Glimcher Annual Report 2004
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10/4510/45 GLIMCHER ANNUAL REPORT 2004 Glimcher Realty Trust • 150 East Gay Street • Columbus, Ohio • 43215 • www.glimcher.com 10/45 GLIMCHER ANNUAL REPORT 2004 GLIMCHER REALTY TRUST, a real estate investment trust, is a recognized leader in the ownership, management, acquisition and development of enclosed regional and super-regional malls. At December 31, 2004, the Company’s mall portfolio comprised of 25 properties located in 16 states with gross leaseable area totaling approximately 21.8 million square feet. The community center assets are comprised of 16 properties representing approximately 2.5 million square feet. Glimcher Realty Trust’s common shares are listed on the New York Stock Exchange under the symbol “GRT.” Glimcher Realty Trust’s Series F and Series G preferred shares are listed on the New York Stock Exchange under the symbols “GRT-F” and “GRT-G,” respectively. Glimcher Realty Trust is a component of both the Russell 2000® Index, representing small cap stocks, and the Russell 3000® Index, representing the broader market. 10/45 The year 2004 marked both the 10th anniversary of Glimcher Realty Trust as a public company trading on the New York Stock Exchange and the 45th anniversary of the founding of GRT’s predecessor, The Glimcher Company. TABLE OF CONTENTS FINANCIAL HIGHLIGHTS // p2 // LETTER TO SHAREHOLDERS // p4 // INTERVIEW WITH THE PRESIDENT & CEO // p6 // REDEVELOPMENT HIGHLIGHTS // p12 // CELEBRATING OUR HISTORY // p15 // PROPERTY HIGHLIGHTS // p18 // ANNUAL REPORT ON FORM 10-K // SHAREHOLDER INFORMATION // p19 // TRUSTEES AND OFFICERS // p20 // This annual report contains certain forward-looking statements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” located in the Annual Report on Form 10-K, with respect to those factors that might cause future events and actual results to differ from the expected results discussed in the forward-looking statements. FINANCIAL HIGHLIGHTS (dollars in thousands, except per share and per square foot amounts) FINANCIAL INFORMATION 2004 2003 2002 as restated (3) as restated (3) (1) (1) Total Revenues $ 345,089 $ 300,730 $ 247,243 Net income available to common shareholders $ 29,360 $ 19,273 $ 21,771 Funds from Operations (FFO)(2) $ 89,629 $ 88,897 $ 74,828 Funds from Operations per Diluted Share $ 2.27 $ 2.33 $ 2.09 Weighted-Average Common Shares Outstanding - Diluted 39,496 38,221 35,748 Dividend per Common Share $ 1.92 $ 1.92 $ 1.92 Total Assets $ 1,947,024 $ 1,837,423 $ 1,622,433 OCCUPANCY Mall Stores 88.5% 89.6% 90.1% Community Centers 67.6% 77.5% 75.5% AVERAGE SALES PER SQUARE FOOT Mall Stores $ 322.60 $ 304.69 $ 300.50 Community Centers $ 184.39 $ 252.57 $ 266.13 AVERAGE BASE RENT PER SQUARE FOOT Mall Stores $ 24.71 $ 23.89 $ 23.21 Community Centers $ 7.59 $ 6.31 $ 6.30 For the purposes of computing occupancy statistics, anchors are defined as tenants whose space is equal to or greater than 20,000 square feet of gross leasable area (“GLA”). All tenants spaces less than 20,000 square feet, and outlots, are considered to be stores. The Company computes occupancy on an economic basis, which means only those spaces where the tenant is open or paying rent are considered as occupied. Consistent with industry practice, mall statistics include only stores, while community center statistics reflect the combined GLA including both anchors and stores. (1) Certain reclassifications of prior period amounts, including the presentation of the statements of operations required by Statement of Financial Accountants Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” have been made in the financial statements to conform to the 2004 presentation. 89.7% 94.0% MALLS MALLS 10.3% 6.0% COMMUNITY COMMUNITY CENTERS CENTERS 2004 PERCENT ANNUALIZED PORTFOLIO DISTRIBUTION GLA MINIMUM RENTS 2003 80.6% 88.6% MALLS MALLS 19.4% 11.4% COMMUNITY COMMUNITY CENTERS CENTERS PERCENT ANNUALIZED GLA MINIMUM RENTS 345.1 89.6 88.9 2.33 300.7 2.27 74.8 247.2 2.09 04 03 02 04 03 0204 03 02 TOTAL REVENUES (dollars in millions) FFO (dollars in millions) FFO PER SHARE (dollars) (2) A table is included as part of “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” which illustrates the calculation of FFO and the reconciliation of FFO to net income available to common shareholders. (3) The explanation of these restatement adjustments are described as Explanatory Note in the Form 10-K, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in Notes 21 and 22 of the Notes to the Consolidated Financial Statements. See “Form 10-K – Consolidated Financial Statements and Supplementary Data – Notes to the Consolidated Financial Statements.” p4 LETTER TO SHAREHOLDERS Dear Shareholders: Glimcher Realty Trust marked its 10th anniversary as a public company with another successful year in 2004. We reported solid results in line with our expectations, strengthened our balance sheet and substantially completed the repositioning of our portfolio to focus on premium mall properties. With these accomplishments, we believe Glimcher Realty Trust is stronger today and better positioned for the future than at any time since our initial public offering in January 1994. This strength is reflected in such measures as average retail sales for mall stores, which increased 5.9% to $323 per square foot at December 31, 2004, compared with a year earlier, and average mall store base rent, which grew 3.4% in 2004 over 2003 to $24.71 per square foot. The quality of our portfolio remains at the center of the strategic vision we have pursued over the past seven years. Our strategy encompasses four objectives: • Actively manage every property in our portfolio to make it as strong as it can be for the market that it is in; • Continually optimize re-tenanting opportunities to introduce high-quality retailers at market rates; • Selectively acquire anchored-mall properties within the top 100 metropolitan markets that are, or have the potential to be, the dominant location within their trade area; and • Carefully maintain a diverse tenant mix to minimize exposure to any single retailer. To reposition the portfolio, we have sold 90 community centers and single-tenant assets since 2000, including 29 community centers, which we sold in 2004 for $113.3 million. At December 31, 2004, our 25 malls represent 89.7% of total portfolio Gross Leasable Area (GLA), 94.1% of total revenues and 94.5% of net operating income. Expect us to continue to evaluate opportunities to sell most of the 16 community centers remaining in our portfolio and to invest the proceeds into higher-growth regional mall opportunities. We are also reinvesting in our core portfolio of mall properties. In 2004, we announced ambitious expansions at Northtown Mall in Blaine (Minneapolis), MN and our two malls in the Dayton, Herbert and Michael Glimcher, at the NYSE p5 OH area. Northtown is undergoing a major upgrade, which includes tripling the size of the food court and renovating the mall entrances, concourse and common areas. We are also freshening the tenant mix and adding a new 10,000 square foot freestanding building that will house a Starbucks Coffee, two restaurants and an electronics store. In Dayton, we announced plans for a combined 168,000 square foot expansion at Dayton Mall and The Mall at Fairfield Commons. The new space at both properties will feature a stylish “lifestyle center” design with outward-facing storefronts, stand-alone restaurants and easy access for shoppers. The Mall at Fairfield Commons will be enhanced through the addition of a 35,000 square foot outward-facing expansion along with additional parking and a 10,000 square foot freestanding retail village. At Dayton Mall, plans call for renovating the mall’s façade and adding a 97,000 square foot open-air center. New tenants at the two properties may include popular home furnishings, better women’s apparel, jewelry, and book stores, as well as sit-down restaurants. Most of the proceeds from the 2004 community center sales were applied to reduce outstanding debt, which helped improve the Company’s debt to market capitalization ratio to 52% at December 31, 2004, compared with 55% a year earlier. We are comfortable with this debt level, which is in line with our real estate investment trust (“REIT”) peers. During 2004, we concluded several other financial transactions that strengthened the Company’s balance sheet and better positioned us for growth. These included a successful $150 million public offering of 8.125% preferred shares that essentially replaced an earlier preferred series paying a 9.25% dividend and a $195 million refinancing of two properties. The refinancing reduced the rate on our fixed debt to a weighted average 6.41% and will allow us to maintain approximately 90% of our debt at fixed interest rates. We are excited about the future of Glimcher Realty Trust. We believe our portfolio today consists of higher quality, more flexible assets compared with the past. Malls provide significant opportunities for good management to add value – through redevelopment, changing the tenant mix, adding amenities and enhancing the overall shopping experience in hundreds of little ways. We are encouraged with Glimcher’s growth prospects for 2005 and beyond, and we thank our shareholders, tenants, employees and communities for their continued support. MICHAEL P. GLIMCHER President and Chief Executive Officer p6 INTERVIEW WITH THE PRESIDENT & CEO QUESTION: WHAT IS GLIMCHER REALTY TRUST? QUESTION: WHAT SIGNIFICANT FINANCING TRANSACTIONS OCCURRED Glimcher Realty Trust, a real estate investment trust, is a recognized DURING 2004? leader in the ownership, management, acquisition and development Glimcher completed a successful $150 million public offering of enclosed regional and super-regional malls.