. Disagreement on Accounting and Financial Disclosure
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Company
Directors
Set forth below are the names of our directors, their ages, their offices, if any, their principal occupations or employment for the past five years, the length of their tenure as directors and the names of other public companies in which they hold directorships:
H. Irwin Levy, Chairman
Mr. Levy, 73, became a director and Chairman of the Board in December 1997. Mr. Levy is Chairman of the Board, Chief Executive Officer and a majority stockholder of Hilcoast. Since 1995, he has also served as a director of nStor Technologies, Inc., an American Stock Exchange listed computer storage company. Mr. Levy was our Chairman of the Board and Chief Executive Officer from 1985 to July 1992. He is currently of counsel to the West Palm Beach law firm of Levy, Kneen Mariani, Curtin, Kornfeld, and del Russo, which provides legal services to our company.
Louis P. Meshon, Sr.
Mr. Meshon, 59, became a director, Chief Executive Officer and President in December 1997. Mr. Meshon has served as President of Drexel since he co-founded that company in 1974. In December 1997, we acquired a 95% economic interest in Drexel. Mr. Meshon is a member of the Wharton School's Real Estate Advisory Board.
Stanley Brenner
Mr. Brenner, 74, has been a director since 1988. Mr. Brenner was a partner of Laventhol & Horvath, certified public accountants, for more than five years until his retirement in 1990. From April 1991 until May 1996, Mr. Brenner served as our consultant and was our Interim President from August 1996 to December 1997.
Stanley S. Cohen
Mr. Cohen, 60, became a director in December 1997. Mr. Cohen is a partner and a member of the Executive Committee of the law firm of Fox, Rothschild, O'Brien & Frankel, LLP in Philadelphia, Pennsylvania, which provides legal services to our company. Mr. Cohen previously served for 11 years as Co-Chairman of that firm's Real Estate Department. Mr. Cohen presently serves as an appointee of the Majority Leader of the Pennsylvania State House of Representatives to the Pennsylvania Economic Development Financing Authority, which grants loans to encourage economic development within Pennsylvania, and served as an appointee of the Governor of Pennsylvania to the Pennsylvania Commission for Women.
Allyn L. Levy
Mr. Levy, 71, has been a director since 1993. Mr. Levy served as Chairman and Chief Executive Officer of Patriot Bancorporation of Boston, Massachusetts, and its predecessor, Harbor National Bank of Boston, from 1975 until 1986. Since 1986, Mr. Levy has been a private investor. Mr. Levy is not related to H. Irwin Levy.
Milton S. Schneider
Mr.Schneider,50, became a director in December 1997. Mr. Schneider is Chief Executive Officer of The Glenville Group, Inc., headquartered in Plymouth Meeting, Pennsylvania, involved in the development, ownership and management of commercial and residential properties. Mr. Schneider is Chairman of Togar Property Company, an apartment development company located in Malvern, Pennsylvania. In addition, Mr. Schneider is Vice Chairman of Parkland Management Company, a financial services company, and Vice Chairman of Horvitz Newspapers, Inc.
Alan L. Shulman
Mr. Shulman, 67, has been a director since 1985 and served as Chairman of the Board from August 1992 until May 1996. Mr. Shulman is a private investor and was previously a general partner of Unitel Associates, Ltd., a Florida limited partnership engaged in the ownership and operation of Holiday Inn motel properties, for more than twenty years until its dissolution in 1987. Mr. Shulman also serves as a director of Engle Homes, a NASDAQ listed real estate development company, and was a director of Island National Bank from its inception in 1989 until April 1997. A company controlled by Mr. Shulman leased, operated and managed a Days Inn Motel in West Palm Beach, Florida, which we owned until sold in May 1998.
Committees of the Board of Directors and Meetings
Our Board of Directors met 6 times during the year ended December 31, 1999. Each of the directors attended at least 75% of the meetings.
The Audit Committee, consisting of Messrs. Shulman and Brenner, met once during the past year. The Audit Committee is responsible for overseeing the financial reporting process and the effectiveness of our internal controls and for recommendations to the full Board of Directors, including the designation of independent auditors on an annual basis.
The Acquisition Committee consists of Messrs. Meshon and H. Irwin Levy. If requested by the Board, the Acquisition Committee reviews for recommendation to the Board, or rejection, proposed acquisitions of real property. During 1999, the Acquisition Committee did not meet since this function was performed by the full Board of Directors.
The Board of Directors has no standing nomination or compensation committees or other committees performing similar functions.
Executive Officers
The following are the executive officers of our company (and our company's wholly-owned subsidiary, Montgomery CV Realty Trust), their respective ages, the year in which each was first elected an officer and the office held by each.
Officer's Name Age Office Officer Since ________________________________________________________________________________
H. Irwin Levy 73 Chairman of the Board 1997 Louis P. Meshon,Sr. 59 President and Chief Executive Officer 1997 Elaine Hauff 37 Vice President and Treasurer 1992 Etta Strehle 44 Chief Financial Officer of the Trust 1999 Orilla Floyd 66 Secretary 1996
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, and persons who own more than ten percent of our outstanding common stock, to file with the Securities and Exchange Commission (SEC) initial reports of ownership and reports of changes in ownership of common stock. Such persons are required by SEC regulation to furnish us with copies of all such reports they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, the officers, directors and greater than ten percent beneficial owners of our company have complied with all applicable Section 16(a) filing requirements.
Item 11.
Item 11. Executive Compensation
The following table sets forth, for the years ended December 31, 1999, 1998 and 1997, the compensation awarded to, earned by, or paid to those persons who were, during 1999 (i) our Chief Executive Officer and (ii) the other executive officers whose compensation is required to be disclosed pursuant to the rules of the SEC (the Named Officers). The only compensation we paid to our executive officers was base salary and annual bonuses.
Summary Compensation Table
Annual Compensation Name and Principal Position Year Salary ($) Bonus ($) ________________________________________________________________________________
Louis P. Meshon, Sr. 1999 $285,000 $97,027 (3) President and Chief Executive 1998 $279,744 $17,829 (3) Officer (1) Etta Strehle 1999 $117,422 (4) $12,962 (4) Chief Financial Officer of the Trust(2)
(1) Mr. Meshon was elected President and Chief Executive Officer effective December 31, 1997. (2) Ms. Strehle was appointed Chief Financial Officer of the Trust effective February 1, 1999. (3) Performance bonus pursuant to Mr. Meshon's Employment Agreement. Amount attributable to 1999 is expected to be paid in March 2000 and amount attributable to 1998 was paid in April 1999. (4) Includes $15,042, which was allocated to Drexel.
Option/Stock Appreciation Rights (SAR) Grants
There were no options to purchase our common stock or SAR's granted during 1999 to the Named Officers Aggregated Year End Options Values
Aggregated Year End Options Values
The following table sets forth information regarding unexercised stock options held by the Named Officers as of December 31, 1999. No stock options were exercised by the Named Officers during 1999. No SAR's have been granted or are outstanding.
Shares Number of Unexercised Value of Unexercised Acquired Options at December In-the-Money Options on Value 31, 1999 (#) at December 31, 1999($) Exercise Realized ___________________________________________________ Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable ________________________________________________________________________________
Louis P. 0 0 60,000(1) 90,000(1) 0 0 Meshon,Sr. Etta Strehle 0 0 4,000(2) 6,000(2) 0 0
(1) These options were granted on December 31, 1997 and are exercisable in equal annual installments of 30,000 shares, commencing on December 31, 1998. Unexercisable options are subject to forfeiture under certain circumstances.
(2) These options were granted on May 1, 1998 and are exercisable in equal annual installments of 2,000 shares, commencing on December 31, 1998. Unexercisable options are subject to forfeiture under certain circumstances.
Board Compensation
Except for Messrs. Meshon and H. Irwin Levy, our directors receive monthly compensation of $1,000, are paid $1,000 for attending each Board of Directors meeting and $500 for attending each committee meeting. Pursuant to the CV Reit, Inc. Non-Employee Director 1998 Stock Option Plan, non-employee directors, excluding Mr. H. Irwin Levy, receive annual grants of options to purchase 5,000 shares of our common stock and the Board has the authority to grant, in its sole discretion, a stock option to purchase up to 20,000 shares of our common stock on the date any individual first commences service as a non-employee director.
Compensation Committee Interlocks and Insider Participation
We have no Compensation Committee. The Chief Executive Officer's salary is based upon his Employment Agreement, as discussed below. Other executive salary decisions are determined in an annual review based upon recommendations of the Chief Executive Officer and/or our financial consultants and approved by the Chairman of the Board.
Board Compensation Report
Since our Board does not have a Compensation Committee, the entire Board has provided the following Compensation Report:
Executive Compensation Policy - Our overall compensation philosophy is to attract and retain quality talent, which is critical to our short-term and long-term success, and to create a mutuality of interest between executive officers and stockholders through compensation structures that share the rewards and risks of strategic decision making.
We examine market compensation levels and trends observed in the labor market. Market information is used as a frame of reference for annual salary adjustments and starting salary offers. Executive salary decisions are generally determined in an annual review of each individual's performance, decision-making responsibilities, experience and team-building skills. In certain instances, these reviews include recommendations by our financial consultants.
Mr. Meshon's compensation arrangement has been established under an Employment Agreement, dated December 31, 1997 (see below).
Base Compensation - Our approach to base compensation is to offer competitive salaries in accordance with market practices prevalent in our geographical areas. In addition, effective in 1999, we are sponsoring a 401(k) - retirement plan which covers substantially all employees meeting certain minimum age and service requirements. The plan provides for employer contributions equal to 50% of amounts contributed by the employee. The employer contributions are limited to 1.5% of the employee's salary. Mr. Meshon's Employment Agreement provides for a base salary of $285,000, subject to increases at the sole discretion of the Trust, in the event that there is a substantial increase in the scope of his responsibilities, and annually commencing in December 2000. Pursuant to his Employment Agreement, in the event we do not pay a quarterly dividend to stockholders of at least $.29 per common share, under certain circumstances, Mr. Meshon's base salary may be reduced by 50% and remain at such reduced level until we have paid quarterly dividends of at least $.29 per common share for four consecutive quarters. In that event, no performance bonus (see below) shall be paid doing the period for which such decrease has been in effect.
Bonus Compensation - Under his Employment Agreement, Mr. Meshon is entitled to an annual performance bonus generally equal to 5% of the annual improvement in our FFO, as determined by our independent auditors. In addition, Mr. Meshon is entitled to receive a bonus, based upon a formula set forth in his Employment Agreement, in the event fees are paid by third parties to Drexel in connection with the termination, on or before December 31, 2000, of certain existing management and leasing agreements between those third parties and Drexel. No bonuses have been paid to Mr. Meshon other than the 1998 performance bonus of $17,829, which was paid in April 1999. The 1999 performance bonus of $97,027 is expected to be paid in March 2000.
We generally reward our other executive officers with annual bonuses based on performance on specific projects or transactions, taking into account the overall performance of our company. Input from our financial consultants and the Chief Executive Officer is considered when establishing bonuses for other executive officers. A balance is made between overall corporate performance and performance of the specific areas under a participant's direct control. This balance supports the accomplishment of overall objectives and rewards individual contributions and tasks assigned to our executives.
Equity-Based Compensation - Stock options provide additional incentives to key employees to maximize shareholder value. Options generally vest over specified periods to encourage continued employment. In accordance with this philosophy, on December 31, 1997, we adopted the Montgomery CV Trust Executive Stock Option Plan which provides for the issuance to certain executives of options to purchase a maximum of 150,000 shares of common stock, all of which were granted to Mr. Meshon on December 31, 1997. Mr. Meshon's options are exercisable in equal annual installments of 30,000 shares, commencing on December 31, 1998. Unexercisable options are subject to forfeiture under certain circumstances.
Employment Agreement - As discussed above, effective December 31, 1997, we entered into an Employment Agreement with Mr. Meshon pursuant to which Mr. Meshon serves as President and Chief Executive Officer of the Company and President and Chief Operating Officer of the Trust for five years, with an automatic extension provision except under certain circumstances. In addition to the compensation provisions discussed above, if, during the term of the Employment Agreement, Mr. Meshon's employment is terminated for Cause, as defined, or Mr. Meshon resigns without Good Reason, as defined, all or a portion of 227,577 OP Units owned by Mr. Meshon was to be transferred to the Trust. The number of OP Units subject to transfer is being reduced on a pro rata basis over five years. Mr. Meshon acquired those OP Units in exchange for his shares of Drexel on December 31, 1997.
In the event of Mr. Meshon's death or disability, we are required to make severance payments for one year equal to Mr. Meshon's base salary, plus certain fringe benefits in the event of disability. In the event Mr. Meshon terminates his employment for Good Reason, as defined, or after the occurrence of a Significant Event, as defined (which includes a change in control and a transfer of substantially all our assets and business), we are required to pay severance benefits equal to the greater of the aggregate sum of all compensation (including bonuses based on historical averages) due to Mr. Meshon during the remaining term of his Employment Agreement, or 199% of Mr. Meshon's annual salary for the year prior to termination. In addition, Mr. Meshon would be entitled to receive certain fringe benefits for up to three years.
Respectfully submitted,
H. Irwin Levy, Chairman Stanley Brenner Stanley S. Cohen Allyn L. Levy Louis P. Meshon, Sr. Milton S. Schneider Alan L. Shulman
Stock Performance Graph
The following graph sets forth the cumulative total shareholder return (assuming reinvestment of dividends) to our stockholders during the five year period ended December 31, 1999, as well as an overall stock market index (S&P 500 Index) and our peer group index (REIT Industry Index):
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 ____________________________________________________________ CV Reit, Inc. 100.00 140.42 188.96 205.84 206.11 162.10 S&P 500 Index 100.00 137.43 168.98 225.37 289.78 350.72 REIT Industry Index 100.00 115.27 155.92 187.51 154.69 147.54
Total returns assume $100 invested on December 31, 1994 in our common stock, the S&P 500 Index and the REIT Industry Index with reinvestment of dividends.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of February 1, 2000, information with respect to the beneficial ownership of our common stock by (i) persons known to own beneficially (as defined under applicable rules of the SEC) more than 5% of our outstanding shares of common stock, (ii) all directors, and all directors and executive officers of our company as a group, beneficially owned (as defined under the applicable rules of the SEC) shares of our company, and OP Units of limited partnership interests in our approximately 84.5% owned subsidiary, Montgomery CV Realty, L.P.:
Amount and Nature of Percent of Class Beneficial Common OP Name and Address Title of Class Ownership(1) Stock Units ________________________________________________________________________________
H. Irwin Levy Common Stock 747,797 (2) 9.4% 100 Century Boulevard OP Units 78,149 (5) * West Palm Beach, FL 33417
Alan J. Evans and Robert J. Common Stock 655,759 (3) 8.2% Cartagena, Trustees 100 Century Boulevard West Palm Beach, FL 33417
Louis P. Meshon, Sr. Common Stock 60,790 * 580 W. Germantown Pike,Suite 200 OP Units 674,249(4)(5)(6) 7.2% Plymouth Meeting, PA 19462
Alan L. Shulman Common Stock 35,680 * 100 Century Boulevard West Palm Beach, FL 33417
Allyn L. Levy Common Stock 35,000(7) * 100 Century Boulevard West Palm Beach, FL 33417
Stanley Brenner Common Stock 17,500 * 100 Century Boulevard West Palm Beach, FL 33417
Stanley S. Cohen Common Stock 16,810(8) * 200 Market Street Philadelphia, PA 19103
Milton S. Schneider Common Stock 15,000 * 580 W.Germantown Pike,Suite 202 OP Units 20,957(5)(9) * Plymouth Meeting, PA 19462
All executive officers and directors as a group (10) Common Stock 932,577 11.5% OP Unit 773,355(4)(5) 8.2%
* Less than 1%.
(1) Unless otherwise indicated, each stockholder listed has the sole power to vote and direct disposition of the shares shown as beneficially owned by such stockholder. For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of the following shares which such person or group has the right to acquire pursuant to options exercisable within 60 days: Allyn L. Levy - 15,000 shares; Alan L. Shulman - 15,000 shares; Stanley Brenner -15,000 shares; Stanley S. Cohen - 15,000 shares; Milton S. Schneider - 15,000 shares; Louis P. Meshon, Sr. - 60,000 shares; all directors and executive officers as a group - 139,000 shares.
(2) Includes 102,292 shares owned by a corporation controlled by Mr. Levy. Excludes 175,000 shares owned by Mr. Levy's wife. Mr. Levy disclaims beneficial ownership of the excluded shares.
(3) Shares owned by a family trust established by Mr. Evans's deceased wife, of which Messrs. Evans and Cartagena are Trustees.
(4) Subject to adjustment under certain circumstances.
(5) The Trust owns 7,966,621 OP Units (representing 84.5% of the OP). The holders of substantially all the remaining 15.5%, or 1,462,406 OP Units, have the right to require the OP to redeem their OP Units for cash at any time. However, upon a holder giving notice of the exercise of this right, the Trust has the right to acquire such holder's OP Units in exchange for cash or, if certain conditions are satisfied, an equal number of shares of our common stock.
(6) Includes 89,909 OP Units jointly owned with Mr. Meshon's wife and 4,573 owned by companies controlled by Mr. Meshon.
(7) Held by a revocable trust, of which Mr. Levy is the trustee and income beneficiary.
(8) Includes 1,000 shares jointly owned with Mr. Cohen's wife. Excludes 145 shares owned by Mr. Cohen's wife. Mr. Cohen disclaims beneficial ownership of the excluded shares.
(9) Excludes 34,013 OP Units owned by Mr. Schneider's wife. Mr. Schneider disclaims beneficial ownership of the excluded shares.
Item 13.
Item 13. Certain Relationships and Related Transactions
H. Irwin Levy/Hilcoast
During December 1981 and January 1982, we sold each of the recreation facilities at the Century Villages in West Palm Beach, Deerfield Beach and Boca Raton in separate transactions to different purchasers, including Mr. Levy, for sales prices based upon independent appraisals. We sold the recreation facilities at Boca Raton to Mr. Levy for $18 million, subject to a lease to a corporation currently owned by Mr. Levy. (The annual net rental to Mr. Levy on that lease is $2.2 million.) At closing, Mr. Levy issued a 30-year non-recourse promissory note to our company in the principal amount of $12.5 million which bears interest at 13.25% per annum and may not be prepaid. At December 31, 1999, the outstanding balance on this note was $10.3 million. During 1999, we recognized $1.4 million in interest income on this note.
Since 1990, companies owned by Mr. Levy and/or certain members of his family have leased, managed and operated the recreation facilities at the Century Villages in West Palm Beach, Deerfield Beach and Boca Raton, which are collateral for certain notes we hold with an outstanding balance of $38.7 million (including the $10.3 million discussed above) at December 31, 1999. During 1999, we leased approximately 2,500 square feet of office space to those companies on a month-to-month basis for $2,100 per month, plus an allocation of utility expenses.
Mr. Levy is Chairman of the Board, Chief Executive Officer and a majority stockholder of Hilcoast which as of December 31, 1999, owed us $24.7 million, consisting of an 11% mortgage note collateralized by first mortgages on the recreation facilities at the Century Village at Pembroke Pines, Florida adult condominium project. The Hilcoast note requires equal monthly payments of principal and interest aggregating approximately $2.9 million per annum through 2023 and may not be prepaid by Hilcoast without a prepayment penalty. During 1999, we recognized $2.7 million in interest income from Hilcoast on the Hilcoast note.
Effective July 31, 1992, we entered into a consulting and advisory agreement under which Hilcoast provides certain investment advisory, consulting and administrative services to our company, excluding matters related to the Hilcoast note. The agreement provides for the payment of $10,000 per month to Hilcoast, plus reimbursement for reasonable out-of-pocket expenses. The agreement may be terminated by Hilcoast upon 180 days notice and by our company upon 30 days notice. During 1999, we paid $115,000 under this agreement, plus expense reimbursement.
On December 31, 1997, the OP acquired nine shopping centers and an office building for a purchase price of approximately $61.7 million. Two of the shopping centers were acquired from Mr. Levy and members of his family in exchange for 390,717 OP Units (valued at approximately $4.6 million), including 78,149 OP Units (valued at approximately $900,000) issued to Mr. Levy. The economic basis used to determine the acquisition price was the same as that used for the other properties acquired by the OP on that date.
Stanley S. Cohen
Mr. Cohen is a partner and a member of the Executive Committee of the law firm of Fox, Rothschild, O'Brien & Frankel, LLP. During 1999, we paid $487,487 to that firm for legal services.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) List of Consolidated Financial Statements:
Report of Independent Certified Public Accountants Consolidated Balance Sheets - December 31, 1999 and 1998 Consolidated Statements of Income - Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Stockholders' Equity -Years Ended December 31, 1999, 1998, and 1997 Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
(2) List of Consolidated Financial Statements Schedules:
Schedule III - Real Estate and Accumulated Depreciation Schedule IV - Mortgage Loans on Real Estate
(3) See Exhibit Index at page 44 of this Form 10-K
(b) Reports on Form 8-K:
On December 17, 1999, the Registrant filed on Form 8-K reporting under Item 5. and Item 7. the Agreement and Plan of Reorganization and Merger With Kranzco Realty Trust
Exhibit Number Description
3.1 Amended Certificate of Incorporation of CV Reit, Inc., filed with Secretary of State of Delaware on December 31, 1997. (Incorporated by reference to Appendix C to the proxy statement of the Company filed November 11, 1997.)
3.2 Amended and Restated By-laws of CV Reit, Inc. (Incorporated by reference to Appendix D to the proxy statement of the Company filed November 11, 1997.)
10.1 Agreement between Cenvill Investors, Inc. and H. Irwin Levy, dated December 31, 1981. (Incorporated by reference to Exhibit (2)(i) to the current report on Form 8-K filed by the Company to report event of December 31, 1981.)
10.2 Agreement of Lease between Cenvill Investors, Inc. and B.R.F., Inc., dated December 30, 1981. (Incorporated by reference to Exhibit (2) (ii) to the current report on Form 8-K filed by the Company to report event of December 31, 1981.)
10.3 Agreement dated January 15, 1982, between Century Village, Inc. and Benenson Capital Company. (Incorporated by reference to Exhibit (2)(i) to the current report on Form 8-K filed by Cenvill Investors, Inc. (File No. 0-03427) to report event of January 15, 1982.)
10.4 Agreement dated January 15, 1982, between Century Village East, Inc. and CVRF Deerfield Limited. (Incorporated by reference to exhibit (2) (ii) to the current report on Form 8-K filed by Cenvill Investors, Inc. (File No. 0-03427) to report event of January 15, 1982.)
10.5 Indenture for Collateralized Mortgage Obligations, dated as of December 30, 1991 between Recreation Mortgages, Inc. (Issuer) and Bankers Trust Company (Trustee). (Incorporated by reference to Exhibit (10)(xvi) to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1991.)
10.6 Restated Loan Agreement, dated July 31, 1992, between CV Reit, Inc. and Cenvill Development Corp. and certain subsidiaries and affiliates thereof. (Incorporated by reference to Exhibit (10)(xi) to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992.)
10.7 Proposal for the Acquisition of Certain Assets, dated June 19, 1992, by and among CV Reit, Inc., Cenvill Development Corp. and certain subsidiaries and affiliates thereof. (Incorporated by reference to Exhibit (10)(xiv) to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992.)
10.8 Order granting Motion of Debtor's [sic] for Approval of Sale of Assets dated July 17, 1992. (Incorporated by reference to Exhibit (10)(xv) to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992.)
10.9 Consulting and Advisory Agreement, dated July 31, 1992, between CV Reit, Inc. and Hilcoast Development Corp. (Incorporated by reference to Exhibit (10)(xviii) to the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1992.)
10.10Letter Agreements, dated July 11, 1994 and August 3, 1995, between CV Reit, Inc. and Hilcoast Advisory Services, Inc. extending the Consulting and Advisory Agreement to July 31, 1995 and July 31, 1996, respectively. (Incorporated by reference to Exhibit 10(vi) to the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 1995.)
10.11Letter Agreement, dated July 12, 1996, between CV Reit, Inc. and Hilcoast Advisory Services, Inc. extending the Consulting and Advisory Agreement to July 31, 1997. (Incorporated by reference to Exhibit 10(i) to the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 1996.)
10.12Letter agreement, dated June 10, 1997, between CV Reit, Inc. and Hilcoast Advisory Services, Inc. extending the Consulting and Advisory Agreement to December 31, 1997. (Incorporated by reference to Exhibit 10(i) to the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30,1997.)
10.13Definitive Master Agreement, dated September 19, 1997, among CV Reit, Inc., Montgomery CV Realty Trust, and Drexel Realty, Inc., Royce Realty, Inc., Louis P. Meshon, Sr. and certain of the Meshon Parties named therein and the Levy Parties named therein. (Incorporated by reference to Appendix A to the Company's proxy statement filed on November 11, 1997.)
10.14Amended and Restated Agreement of Limited Partnership of Montgomery CV Realty L.P. dated December 31, 1997. (Incorporated by reference to Appendix B to the Company's proxy statement filed on November 11, 1997.)
10.15Supplemental Indenture No. 2 for Collateralized Mortgage Obligations, dated as of December 30, 1997 between Recreation Mortgages, L.P., (Issuer) and Bankers Trust Company (Trustee). (Incorporated by reference to the Annual Report on Form 10-K of the Company for fiscal year ended December 31, 1997.)
10.16Real Estate Purchase Agreement dated September 29, 1997 by and between Newtown Village Partnership and RCEK, Inc., or its nominee or assignee. (Incorporated by reference to Exhibit 2.1 to the current report on Form 8-K filed by CV Reit, Inc. on April 14, 1998.)
10.17Letter Amendment to Real Estate Purchase Agreement dated December 15, 1997 by and between Newtown Village Partnership and RCEK, Inc. (Incorporated by reference to Exhibit 2.2 to the current report on Form 8-K filed by CV Reit, Inc. on April 14, 1998.)
10.18Assignment of Real Estate Purchase Agreement dated January 26, 1998 from RCEK, Inc. to Newtown Village Plaza Associates, L.P. (Incorporated by reference to Exhibit 2.3 to the current report on Form 8-K filed by CV Reit, Inc. on April 14, 1998.)
10.19Second Amendment to Real Estate Purchase Agreement dated February 5, 1998 by and between Newtown Village Partnership and Newtown Village Plaza Associates, L.P. (Incorporated by reference to Exhibit 2.4 to the current report on Form 8-K filed by CV Reit, Inc. on April 14, 1998.)
10.20Third Amendment to Real Estate Purchase Agreement dated March 31, 1998 by and between Newtown Village Partnership and Newtown Village Plaza Associates, L.P. (Incorporated by reference to Exhibit 2.5 to the current report on Form 8-K filed by CV Reit, Inc. on April 14, 1998.)
10.21Loan and Credit Facility Agreement dated as of March 31, 1998 by and between Montgomery CV Realty L.P. as Borrower, Century Plaza Associates, L.P. and CV Reit, Inc., as guarantors, and GMAC Commercial Mortgage Corporation, as Lender. (Incorporated by reference to Exhibit 5.1 to the current report on Form 8-K filed by CV Reit, Inc. on April 15, 1998.)
10.22$7,650,000 Promissory Note dated as of April 9, 1998 from Montgomery CV Realty L.P. to GMAC Commercial Mortgage Corporation. (Incorporated by reference to Exhibit 5.2 to the current report on Form 8-K filed by CV Reit, Inc. on April 15, 1998.)
10.23Mortgage and Security Agreement dated as of April 9, 1998 by Century Plaza Associates, L.P. to GMAC Commercial Mortgage Corporation. (Incorporated by reference to Exhibit 5.3 to the current report on Form 8-K filed by CV Reit, Inc. on April 15, 1998.)
10.24Guaranty and Suretyship Agreement dated as of April 9, 1998 by CV Reit, Inc. to GMAC Commercial Mortgage Corporation. (Incorporated by reference to Exhibit 5.4 to the current report on Form 8-K filed by CV Reit, Inc. on April 15, 1998.)
10.25Contribution Agreement dated May 29, 1998 by and between Marlton Crossing Shopping Center Limited Partnership and Montgomery CV Realty L.P. (Incorporated by reference to Exhibit 2.1 to the current report on Form 8-K dated June 24, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.26Assignment and Assumption of Contribution Agreement dated June 22, 1998 by and between Montgomery CV Realty L.P. and Marlton Plaza Associates II, L.P. (Incorporated by reference to Exhibit 2.2 to the current report on Form 8-K dated June 24, 1998 filed by CV Reit, Inc. on July 7, 1998.)
10.27Mortgage and Security Agreement dated as of June 24, 1998 by and between Marlton Plaza Associates II, L.P., as Borrower, and GMAC Commercial Mortgage Corporation, as Lender. (Incorporated by reference to Exhibit 2.3 to the current report on Form 8-K dated June 24, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.28$11,650,000 Promissory Note dated as of June 24, 1998 from Marlton Plaza Associates II, L.P. to GMAC Commercial Mortgage Corporation. (Incorporated by reference to Exhibit 2.4 to the current report on Form 8-K dated June 24, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.29Real Estate Purchase Agreement dated January 27, 1998 by and between Seller and Purchaser. (Incorporated by reference to Exhibit 2.1 to the current report on Form 8-K dated June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.30Amendment to Real Estate Purchaser Agreement dated February 26, 1998 by and between Seller and Purchaser. (Incorporated by reference to Exhibit 2.2 to the current report on Form 8-K dated June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.31Second Amendment to Real Estate Purchase Agreement dated March 31, 1998 by and between Seller and Purchaser. (Incorporated by reference to Exhibit 2.3 to the current report on Form 8-K dated June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.32Mortgage and Security Agreement dated as of June 25, 1998 by and between Marlton Plaza Associates, L.P., as Borrower, and GMAC Commercial Mortgage Corporation, as Lender. (Incorporated by reference to Exhibit 2.4 to the current report on Form 8-K dated June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.33$9,300,000 Promissory Note dated as of June 25, 1998 from Marlton Plaza Associates, L.P. to GMAC Commercial Mortgage Corporation. (Incorporated by reference to Exhibit 2.5 to the current report on Form 8-K dated June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.34Guaranty and Suretyship Agreement dated as of June 25, 1998 by CV Reit, Inc. to GMAC Commercial Mortgage Corporation. (Incorporated by reference to Exhibit 2.6 to the current report on Form 8-K dated June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.35Guaranty and Suretyship Agreement dated as of June 25, 1998 by Montgomery CV Realty L.P. to GMAC Commercial Mortgage Corporation. (Incorporated by reference to Exhibit 2.7 to the current report on Form 8-K dated June 25, 1998, filed by CV Reit, Inc. on July 7, 1998.)
10.36Second Amendment to Loan and Credit Facility Agreement dated as of March 8, 1999, by and between Montgomery CV Realty, L.P. as Borrower, Century Plaza Associates, L.P. and CV Reit, Inc., as Guarantors, and GMAC Commercial Mortgage Corporation as Lender. (Incorporated by reference to Exhibit 10.36 Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1998.)
10.37$18,500,000 Note dated March 8, 1999 between Montgomery CV Realty, L.P. as Borrower and GMAC Commercial Mortgage Corporation as Lender. (Incorporated by reference to Exhibit 10.37 Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1998.)
10.38Collateral, Pledge, Assignment and Security Agreement, dated March 8, 1999 between Montgomery CV Realty, L.P. and GMAC Commercial Mortgage Corporation. (Incorporated by reference to Exhibit 10.38 Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 1998.)
10.39Agreement of Sale dated January 21, 1999 by and between Lakewood-9 Investors, L.P. and ARC-Lakewood-9, L.L.C. Montgomery CV Realty L.P. (Incorporated by reference to Exhibit 2.1 to the current report on Form 8-K dated March 31, 1999, filed by CV Reit, Inc. on April 7, 1999.)
10.40Reinstatement and Amendment Agreement of Sale dated February 5, 1999 by and between Lakewood-9 Investors, L.P. and ARC-Lakewood-9, L.L.C. Montgomery CV Realty L.P. (Incorporated by reference to Exhibit 2.2 to the current report on Form 8-K dated March 31, 1999, filed by CV Reit, Inc. on April 7, 1999.)
10.41Assignment of Agreement of Sale dated March 17, 1999 from Montgomery CV Realty L.P. to Lakewood Plaza 9 Associates, L.P. (Incorporated by reference to Exhibit 2.3 to the current report on Form 8-K dated March 31, 1999, filed by CV Reit, Inc. on April 7, 1999.)
10.42Agreement of Plan of Reorganization and Merger among CV Reit, Inc., Kranzco Realty Trust, KRT Trust and Kramont Realty Trust, dated December 10, 1999 (Incorporated by reference to Exhibit 2.1 to the current report on Form 8-K dated December 10, 1999, filed by CV Reit, Inc. on December 17, 1999.)
10.43Press Release, dated December 13, 1999, issued by CV Reit, Inc. (Incorporated by reference to Exhibit 99.1 to the current report on Form 8-K dated December 10, 1999, filed by CV Reit, Inc. on December 17, 1999.)
11 Statement regarding computation of per share earnings. Omitted; computation can be clearly determined from material contained in the report.
21 Subsidiaries of the Company.
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CV REIT, INC.
/s/ Elaine Hauff March 16, 2000 By: ---------------------------- Elaine Hauff, Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ H. Irwin Levy March 16, 2000 -------------------------------- H. Irwin Levy, Chairman of the Board of Directors
/s/ Louis P. Meshon March 16, 2000 -------------------------------- Louis P. Meshon, President and Director
/s/ Elaine Hauff March 16, 2000 -------------------------------- Elaine Hauff, Vice President and Treasurer, (Principal Financial Officer and Principal Accounting Officer)
/s/ Stanley Brenner March 16, 2000 -------------------------------- Stanley Brenner, Director
/s/ Stanley S. Cohen March 16, 2000 -------------------------------- Stanley S. Cohen, Director
/s/ Allyn Levy March 16, 2000 -------------------------------- Allyn Levy, Director
/s/ Milton S. Schneider March 16, 2000 -------------------------------- Milton S. Schneider, Director
/s/ Alan L. Shulman March 16, 2000 -------------------------------- Alan L. Shulman, Director