8-K 1 doc1.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) November 19, 2002 ---------------- IRT PROPERTY COMPANY -------------------- (Exact Name of Registrant as Specified in Charter) Georgia 1-7859 58-1366611 ---------------------------- ------------ ------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 200 Galleria Parkway, Suite 1400, Atlanta, Georgia 30339 -------------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (770) 955-4406 -------------- 1 ITEM 5. OTHER EVENTS. IRT Property Company (the "Company") is filing financial statements that were originally filed in Item 8 of its 2001 Annual Report on Form 10-K, to include the audit report of Deloitte & Touche LLP on the Company's Consolidated Financial Statements as of December 31, 2001 and 2000 and for the three years in the period ended December 31, 2001. Deloitte & Touche audited these financial statements after it replaced the Company's previous auditor in May 2002. The audit report of Deloitte & Touche LLP contains an unqualified opinion, as did the audit report of the Company's previous auditor. Certain amounts in the consolidated financial statements have been reclassified to conform with the presentation in the Company's 2002 Quarterly Condensed Consolidated Financial Statements. In addition, the Company is filing these financial statements to reflect the reclassification of discontinued operations as prescribed by Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires the Company to report in discontinued operations the results of operations of a property that has either been disposed or is classified as held for sale, unless certain conditions are met. SFAS No. 144 further requires the Company to reclassify results of operations from a property disposed of or held for sale subsequent to December 31, 2001 as income from discontinued operations during prior reported periods. During the nine-month period ended September 30, 2002, the Company sold one property that was not classified as an asset held for sale as of December 31, 2001. The results of operations from this property have been reclassified as income from discontinued operations for the three years in the period ended December 31, 2001 in the accompanying consolidated statements of earnings. There is no effect on the previously reported net earnings available for common shareholders. Management does not believe that adoption of SFAS No. 144 or the reclassifications described above have a material effect on the Company's selected consolidated financial data or management's discussion and analysis of financial condition and results of operations for the three years in the period ended December 31, 2001 as previously reported in the Company's 2001 Annual Report on Form 10-K. 2 ITEM 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS IRT PROPERTY COMPANY AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- Independent Auditors' Report 4 Consolidated Balance Sheets: December 31, 2001 and 2000 5 Consolidated Statements of Earnings: For the Years Ended December 31, 2001, 2000 and 1999 6 Consolidated Statements of Changes in Shareholders' Equity: For the Years Ended December 31, 2001, 2000 and 1999 7 Consolidated Statements of Cash Flows: For the Years Ended December 31, 2001, 2000 and 1999 8 Notes to Consolidated Financial Statements: December 31, 2001, 2000 and 1999 9 SCHEDULES III Real Estate and Accumulated Depreciation 38 IV Mortgage Loans on Real Estate 45 3 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of IRT Property Company Atlanta, Georgia We have audited the accompanying consolidated balance sheets of IRT Property Company (the "Company") (a Georgia corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of earnings, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of IRT Property Company and subsidiaries as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 26 to the consolidated financial statements, on October 28, 2002, the Company executed a merger agreement with Equity One, Inc. to which Equity One, Inc. will acquire the Company. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to consolidated financial statements are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. DELOITTE & TOUCHE LLP Atlanta, Georgia November 19, 2002 4

~~SECURITIES~~IRT PROPERTY COMPANY AND ~~EXCHANGE~~SUBSIDIARIES ~~COMMISSION WASHINGTON~~CONSOLIDATED BALANCE SHEETS DECEMBER 31, D2001 AND 2000 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 2001 2000 ---------- --------- ASSETS Real estate investments: Rental properties $ 659,820 $632,337 Properties under development 23,445 4,922 ---------- --------- 683,265 637,259 Accumulated depreciation (109,344) (96,183) ---------- --------- Net rental properties 573,921 541,076 Equity investment in and advances to unconsolidated affiliates - 17,342 Net investment in direct financing leases 2,174 4,245 Mortgage loans, net 314 70 ---------- --------- Net real estate investments 576,409 562,733 Cash and cash equivalents 2,457 831 Prepaid expenses and other assets 11,634 10,996 ---------- --------- Total assets $ 590,500 $574,560 ========== ========= LIABILITIES & SHAREHOLDERS' EQUITY Liabilities: Mortgage notes payable, net $ 134,672 $116,509 7.C.3% ~~20549~~ convertible subordinated debentures, net 23,275 23,275 Senior notes, net 124,760 124,714 Indebtedness to banks 51,654 55,000 Accrued interest 4,598 5,010 Accrued expenses and other liabilities 10,652 6,918 ---------- --------- Total liabilities 349,611 331,426 Commitments and contingencies (Notes 5 and 13) Minority interest payable 7,755 7,981 Shareholders' equity: Preferred stock, $1 par value, authorized 10,000,000 shares; none issued - - Common stock, $1 par value, 150,000,000 shares authorized; 33,234,206 shares issued in 2001 and 2000, respectively 33,234 33,234 Additional paid-in capital 272,172 272,040 Deferred compensation/stock loans (1,732) (1,850) Treasury stock, at cost, 2,738,204 and 2,889,276 shares in 2001 and 2000, respectively (22,783) (23,883) Cumulative distributions in excess of net earnings (47,757) (44,388) ---------- --------- Total shareholders' equity 233,134 235,153 ---------- --------- Total liabilities and shareholders' equity $ 590,500 $574,560 ========== =========

The accompanying notes are an integral part of these consolidated balance sheets. 5

~~FORM~~IRT 8PROPERTY COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2001 2000 1999 -K ------- -------- -------- REVENUES: Income from rental properties $84,992 $83,507 $83,094 Interest income 158 967 381 Interest on direct financing leases 385 542 560 Other income - - 969 -------- -------- -------- Total revenues 85,535 85,016 85,004 -------- -------- -------- EXPENSES: Operating expenses of rental properties 21,315 20,229 19,619 Interest expense 22,525 21,747 21,473 Depreciation 14,941 14,226 13,739 Amortization of debt costs 641 541 460 General and administrative 4,570 3,507 3,432 -------- -------- -------- Total expenses 63,992 60,250 58,723 EQUITY IN (LOSS) EARNINGS OF UNCONSOLIDATED AFFILIATES (4) (56) 4 -------- -------- -------- Income from continuing operations before income taxes, minority interest, gain on sales of properties, discontinued operations and extraordinary item 21,539 24,710 26,285 INCOME TAX PROVISION (53) - - MINORITY INTEREST OF UNITHOLDERS IN OPERATING PARTNERSHIP (530) (568) (654) GAIN ON SALES OF OPERATING PROPERTIES AND OUTPARCELS 3,848 4,549 2,483 -------- -------- -------- Income from continuing operations 24,804 28,691 28,114 -------- -------- -------- DISCONTINUED OPERATIONS Income from discontinued operations, net of minority interest 416 348 374 -------- -------- -------- Income before extraordinary item 25,220 29,039 28,488 EXTRAORDINARY ITEM Loss on extinguishment of debt - - (157) -------- -------- -------- NET INCOME $25,220 $29,039 $28,331 ======== ======== ======== PER SHARE: (Note 20) Income from continuing operations - basic $ 0.82 $ 0.91 $ 0.85 Income from discontinued operations - basic 0.01 0.01 0.01 -------- -------- -------- Income before extraordinary item 0.83 0.92 0.86 Extraordinary item - basic - - - -------- -------- -------- Net earnings - basic $ 0.83 $ 0.92 $ 0.86 ======== ======== ======== Income from continuing operations - diluted $ 0.82 $ 0.90 $ 0.85 Income from discontinued operations - diluted 0.01 0.01 0.01 -------- -------- -------- Income before extraordinary item 0.83 0.91 0.86 Extraordinary item - diluted - - - -------- -------- -------- Net earnings - diluted $ 0.83 $ 0.91 $ 0.86 ======== ======== ======== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 30,322 31,536 33,119 ======== ======== ======== Diluted 33,301 34,432 33,904 ======== ======== ========

The accompanying notes are an integral part of these consolidated statements. 6

~~CURRENT~~IRT ~~REPORT PURSUANT~~PROPERTY TOCOMPANY ~~SECTION~~AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (IN THOUSANDS, EXCEPT SHARE AMOUNTS) Total Shares ------------------ Additional Deferred Common Treasury Common Paid-In Treasury Compensation/ Stock Stock Stock Capital Stock Stock Loans ------- --------- -------- --------- ---------- --------------- BALANCE AT DECEMBER 31, 1998 33,252 - $33,252 $272,975 $ - $ (2,386) Net earnings - - - - - - Dividends declared - $.93 per share - - - - - - Exercise of options 4 - 4 33 - - Amortization of deferred compensation - - - - - 103 Forfeiture of restricted stock (22) - (22) (203) - 225 Adjustment to minority interest of unitholders in operating partnership for issuance of additional units - - - (357) - - Acquisition of treasury stock - (517) - - (4,026) 250 ------- --------- -------- --------- ---------- --------------- BALANCE AT DECEMBER 31, 1999 33,234 (517) 33,234 272,448 (4,026) (1,808) Net earnings - - - - - - Dividends declared - $.94 per share - 59 - (16) 513 - Exercise of options - 37 - (8) 295 - Amortization of deferred compensation - - - - - 122 Issuance of restricted stock to employees - 25 - 13 OR191 15(d204) OFForfeiture ~~THE SECURITIES~~of ~~EXCHANGE~~restricted ~~ACT~~stock OF- ~~1934~~ (5) - (2) (38) 40 Adjustment to minority interest of unitholders in operating partnership for issuance of additional units - - - (395) - - Acquisition of treasury stock - (2,488) - - (20,818) - ------- --------- -------- --------- ---------- --------------- BALANCE AT DECEMBER 31, 2000 33,234 (2,889) 33,234 272,040 (23,883) (1,850) Net earnings - - - - - - Dividends declared - $.94 per share - - - - - - Exercise of options - 196 - 114 1,486 - Shares issued pursuant to the stock purchase plan - 2 - 5 19 - Amortization of deferred compensation - - - - - 118 Adjustment to minority interest of unitholders in operating partnership for issuance of additional units - - - 13 - - Acquisition of treasury stock - (47) - - (405) - ------- --------- -------- --------- ---------- --------------- BALANCE AT DECEMBER 31, 2001 33,234 (2,738) $33,234 $272,172 $ (22,783) $ (1,732) ======= ========= ======== ========= ========== =============== Cumulative Distributions Total in Excess of Shareholders' Net Earnings Equity -------------- --------------- BALANCE AT DECEMBER 31, 1998 $ (41,068) $ 262,773 Net earnings 28,331 28,331 Dividends declared - $.93 per share (30,908) (30,908) Exercise of options - 37 Amortization of deferred compensation - 103 Forfeiture of restricted stock - - Adjustment to minority interest of unitholders in operating partnership for issuance of additional units - (357) Acquisition of treasury stock - (3,776) -------------- --------------- BALANCE AT DECEMBER 31, 1999 (43,645) 256,203 Net earnings 29,039 29,039 Dividends declared - $.94 per share (29,782) (29,285) Exercise of options - 287 Amortization of deferred compensation - 122 Issuance of restricted stock to employees - Forfeiture of restricted stock - - Adjustment to minority interest of unitholders in operating partnership for issuance of additional units - (395) Acquisition of treasury stock - (20,818) -------------- --------------- BALANCE AT DECEMBER 31, 2000 (44,388) 235,153 Net earnings 25,220 25,220 Dividends declared - $.94 per share (28,589) (28,589) Exercise of options - 1,600 Shares issued pursuant to the stock purchase plan - 24 Amortization of deferred compensation - 118 Adjustment to minority interest of unitholders in operating partnership for issuance of additional units - 13 Acquisition of treasury stock - (405) -------------- --------------- BALANCE AT DECEMBER 31, 2001 $ (47,757) $ 233,134 ============== ===============

The accompanying notes are an integral part of these consolidated statements. 7

~~Date~~IRT PROPERTY COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (IN THOUSANDS) 2001 2000 1999 --------- --------- --------- Cash flows from operating activities: Net earnings $ 25,220 $ 29,039 $ 28,331 Adjustments to reconcile earnings to net cash from operating activities: Depreciation 15,088 14,368 13,869 Gain on sales of ~~report~~operating properties (~~Date~~2,498) (4,549) (2,483) Gain on sales of ~~earliest~~outparcels ~~event~~(1,350) ~~reported~~- - Minority interest of unitholders in partnership (213) ~~October~~ 288 (50) Straight line rent adjustment (533) (153) - Amortization of deferred compensation 118 122 103 Amortization of debt costs and discounts 673 700 519 Amortization of capitalized leasing income 152 166 160 Extraordinary loss - extinguishment of debt - - 157 Changes in assets and liabilities: Increase in accrued interest on debentures and senior notes 40 - - Decrease (increase) in interest receivable, prepaid expenses and other assets 476 (1,708) (146) Increase in accrued expenses and other liabilities 2,317 143 992 --------- --------- --------- Net cash flows from operating activities 39,490 38,416 41,452 --------- --------- --------- Cash flows used in investing activities: Additions to operating properties, net (23,801) (19,424) (14,714) Additions to development properties, net (13,443) - - Proceeds from sales of operating properties, net 11,196 16,719 12,409 Proceeds from sale of outparcels, net 2,113 - - Investment in unconsolidated affiliates - (10,091) (7,251) Purchase of unconsolidated affiliate, net of assets acquired 177 - - Distribution from dissolution of unconsolidated affiliate 21 - - Funding of mortgage loans (516) (4,507) - Collections of mortgage loans 24 292 1,005 --------- --------- --------- Net cash flows used in investing activities (24,229) (17,011) (8,551) --------- --------- --------- Cash flows used in financing activities: Cash dividends, net (28,589) ~~2002~~ (29,285) (30,908) Purchase of treasury stock (405) (20,818) (3,776) Exercise of stock options 1,600 287 37 Issuance of shares under stock purchase plan 24 - - Proceeds from mortgage notes payable 20,740 - 40,000 Principal amortization of mortgage notes payable (2,577) (2,134) (1,835) Repayment of mortgage notes payable - (3,521) (3,958) Proceeds from 7.77% senior notes issuance 50,000 - - Repayment of 7.45% senior notes (50,000) - - (Decrease) increase in bank indebtedness (3,346) 34,600 (31,100) Payment of deferred financing costs (1,082) (217) (1,191) --------- --------- --------- Net cash flows used in financing activities (13,635) (21,088) (32,731) --------- --------- --------- Net increase in cash and cash equivalents 1,626 317 170 Cash and cash equivalents at beginning of period 831 514 344 --------- --------- --------- Cash and cash equivalents at end of period $ 2,457 $ 831 $ 514 ========= ========= ========= Supplemental disclosures of cash flow information: Total cash paid during period for interest $ 23,937 $ 21,501 $ 21,344 ========= ========= =========

The accompanying notes are an integral part of these consolidated statements. 8 IRT PROPERTY COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000, AND 1999 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. ORGANIZATION AND NATURE OF OPERATIONS IRT Property Company, individually and collectively with its subsidiaries ("IRT" or the "Company"), was founded in 1969 and became a public company in May 1971 (NYSE: IRT). The Company is an owner, operator, redeveloper and developer of high quality, well located neighborhood and community shopping centers. The Company's portfolio consists of 87 shopping centers, three shopping center investments, four development properties, one industrial property and four mortgage loans. The 87 shopping centers and the three shopping center investments total approximately 9.7 million square feet of retail space and are located in eleven southeastern states. IRT shopping centers are anchored by necessity-oriented retailers such as supermarkets, drug stores, national value retailers and department stores. The Company has four wholly-owned subsidiaries. VW Mall, Inc. ("VWM") was formed in July 1994, but is currently inactive. IRT Alabama, Inc. ("IRTAL") was formed in August 1997 to purchase Madison Centre in Madison, Alabama, which it continues to own, but it conducts no significant operations beyond this property. IRT Management Company ("IRTMC") was formed in 1990 and currently holds 93.3% of the operating units of IRT Partners L.P ("LP"). IRT Capital Corporation II ("IRTCCII") is a taxable real estate investment trust ("REIT") subsidiary and was formed under the laws of Georgia in 1999. IRTCCII elected on March 15, 2001 to become a taxable REIT subsidiary pursuant to the Tax Relief Extension Act of 1999 as amended (the "REIT Modernization Act of 1999"). Although IRTCCII is primarily used by the company to develop properties, it also has the ability to buy and sell properties, provide equity to developers and perform third-party management, leasing and brokerage operations. The Company also serves as general partner of LP, a Georgia limited partnership formed in 1998 to enhance the Company's acquisition opportunities through a "downreit" structure. This structure offers potential sellers the ability to make a tax-deferred sale of their real estate investment in exchange for Operating Partnership Units ("OP Units") of LP. OP Units receive the same distributions as the Company's common stock and are redeemable for shares of the Company's common stock. IRT and IRTMC, together, owned approximately 1% and 93.3%, respectively, of LP as of December 31, 2001. The accounts of LP are included in the accompanying consolidated financial statements. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The accompanying consolidated financial statements include the accounts of IRT, its wholly-owned subsidiaries, majority-owned and controlled subsidiaries and the partnership. Prior to 2001, the Company had investments in affiliates over which the Company did not exercise control, and therefore accounted for the investments by the equity method. Intercompany transactions and balances have been eliminated in consolidation. 9 USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions within the financial statements include impairment evaluation of operating and development properties and other long-term assets, determination of useful lives of assets subject to depreciation or amortization and valuation adjustments to tenant related accounts. Actual results could differ from those estimates. REVENUE RECOGNITION Leases with tenants are accounted for as operating leases. Rental revenue for leases entered into after January 1, 2000 is recognized on a straight-line basis over the initial lease term. Rental revenue for leases entered into prior to January 1, 2000, is accounted for based on contractual rental obligations, which is not materially different from revenue recorded on a straight-line basis to any interim or annual period. Certain tenants are required to pay percentage rents based on their gross sales exceeding specified amounts. This percentage rental revenue is recorded upon collection, which is not materially different from recognizing such percentage rental revenue on an accrual basis. The Company receives reimbursements from tenants for real estate taxes, common area maintenance and other recoverable costs. These tenant reimbursements are recognized as revenue in the period the related expense is recorded. The Company makes specific valuation adjustments (bad debt reserves) to tenant related revenue based upon the tenant's credit and business risk. Other non-rental revenue is recognized as revenue when earned. Gain on sales of real estate assets is recognized at the time title to the asset is transferred to the buyer, subject to the adequacy of the buyer's initial and continuing investment and the assumption by the buyer of all future ownership risks of the property. The gain on sales of operating properties is calculated based on the net carrying value of the property at the time of sale. The net carrying value represents the cost of acquisition, renovation or betterment of the property less the accumulated depreciation of such costs. For gains on outparcel sales, the gain is calculated based on the value assigned to the outparcel lot through specific identification of costs or the relative sales value of the outparcel lot to the entire property. 10 RENTAL PROPERTIES AND PROPERTIES UNDER DEVELOPMENT Rental properties are stated at cost less accumulated depreciation. Costs incurred for the acquisition, renovation, and betterment of the properties are capitalized and depreciated over their estimated useful lives. Recurring maintenance and repairs are charged to expense as incurred. Depreciation is computed on a straight-line basis generally for a period of sixteen to forty years for significant improvements and buildings. Tenant improvements are depreciated on a straight-line basis over the life of the related lease. Properties under development are stated at cost. Depreciation does not begin until the asset is placed in service. Acquisition, development and construction costs are capitalized, including predevelopment costs, interest and salaries. Predevelopment costs include costs for zoning, planning, development feasibility studies and other costs directly related to the development property. Unsuccessful predevelopment efforts and their related costs are expensed when it is probable development efforts will not continue. Interest costs and salaries directly attributable to the development process are capitalized for the period of development to ready the property for its intended use. The Company periodically evaluates the carrying value of its long-lived assets, including operating and development properties, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Impairment is based on whether it is probable that undiscounted future cash flows from each property will be less than its net book value. If an impairment exists, the asset is written down to its estimated fair value and an impairment loss is recognized. CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. DEFERRED LEASING COSTS Internal and external commission costs incurred in obtaining tenant leases are included in prepaid expenses and other assets. The costs are amortized on a straight-line basis over the terms of the related leases. Upon lease cancellation or termination, unamortized costs are charged to operations. DEBT ISSUE AND DEFERRED FINANCE COSTS Costs related to the issuance of debt instruments and loan costs incurred in obtaining long-term financing are included within prepaids and other assets. The costs are capitalized and amortized over the life of the related issue or financing on a straight-line basis, which approximates the effective interest method. Upon conversion, in the event of redemption or prepayment, applicable unamortized costs are charged to shareholders' equity or to operations, respectively. 11 INCOME TAXES The Company has elected since its inception to be treated as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). In accordance with the Code, a REIT must distribute at least 90% (95% prior to 2001) of its taxable income to its shareholders each year and meet certain other qualifications prescribed by the Code. If all qualifications are met, the Company will not be taxed on that portion of its taxable income which is distributed to its shareholders. For the special provisions applicable to REITs, see Sections 856-860 of the Code. IRT intends to continue to elect to be treated and to continue to qualify as a REIT under the Code. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax, at regular corporate tax rates, on its taxable income. The Company may be disqualified from treatment as a REIT for the four taxable years following the year during which its REIT qualification is lost. Even if the Company maintains its qualification for taxation as a REIT, the Company also may be subject to certain state and local taxes on its income and property and to federal income and excise taxes on its undistributed income. The Company has one wholly-owned subsidiary, IRTCCII, that elected on March 15, 2001 to become a taxable REIT subsidiary pursuant to the REIT Modernization Act of 1999. The services provided by this subsidiary generate taxable income and are taxed at regular corporate income tax rates. The corresponding income tax is expensed. EARNINGS PER SHARE Basic EPS excludes dilution and is computed by dividing net earnings by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares and then shared in the earnings of the Company. STOCK-BASED COMPENSATION The Company accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25"). The Company has adopted the disclosure option of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 requires companies that do not choose to account for stock-based compensation as prescribed by the statement to disclose the pro forma effects on net income and earnings per share as if SFAS No. 123 had been adopted. Additionally, certain other disclosures are required with respect to stock-based compensation and the assumptions used to determine the pro forma effects of SFAS No. 123. 12 SEGMENT REPORTING In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement established standards for reporting financial and descriptive information about operating segments in annual financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is its senior management group. The Company owns and operates retail shopping centers in the southeastern United States. Such shopping centers generate rental and other revenue through the leasing of shop spaces to a diverse base of tenants. The Company evaluates the performance of each of its shopping centers on an individual basis due to specific geographical market demographics and local competitive forces. However, because the shopping centers have generally similar economic characteristics and tenants, the shopping centers have been aggregated into one reportable segment. DERIVATIVE FINANCIAL INSTRUMENTS In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued. This statement, as amended, establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair market value. SFAS No. 133 requires that changes in the derivative's fair market value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. The Company adopted this statement on January 1, 2001. The Company did not hold and has not engaged in transactions using derivative financial instruments. The adoption of this statement did not have a material effect on the Company's balance sheets or statements of earnings. RECENT ACCOUNTING PRONOUNCEMENTS In June 2001, SFAS No. 141, "Business Combinations," was issued. This statement eliminates pooling of interests accounting and requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. The Company adopted this standard on July 1, 2001 and adoption of this standard did not have a significant effect on the Company's financial statements. In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets," was issued establishing accounting and reporting standards that address how goodwill and intangible assets should be accounted for within the financial statements. The statement requires companies to not amortize goodwill and intangible assets with infinite lives, but to test such assets for impairment on a regular basis. An intangible asset that has a finite life should be amortized over its useful life and evaluated for impairment on a regular basis. This statement is effective for fiscal years beginning after December 15, 2001. The Company adopted this standard on January 1, 2002 and adoption of this standard did not have a significant effect on the Company's financial statements. 13 In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," was issued establishing new rules and clarifying implementation issues with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," by allowing a probability-weighted cash flow estimation approach to measure the impairment loss of a long-lived asset. The statement also established new standards for accounting for discontinued operations. Transactions that qualify for reporting in discontinued operations include the disposal of a component of an entity's operations that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. The statement is effective for fiscal years beginning after December 15, 2001. The Company adopted this standard on January 1, 2002 and adoption of this standard did not have a significant effect on the Company's financial statements. In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections", was issued. This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt", and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements". This Statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for Leases", to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The adoption of SFAS No. 145 had no effect on the financial position and results of operations of the Company. In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", was issued which nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit and Activity (including Certain Costs Incurred in a Restructuring)". The adoption of SFAS No. 146 had no effect on the financial position and results of operations of the Company. RECLASSIFICATION OF AMOUNTS Certain amounts in the consolidated financial statements have been reclassified to conform with the presentation in the Company's 2002 Quarterly Condensed Consolidated Financial Statements. 14 3. RENTAL PROPERTIES Buildings and related improvements are depreciated on a straight-line basis for a period of 16 to 40 years. Tenant improvements are depreciated on a straight-line basis over the life of the related lease. Rental properties are comprised of the following:

~~IRT~~DECEMBER ~~PROPERTY~~31, ~~COMPANY~~ ------------------ 2001 2000 -------- -------- Land covered by purchase-leaseback agreements $ 250 $ 686 Land related to building and improvements 153,300 146,102 Building and improvements 493,188 476,510 Tenant improvements 13,082 9,039 -------- -------- Total rental properties $659,820 $632,337 ======== ========

Upon expiration of the leases for land covered by purchase-leaseback agreements, all improvements on the land will become the property of the Company. The lessee of one of these properties had the option, subject to certain conditions, to repurchase the land. The option price was for an amount greater than the Company's carrying value of the related land. This option to repurchase the land was exercised in 2001, resulting in a gain to the Company of $347, included in the gain on sale of operating properties and outparcels in the accompanying Consolidated Statements of Earnings. Rental properties acquired and disposed in 2001, 2000 and 1999 are summarized below. In addition, see Footnote 7 for additional disclosure of a property disposition in 2001.

~~(Exact~~SHOPPING CENTER ACQUISITIONS Date Square Year Built/ % Leased Total Initial Acquired Property Name ofCity, ~~Registrant~~State asFootage ~~Specified~~Renovated inat ~~Charter~~Acquisition Cost Cash Paid --------------- ----------------------- ----------------- ----------- --------- -------------- --------- ---------- (unaudited) 2001 ACQUISITIONS 4/12/01 Unigold Shopping Center Orlando, FL 102,985 1987 97% $ 8,000 $ 7,903 11/30/01 Carrollwood Center Tampa, FL 96,242 1971/1996 85% 6,763 6,763 --------- ------- --------- 199,227 $14,763 $ 14,666 ========== ========= ========= 2000 ACQUISITIONS 12/28/00 Pine Ridge Square Coral Springs, FL 117,399 1986 100% $11,600 $ 11,438 1999 ACQUISITIONS 2/26/99 Shoppes at Lago Mar Kendall, FL 82,613 1995 98% $ 9,916 $ 4,174 3/15/99 Willamsburg at Dunwoody Dunwoody, GA 44,928 1983 100% 5,602 5,602 ----------- ------- --------- 127,541 $15,518 $ 9,776 =========== ======== =========

Georgia		1-7859		58-1366611
(State or Other Jurisdiction of Incorporation)		(Commission File Number		(IRS Employer Identification No.)

4. PROPERTIES UNDER DEVELOPMENT Development properties consisted of the following:

200 Galleria Parkway, Suite 1400, Atlanta, Georgia			30339
(Address of Principal Executive Offices)			(Zip Code)

At December 31, 2001, the Company is in the process of developing four shopping centers. - Conway Crossing, located in Orlando, Florida, will consist of a 44,270 square foot Publix with 28,740 additional square feet of shop space. - The Shops at Huntcrest, in Lawrenceville, Georgia, will be a 97,000 square foot shopping center anchored by a 54,340 square foot Publix. - Lutz Lake Crossing, in Tampa, Florida, will have approximately 68,000 square feet of retail space, anchored by a 44,270 square foot Publix. - Miramar, located in Broward County, Florida, encompasses approximately 23 acres and site preparation has been completed. This development is anticipated to consist of one outparcel and a 185,000 square foot developable tract for a national anchor tenant. 16 During the year, IRTCCII completed the first development property, Regency Square, a 85,864 square foot shopping center, located in Port Richey, Florida and anchored by a 44,270 square foot Publix. The total cost of the development property was $9,817. Costs capitalized for development properties include, but are not limited to, interest and internal development costs. Amounts capitalized for interest in 2001, 2000 and 1999 were $776, $906 and $288, respectively. Internal development costs capitalized in 2001, 2000 and 1999 were $642, $276 and $230, respectively. 5. DEVELOPMENT AGREEMENTS AND LOANS The Company enters into agreements and loans to develop shopping centers with local developers. The loans generally consist of the Company committing to loan a fixed amount, at a specified interest rate, for the development of the shopping center. The loan is secured by the development property and due upon completion of the shopping center. Additionally, the Company could enter into a separate agreement to purchase the completed shopping center. Generally, the purchase price to the Company is based on the shopping center's net operating income and an implied rate of return at the time when the developer meets certain budgetary and leasing requirements. The developer is responsible for all construction matters as well as initial leasing efforts. During 2001, the Company completed one such development agreement and loan, Chastain Square II. This agreement was to purchase the expansion of a currently owned shopping center by 13,500 square feet. The Company made the development loan pursuant to a January 2000 development agreement with the developer. The Company loaned the developer a total of $3,645, which was repaid upon completion of the expansion. This loan had an interest rate of one month London Interbank Offering Rate ("LIBOR") plus a premium of 2.5%. Interest capitalized from this loan was $189 and $218 for 2001 and 2000, respectively. The Company then purchased the expansion, under the terms of the agreement, for approximately $4,155. In October 2000, the Company entered into a development loan for the development of a 89,720 square foot center, Freehome Village, located in Cherokee County, Georgia. The Company has guaranteed to loan an amount not to exceed $925, of which $846 has been distributed as of December 31, 2001. The loan bears interest at the one month LIBOR plus a premium of 3%. Interest capitalized from this loan was $53 and $17 for 2001 and 2000, respectively. The loan is secured by the development property and is due in full in October 2002. As of December 31, 2001, the Company does not have an obligation to purchase this development. 17 6. INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES IRT Capital Corporation ("IRTCC") was formed under the laws of Georgia in 1996 and subsequently dissolved in January 2001. This taxable subsidiary of the Company had the ability to develop properties, buy and sell properties, provide equity to developers and perform third-party management, leasing and brokerage. The Company held 96% of the non-voting common stock and 1% of the voting common stock of IRTCC. The remaining common stock was held by a former member of the Board of Directors and a former executive officer of the Company. In January 2001, the Company purchased the remaining outstanding common stock from the former member of the Board of Directors and the former executive officer of the Company for $16. Subsequent to IRTCC becoming wholly-owned, the Company dissolved IRTCC and recognized a $4 loss. The loss upon dissolution is included within the accompanying Consolidated Statements of Earnings. Prior to IRTCC becoming wholly owned and consolidated, it was accounted for by the Company under the equity method. IRTCCII was formed under the laws of Georgia in 1999 and is used by the Company primarily to develop properties. IRTCCII elected on March 15, 2001 to become a taxable REIT subsidiary pursuant to the REIT Modernization Act of 1999. In conjunction with the election, the Company made IRTCCII wholly-owned by purchasing the remaining outstanding common stock of IRTCCII for $2. Prior to March 15, 2001, the Company held 96% of the non-voting common stock and 1% of the voting common stock of IRTCCII. The remaining common stock was held by an executive officer and a director of the Company. IRTCCII was accounted for by the Company under the equity method prior to it becoming wholly-owned and consolidated as of March 15, 2001. As a result of the consolidation, the equity investment in IRTCCII of $17,313 was eliminated and the equity investment was allocated, based on net book values, to the respective places within the 2001 Consolidated Balance Sheet. Within the allocation, net rental properties of the Company increased $17,989, cash increased $177, other assets increased $220 and liabilities increased $1,073. LP, IRTCCII, IRTAL and IRTMC guarantee the Company's indebtedness under the Company's existing unsecured revolving term loan and its other senior debt. The guarantees are joint and several and full and unconditional. Condensed consolidating financial information for the wholly owned subsidiaries and the affiliates is presented as follows:

~~Registrant’s~~GUARANTORS ~~telephone~~------------------------------- ~~number~~CONSOLIDATED IRT PROPERTY COMBINED IRT ELIMINATING IRT PROPERTY COMPANY SUBSIDIARIES(1) PARTNERS, ~~including~~LP ~~area~~ENTRIES ~~code~~COMPANY ------------- ---------------- ------------- ------------- ------------- AS OF DECEMBER 31, 2001 ASSETS Net rental properties $ 400,158 $ 28,138 $ 145,625 $ - $ 573,921 Investment in affiliates 122,168 - - (~~770~~122,168) ~~955~~ -~~4406~~ Other assets 34,831 33,488 21,248 (72,988) 16,579 ------------- ---------------- ------------- ------------- ------------- Total assets 557,157 61,626 166,873 (195,156) 590,500 ============= ================ ============= ============= ============= LIABILITIES Mortgage notes payable 93,115 4,093 37,464 - 134,672 Senior Notes, net 124,760 - - - 124,760 Indebtedness to banks 51,654 - - - 51,654 Other liabilities 84,928 24,431 10,802 (73,881) 46,280 ------------- ---------------- ------------- ------------- ------------- Total liabilities 354,457 28,524 48,266 (73,881) 357,366 ------------- ---------------- ------------- ------------- ------------- SHAREHOLDERS' EQUITY Total shareholders' equity 202,700 33,102 118,607 (121,275) 233,134 ------------- ---------------- ------------- ------------- ------------- Total liabilities and shareholders' equity $ 557,157 $ 61,626 $ 166,873 $ (195,156) $ 590,500 ============= ================ ============= ============= =============

~~Item~~ GUARANTORS --------------------------------------------------- IRT PROPERTY COMBINED IRT IRT CAPITAL IRT CAPITAL COMPANY SUBSIDIARIES (1) PARTNERS, LP CORPORATION II CORPORATION I ------------- ------------- ------------- ---------------- -------------- AS OF DECEMBER 31, 2000 ASSETS Net rental properties $ 398,387 $ 5,575 $ 137,114 $ 17,989 $ - Investment in affiliates 107,555 - - - - Mortgage loans, net 70 - - - - Other assets 25,131 21,720 8,700 397 31 ------------- ------------- ------------- ---------------- -------------- Total assets 531,143 27,295 145,814 18,386 31 ============= ============= ============= ================ ============== LIABILITIES Mortgage notes payable 81,741 4,173 30,595 - - Senior Notes, net 124,714 - - - - Indebtedness to banks 55,000 - - - - Other liabilities 54,344 1,319 8,320 18,396 2 ------------- ------------- ------------- ---------------- -------------- Total liabilities 315,799 5,492 38,915 18,396 2 ------------- ------------- ------------- ---------------- -------------- SHAREHOLDERS' EQUITY Total shareholders' equity 215,344 21,803 106,899 (b10). ~~Changes~~29 ------------- ------------- ------------- ---------------- -------------- Total liabilities and shareholders' equity $ 531,143 $ 27,295 $ 145,814 $ 18,386 $ 31 ============= ============= ============= ================ ============== CONSOLIDATED ELIMINATING IRT PROPERTY ENTRIES COMPANY ------------- ------------- AS OF DECEMBER 31, 2000 ASSETS Net rental properties $ (17,989) $ 541,076 Investment in ~~Control~~affiliates of(90,213) ~~Registrant.~~ 17,342 Mortgage loans, net - 70 Other assets (39,907) 16,072 ------------- ------------- Total assets (148,109) 574,560 ============= ============= LIABILITIES Mortgage notes payable - 116,509 Senior Notes, net - 124,714 Indebtedness to banks - 55,000 Other liabilities (39,197) 43,184 ------------- ------------- Total liabilities (39,197) 339,407 ------------- ------------- SHAREHOLDERS' EQUITY Total shareholders' equity (108,912) 235,153 ------------- ------------- Total liabilities and shareholders' equity $ (148,109) $ 574,560 ============= =============

OnGUARANTORS ~~October 29~~-------------------------------- IRT PROPERTY COMBINED IRT ELIMINATING COMPANY SUBSIDIARIES(1) PARTNERS, ~~2002~~LP ENTRIES -------------- ---------------- -------------- ------------- AS OF DECEMBER 31, 2001 REVENUES Income from rental properties $ 61,071 $ 1,330 $ 22,591 $ - Interest Income 801 - 417 (1,060) Interest on direct financing leases 385 - - - Other income 696 10,989 - (11,685) -------------- ---------------- -------------- ------------- Total revenues 62,953 12,319 23,008 (12,745) -------------- ---------------- -------------- ------------- EXPENSES Operating expenses of rental properties 14,904 322 6,089 - Interest expense 20,182 632 2,772 (1,061) Depreciation 10,974 219 3,748 - Amortization of debt costs 629 3 9 - General and administrative 2,920 289 1,050 311 -------------- ---------------- -------------- ------------- Total expenses 49,609 1,465 13,668 (750) -------------- ---------------- -------------- ------------- Equity ~~One~~in earnings (losses) of affiliates 10,854 ~~Inc.~~- - (10,858) -------------- ---------------- -------------- ------------- Earnings from continuing operations before income taxes, minority interest, gain on sales of properties and discontinued operations 24,198 10,854 9,340 (22,853) Income tax provision - - - (53) Minority interest in operating partnership 24 - - (554) Gain on sales of properties 1,390 - 1,401 1,057 -------------- ---------------- -------------- ------------- Income from continuing operations before discontinued operations 25,612 10,854 10,741 (22,403) Income from discontinued operations (49) - 465 - -------------- ---------------- -------------- ------------- Net Income $ 25,563 $ 10,854 $ 11,206 $ (22,403) ============== ================ ============== ============= Net cash flows provided by (used in) operating activities $ 26,432 $ 10,741 $ 13,698 $ (11,381) ============== ================ ============== ============= Net cash flows (used in) provided by investing activities $ (9,088) $ (4,164) $ (10,979) $ 2 ============== ================ ============== ============= Net cash flows (used in) provided by financing activities $ (9,796) $ (6,357) $ (8,862) $ 11,380 ============== ================ ============== ============= CONSOLIDATED IRT ~~Property~~PROPERTY ~~Company~~COMPANY ~~announced that~~-------------- ~~they~~AS ~~have~~OF ~~entered~~DECEMBER ~~into~~31, an2001 ~~Agreement~~REVENUES Income from rental properties $ 84,992 Interest Income 158 Interest on direct financing leases 385 Other income - -------------- Total revenues 85,535 -------------- EXPENSES Operating expenses of rental properties 21,315 Interest expense 22,525 Depreciation 14,941 Amortization of debt costs 641 General and ~~Plan~~administrative 4,570 -------------- Total expenses 63,992 -------------- Equity in earnings (losses) of ~~Merger~~affiliates (4) -------------- Earnings from continuing operations before income taxes, ~~dated~~minority asinterest, gain on sales of ~~October 28~~ properties and discontinued operations 21,539 ~~2002~~Income tax provision (53) Minority interest in operating partnership (530) Gain on sales of properties 3,848 ~~pursuant~~-------------- toIncome ~~which~~from ~~Equity~~continuing ~~One~~operations ~~will~~before ~~acquire~~discontinued ~~IRT.~~ operations 24,804 Income from discontinued operations 416 -------------- Net Income $ 25,220 ============== Net cash flows provided by (used in) operating activities $ 39,490 ============== Net cash flows (used in) provided by investing activities $ (24,229) ============== Net cash flows (used in) provided by financing activities $ (13,635) ==============

InGUARANTORS ~~connection~~----------------------------------------------------- ~~with~~IRT ~~the~~PROPERTY ~~merger,~~COMBINED ~~each~~IRT IRT ~~shareholder~~CAPITAL ~~may~~COMPANY ~~elect~~SUBSIDIARIES to(1) ~~receive for~~PARTNERS, ~~each~~LP ~~share~~CORPORATION ofII ~~IRT~~-------------- ~~common~~-------------- ~~stock~~-------------- ~~either~~---------------- FOR THE YEAR ENDED DECEMBER 31, 2000 REVENUES Income from rental properties $ 63,111 $ 688 $ 19,708 $ 129 Interest Income 636 - 331 - Interest on direct financing leases 542 - - - Other income 84 7,705 - - -------------- -------------- -------------- ---------------- Total revenues 64,373 8,393 20,039 129 -------------- -------------- -------------- ---------------- EXPENSES Operating expenses of rental properties 14,777 128 5,324 84 Interest expense 19,033 273 2,441 - Depreciation 10,710 77 3,439 30 Amortization of debt costs 539 2 - - General and administrative 2,656 3 848 79 -------------- -------------- -------------- ---------------- Total expenses 47,715 483 12~~.15~~,052 193 -------------- -------------- -------------- ---------------- Equity in earnings (losses) of affiliates 16,236 - - - -------------- -------------- -------------- ---------------- Earnings from continuing operations before income taxes, minority interest, gain on sales of properties and discontinued operations 32,894 7,910 7,987 (64) Income tax provision - - - - Minority interest in operating partnership 28 - - - Gain on sales of properties 4,549 - - - -------------- -------------- -------------- ---------------- Income from continuing operations before discontinued operations 37,471 7,910 7,987 (64) Income from discontinued operations (50) - 398 - -------------- -------------- -------------- ---------------- Net Income $ 37,421 $ 7,910 $ 8,385 $ (64) ============== ============== ============== ================ Net cash orflows 0.provided by (used in) operating activities $ 28,178 $ 7,645 $ 10,837 $ 881 ============== ============== ============== ================ Net cash flows provided by (used in) investing activities $ (13,749) $ (14) $ (13,898) $ (10,841) ============== ============== ============== ================ Net cash flows provided by (used in) financing activities $ (20,395) $ (7,631) $ 9,345 ~~shares~~$ 10,148 ============== ============== ============== ================ CONSOLIDATED IRT CAPITAL ELIMINATING IRT PROPERTY CORPORATION I ENTRIES COMPANY --------------- ------------- -------------- FOR THE YEAR ENDED DECEMBER 31, 2000 REVENUES Income from rental properties $ 15 $ (144) $ 83,507 Interest Income - - 967 Interest on direct financing leases - - 542 Other income - (7,789) - --------------- ------------- -------------- Total revenues 15 (7,933) 85,016 --------------- ------------- -------------- EXPENSES Operating expenses of ~~Equity~~ ~~One~~rental ~~common~~properties ~~stock~~- (84) 20,229 orInterest aexpense ~~combination~~- ~~thereof.~~- ~~The~~21,747 ~~terms~~Depreciation - (30) 14,226 Amortization of ~~the~~debt ~~merger agreement~~costs ~~further~~- ~~provide~~- ~~that~~541 ~~the~~General ~~holders~~and administrative 10 (89) 3,507 --------------- ------------- -------------- Total expenses 10 (203) 60,250 --------------- ------------- -------------- Equity in earnings (losses) of noaffiliates ~~more~~- ~~than~~(16,292) ~~50%~~(56) --------------- ------------- -------------- Earnings from continuing operations before income taxes, minority interest, gain on sales of ~~IRT’s outstanding~~properties ~~common~~and ~~stock~~discontinued ~~may~~operations ~~elect~~5 to(24,022) ~~receive~~24,710 Income tax provision - - - Minority interest in operating partnership - (596) (568) Gain on sales of properties - - 4,549 --------------- ------------- -------------- Income from continuing operations before discontinued operations 5 (24,618) 28,691 Income from discontinued operations - - 348 --------------- ------------- -------------- Net Income $ 5 $ (24,618) $ 29,039 =============== ============= ============== Net cash. flows provided by (used in) operating activities $ (7) $ (9,118) $ 38,416 =============== ============= ============== Net cash flows provided by (used in) investing activities $ - $ 21,491 $ (17,011) =============== ============= ============== Net cash flows provided by (used in) financing activities $ - $ (12,555) $ (21,088) =============== ============= ==============

~~Equity~~GUARANTORS ~~One~~---------------------------------------------------- ~~intends~~IRT toPROPERTY ~~fund~~COMBINED aIRT ~~portion~~IRT ofCAPITAL ~~the~~COMPANY ~~cash~~SUBSIDIARIES ~~consideration~~(1) ~~through~~PARTNERS, ~~the private~~LP ~~placement~~CORPORATION ofII up-------------- to-------------- 6.-------------- ---------------- FOR THE YEAR ENDED DECEMBER 31, 1999 REVENUES Income from rental properties $ 63,209 $ 742 $ 19,104 $ 57 Interest Income 57 - 324 - Interest on direct financing leases 560 - - - Other income 1,067 9 ~~million~~,012 ~~shares~~- - -------------- -------------- -------------- ---------------- Total revenues 64,893 9,754 19,428 57 -------------- -------------- -------------- ---------------- EXPENSES Operating expenses of rental properties 14,687 135 4,759 24 Interest expense 18,820 235 2,418 - Depreciation 10,443 76 3,220 10 Amortization of debt costs 458 2 - - General and administrative 2,642 2 788 20 -------------- -------------- -------------- ---------------- Total expenses 47,050 450 11,185 54 -------------- -------------- -------------- ---------------- Equity ~~One~~in ~~common~~earnings ~~stock~~(losses) ~~to existing~~of affiliates 19,096 ~~affiliated~~- ~~investors~~- ~~pursuant~~- to-------------- ~~the~~-------------- ~~terms~~-------------- ---------------- Earnings from continuing operations before income taxes, minority interest, gain on sales of aproperties ~~Common~~and ~~Stock~~discontinued ~~Purchase Agreement~~operations ~~dated~~36,939 as9,304 8,243 3 Income tax provision - - - - Minority interest in operating partnership 29 - - - Gain on sales of ~~October 28~~properties 1,353 ~~2002.~~- ~~The~~1,130 ~~investors~~- ~~have~~-------------- ~~agreed~~-------------- to-------------- ~~pay~~ ---------------- Income from continuing operations before discontinued operations 38,321 9,304 9,373 3 Income from discontinued operations (44) - 418 - -------------- -------------- -------------- ---------------- Income from continuing operations 38,277 9,304 9,791 3 Extraordinary item Loss on extinguishment of debt (157) - - - -------------- -------------- -------------- ---------------- Net Income $~~13.~~ 38,120 $ 9,304 $ 9,791 $ 3 ============== ============== ============== ================ Net cash flows provided by (used in) operating activities $ 30,113 ~~per~~$ ~~share~~8,854 ~~subject~~$ to12,218 ~~pro~~$ ~~rata~~(45) ~~upward~~============== ~~adjustment~~============== to============== a================ ~~maximum~~Net ofcash flows provided by (used in) investing activities $~~13.50 per~~ ~~share~~7,217 as$ ~~the~~- ~~number~~$ of(2,246) $ (7,188) ============== ============== ============== ================ Net cash flows provided by (used in) financing activities $ (36,389) $ (8,854) $ (10,716) $ 7,223 ============== ============== ============== ================ CONSOLIDATED IRT ~~shares~~CAPITAL ~~converted~~ELIMINATING ~~into~~IRT ~~Equity~~PROPERTY ~~One~~CORPORATION ~~common~~I ~~stock pursuant~~ENTRIES toCOMPANY ~~the~~--------------- ~~merger~~------------- ~~rises~~-------------- FOR THE YEAR ENDED DECEMBER 31, 1999 REVENUES Income from ~~50%~~rental toproperties ~~approximately~~$ ~~55.8%.~~5 ~~The~~$ ~~investors were~~(23) ~~also~~$ ~~granted~~83,094 ~~registration~~Interest ~~rights~~Income ~~pursuant~~- to- a381 ~~Registration~~Interest ~~Rights Agreement~~on ~~dated~~direct asfinancing leases - - 560 Other income - (9,110) 969 --------------- ------------- -------------- Total revenues 5 (9,133) 85,004 --------------- ------------- -------------- EXPENSES Operating expenses of ~~October~~ rental properties - 14 19,619 Interest expense - - 21,473 Depreciation - (10) 13,739 Amortization of debt costs - - 460 General and administrative 7 (27) 3,432 --------------- ------------- -------------- Total expenses 7 (23) 58,723 --------------- ------------- -------------- Equity in earnings (losses) of affiliates - (19,092) 4 --------------- ------------- -------------- Earnings from continuing operations before income taxes, minority interest, gain on sales of properties and discontinued operations (2) (28,202) ~~2002~~26,285 ~~with~~Income ~~respect~~tax toprovision ~~the~~- ~~shares~~- to- ~~be purchased~~Minority interest in ~~the~~operating ~~private~~partnership ~~placement.~~- ~~Equity~~(683) ~~One~~(654) ~~intends~~Gain toon ~~fund~~sales ~~the~~of ~~balance~~properties - - 2,483 --------------- ------------- -------------- Income from continuing operations before discontinued operations (2) (28,885) 28,114 Income from discontinued operations - - 374 --------------- ------------- -------------- Income from continuing operations (2) (28,885) 28,488 Extraordinary item Loss on extinguishment of ~~the~~ debt - - (157) --------------- ------------- -------------- Net Income $ (2) $ (28,885) $ 28,331 =============== ============= ============== Net cash ~~consideration~~flows ~~from~~provided ~~existing~~by ~~and~~(used ~~new~~in) ~~credit~~operating ~~facilities.~~ activities $ 36 $ (9,724) $ 41,452 =============== ============= ============== Net cash flows provided by (used in) investing activities $ - $ (6,334) $ (8,551) =============== ============= ============== Net cash flows provided by (used in) financing activities $ (35) $ 16,040 $ (32,731) =============== ============= ==============

NOTES: (1) Includes IRT Management Co. and IRT Alabama. 7. NET INVESTMENT IN DIRECT FINANCING LEASES At December 31, 2001, two retail facilities are leased to Wal-Mart Stores, Inc. at a total annual rental of $333 plus percentage rentals of 1% of gross sales in excess of the tenants' actual sales for its fiscal year ended January 31, 1990. Rental income, including percentage rent, from these leases totaled $281, $402 and $399 in 2001, 2000 and 1999, respectively. The Company sold in May 2001 ten branch bank buildings acquired in a 1984 merger. These facilities were leased to The Old Phoenix National Bank at a total annual rental of $313. For 2001, the Company recognized rental income of $104. The Company sold the bank buildings for $3,500 and recognized a gain on the sale of $1,525. Of the total rental income on direct financing leases, $153, $166 and $160 was recorded as amortization of capitalized leasing income in 2001, 2000 and 1999, respectively. The Company is to receive minimum lease payments of $333 per year during 2002 through 2006 and a total of $1,332 thereafter through the remaining lease terms. 21 8. MORTGAGE LOANS The Company has two mortgage loans, Cypress Chase "A" Condominiums and Mill Creek Club Condominiums. The Cypress Chase "A" Condominium loan has an interest rate of 10.0% and is due in May 2009. The Mill Creek Club Condominium loan is a participating loan of which the Company has a 46.2% interest. The loans associated with the Company's interest are due in 2006 and 2007 and have interest rates ranging from 8.63% to 12.38%. As of December 31, 2001 the balance outstanding on these two mortgage loans was approximately $91. In June 2001, the Company entered into a second mortgage in the amount of $250, with an interest rate of 7.0%, in connection with the sale of an operating property. The loan is due in its entirety in June 2003. The Company's investments in mortgage loans, all of which are secured by real estate investments, are summarized by type of loan at December 31, 2001 and 2000, as follows:

~~The~~2001 ~~following~~2000 ~~stockholders~~----------------------- of----------------------- ~~Equity~~NUMBER ~~One~~AMOUNT ~~have~~NUMBER ~~entered~~AMOUNT ~~into~~OF aLOANS ~~voting agreement~~OUTSTANDING ~~with~~OF ~~IRT~~LOANS ~~pursuant~~OUTSTANDING to-------- ~~which,~~------------- ~~among~~-------- ~~other~~------------- ~~things,~~First ~~they~~Mortgage ~~have~~1 ~~agreed~~$ ~~to vote~~76 ~~their~~1 ~~shares~~$ of82 ~~Equity~~Mortgage ~~One~~Participation ~~common~~1 ~~stock,~~16 1 19 Second Mortgage 1 250 - - -------- ------------- -------- ------------- 3 342 2 101 Less: Interest discounts and ~~any~~negative ~~shares~~goodwill of- ~~IRT~~(28) ~~common stock~~- ~~beneficially~~(31) ~~owned~~-------- by------------- ~~them~~-------- ------------- Mortgage Loans, innet ~~favor~~3 of$ ~~the~~314 ~~approval~~2 of$ ~~the~~70 ~~Agreement~~======== ~~and Plan~~============= of======== ~~Merger:~~ =============

Annual principal payments applicable to mortgage loan investments in the next five years and thereafter are as follows:

~~STOCKHOLDER~~YEAR AMOUNT ---------- ------- 2002 $ 9 2003 260 2004 11 2005 6 2006 7 Thereafter 21 ------- $ 314 =======

Based on current rates at which similar loans would be made, the estimated fair value of mortgage loans was approximately $375 and $111 at December 31, 2001 and 2000, respectively. 22 9. MORTGAGE NOTES PAYABLE Mortgage notes payable are collateralized by various real estate investments having a net carrying value of approximately $207,895 at December 31, 2001. These notes have stated interest rates ranging from 6.50% to 9.625% and are due in monthly installments with maturity dates ranging from 2002 to 2024. In April 2001, the Company entered into three notes totaling $20,740, secured by first mortgages on three properties. These notes are due and payable in ten years and the principal amortization is based on a thirty year amortization schedule. The notes bear interest at a weighted average interest rate of 7.17% and range from 7.02% to 7.25%. Costs associated with obtaining the secured notes totaled $366 and are being amortized over the term of the loans. During 2000, the Company made a scheduled balloon payment at maturity of $3,521 on a note bearing interest at 7.75%. Future principal amortization and balloon payments applicable to mortgage notes payable at December 31, 2001 are as follows:

AHPRINCIPAL ~~Investments~~BALLOON ~~US,~~YEAR ~~L.P.~~AMORTIZATION ~~Alony~~PAYMENTS ~~Hetz~~TOTAL ~~Properties~~---------------- &------------- ~~Investments,~~--------- ~~Ltd.~~-------- ~~Ficus~~2002 $ 2,684 ~~Inc.~~$ ~~Gazit~~7,155 ~~(1995)~~$ 9,839 ~~Inc.~~2003 ~~Gazit~~2,805 -~~Globe~~ ~~(1982)~~2,805 ~~Ltd.~~2004 ~~M.G.N. (USA)~~3,023 ~~Inc.~~- ~~Silver~~3,023 ~~Maple~~2005 ~~(2001)~~3,266 ~~Inc.~~7,500 ~~Noam~~10,766 ~~Ben-Ozer~~2006 ~~Robert~~3,393 L.4,797 ~~Cooney~~8,190 ~~Nathan~~Thereafter ~~Hetz~~53,150 ~~Chaim~~45,604 ~~Katzman~~98,754 ~~Peter~~------------- ~~Linneman~~--------- ~~Alan~~-------- J.$ ~~Marcus~~68,321 ~~Alan~~$ ~~Merkur~~65,056 ~~Shaiy~~133,377 ~~Pilpel~~============= ~~Dori~~========= ~~Segal~~Interest ~~Howard~~Premium M.1,295 ~~Sipzner~~-------- ~~Doron~~$134,672 ~~Valero~~========

The $1,295 of interest premium as of December 31, 2001 relates to the fair value adjustment of the three mortgages assumed from the minority interest holder in connection with the formation of LP in 1998. Based on the borrowing rates currently available to the Company for notes with similar terms and maturities, the estimated fair value of mortgage notes payable was approximately $137,522 and $129,371 at December 31, 2001 and 2000, respectively. 10. CONVERTIBLE SUBORDINATED DEBENTURES Effective August 31, 1993, the Company issued $86,250 of 7.3% convertible subordinated debentures due August 15, 2003, $23,275 of which are outstanding as of December 31, 2001. Interest on the debentures is payable semi-annually on February 15 and August 15. The debentures are convertible at any time prior to maturity into common stock of the Company at $11.25 per share, subject to adjustment in certain events. Costs associated with the issuance of the debentures are approximately $3,701 and are being amortized over the life of the debentures. 23 During 1997, $1,653 of these debentures were converted into 146,921 shares of common stock. During 1998, $5,178 of these debentures were converted into 460,263 shares of common stock. No debentures were converted during 2001, 2000 or 1999. Based upon the conversion price, 2,068,889 authorized but unissued common shares have been reserved for possible issuance if the $23,275 debentures outstanding at December 31, 2001 are converted. The Company had the option to redeem the debentures at par and, on December 24, 2001, the Company gave notice it intended to exercise such redemption option by January 24, 2002. See Note 25 for additional disclosure. Based on the closing market price of the debentures at year-end, the estimated fair value of the debentures was approximately $23,828 and $22,111 at December 31, 2001 and 2000, respectively. 11. SENIOR NOTES On March 26, 1996, the Company issued $50,000 of 7.45% senior notes. These notes were due April 1, 2001 and were repaid on such date. These senior notes were issued at a discount of $84 which was amortized over the life of the notes on a straight-line basis for financial reporting purposes. Net proceeds from the issuance totaled approximately $49,394. Interest on the 7.45% senior notes was payable semi-annually on April 1 and October 1. Costs associated with the issuance of these senior notes totaled approximately $522 and were amortized over the life of the notes. On August 15, 1997, the Company issued $75,000 of 7.25% senior notes due August 15, 2007. These senior notes were issued at a discount of $426 which is being amortized over the life of the notes on a straight-line basis for financial reporting purposes. Net proceeds from the issuance totaled $73,817. Interest on the 7.25% senior notes is payable semi-annually on February 15 and August 15. Costs associated with the issuance of these senior notes totaled approximately $757 and are being amortized over the life of the notes. On March 23, 2001, the Company established a Medium Term Note Program (the "MTN Program"), pursuant to the Company's shelf registration statement filed in January, 2001. The MTN Program allows the Company, from time to time, to issue and sell up to $100,000 of medium term notes. Medium term notes have a maturity of nine months or more from the date of issuance and are unconditionally guaranteed as to the payment of principal, premium, if any, and interest, if any, by each of LP, IRTMC, IRTAL and IRTCCII. On March 29, 2001, pursuant to the MTN Program, the Company issued $50,000 of 7.77% senior notes due April 1, 2006. Net proceeds from the issuance totaled $49,324. Interest on these senior notes is payable semi-annually on April 1 and October 1. Costs associated with the issuance of these senior notes totaled approximately $676 and are being amortized over the life of the notes. 24 12. INDEBTEDNESS TO BANKS On November 1, 1999, the Company obtained a $100,000 unsecured revolving loan facility ("Revolving Loan"), which was scheduled to mature on November 1, 2002. This loan replaced the Company's previous credit facility which was cancelled in conjunction with the new Revolving Loan. Due to the cancellation of the previous credit facility, the Company recognized an extraordinary loss of $157 for the write-off of the related unamortized loan costs. In addition to the new Revolving Loan, the Company secured a $5,000 swing line credit facility with terms similar to those of the Revolving Loan and a scheduled maturity date of October 31, 2000. On November 1, 2000, the Company extended the maturity date of the Revolving Loan and swing line credit facility to November 1, 2003 and the Company secured an option to increase the Revolving Loan at its discretion by $50,000. Under the Revolving Loan, the Company may elect to pay interest at either the lender's prime, adjusted daily or the LIBOR plus the "Applicable Margin" based upon the rating of the senior unsecured debt obligations of the Company. The Applicable Margin ranges from 0.95% to 1.40%. The Applicable Margin based on the Company's current rating is 1.15%. At December 31, 2001, the weighted average interest rate was 3.67% on outstanding borrowings under the Revolving Loan. The terms of the Revolving Loan and swing line credit facility require the Company to pay an annual facility fee equal to 0.2% of the total commitment and include certain restrictive covenants which require compliance with certain financial ratios and measurements. At December 31, 2001, the Company was in compliance with these covenants. LP, IRTCCII, IRTAL and IRTMC guarantee the Company's indebtedness on the Revolving Loan and swing line credit facility. The following data is presented with respect to the Revolving Loan and swing line credit facility in 2001 and 2000:

~~The~~2001 ~~following~~2000 ~~shareholders~~-------- of-------- ~~IRT~~Available ~~have~~balance ~~each~~at ~~entered~~year ~~into~~end a$53,346 ~~voting agreement~~$50,000 ~~with~~Average ~~Equity~~borrowing ~~One~~for ~~pursuant~~the toperiod ~~which~~$43,355 ~~among~~$35,583 ~~other~~Maximum ~~things,~~amount ~~they~~outstanding ~~have agreed~~during tothe ~~vote~~period ~~their~~$57,000 ~~shares~~$55,000 ofAverage ~~IRT~~interest ~~common~~rate ~~stock~~for inthe ~~favor~~period of6.48% ~~the~~7.61% ~~approval~~Interest ofrate ~~the Agreement~~at ~~and~~year ~~Plan~~end of3.67% ~~Merger~~7. 97%

The Company incurred facility fees of approximately $224, $202, and $201 for the years ended December 31, 2001, 2000 and 1999, respectively. 25 13. COMMITMENTS AND CONTINGENCIES The Company has entered into change in control employment agreements with certain key executives. Under each agreement in the event employment is terminated following a "Change In Control," the Company is committed to pay certain benefits, including the payment of each employee's base salary through the expiration of each agreement. Certain of the Company's properties have environmental concerns that have been or are being addressed. The Company maintains limited insurance coverage for this type of environmental risk. Although no assurance can be given that Company properties will not be affected adversely in the future by environmental problems, the Company presently believes that there are no environmental matters that are reasonably likely to have a material adverse effect on the Company's financial position. 14. MINORITY INTEREST Minority interest for the years ended December 31, 2001 and 2000 represents a 5.66% and 7.0% interest, respectively, in the results of the LP which are owned by a third party. In 1998, LP was formed with a contribution of three Florida shopping centers by an unaffiliated limited partner and a contribution of twenty shopping centers by the Company. Subsequent to the formation of LP, the Company has contributed cash to acquire seven shopping centers and LP has divested of five shopping centers. At December 31, 2001 and 2000, 815,852 OP Units were held by the limited partner. The unaffiliated limited partner has the option to require LP to redeem its OP Units at any time, in which event LP has the option to purchase the OP Units for cash or convert them into one share of the Company's common stock for each OP Unit. Adjustments have been made to the minority interest balance in LP to properly reflect its ownership interest in the Company. During 2001, 2000 and 1999, adjustments of $13, $(395) and $(357) were recorded, respectively. The adjustments are a result of the purchase or issuance of additional shares of common stock and OP units. The Company also records a minority interest for the limited partners' share of equity in two properties. The two properties in which the Company has a general partner interest are Venice Plaza (75% interest) and North Village Center (49.5% interest). The aggregate balance of the minority interest in these properties as of December 31, 2001 and 2000 is $528 and $434, respectively, and is included within accrued expenses and other liabilities on the accompanying Consolidated Balance Sheets. 15. DEFERRED COMPENSATION AND STOCK LOANS On June 18, 1998, 119,760 restricted shares of common stock were granted and 119,760 shares (the "Loan Shares") were issued pursuant to non-recourse loans due June 18, 2008. The loans were made to certain Company officers as incentives for future services. The restricted shares vest ratably over 10 years from the date of grant. The restricted shares and the Loan Shares were valued at the closing price of the Company's common stock on June 18, 1998 of $10.437. On January 7, 2000, an additional 25,001 restricted shares of common stock were granted to certain Company officers as incentives for future services. The restricted shares vest ratably over 9 years from the date of grant. The restricted shares were valued at the closing price of the Company's common stock on January 7, 2000 of $8.1875. 26 Compensation expense recognized for the three years in the period ended December 31, 2001 for the restricted stock grants was as follows:

~~SHAREHOLDER~~GRANT DATE 2001 2000 1999 --------------- -------- -------- -------- June 18, 1998 $100,000 $100,000 $102,000 January 7, 2000 17,690 22,745 - -------- -------- -------- Total $117,690 $122,745 $102,000 ======== ======== ========

16. TREASURY STOCK In November 1999, the Board of Directors authorized the Company to repurchase up to $25,000 of its common stock through the open market or in privately negotiated transactions. During 2001 and 2000, the Company repurchased 47,000 and 2,488,701 shares, for a cost of $405 and $20,818, respectively, including commissions and other costs. On January 16, 2001, the Company completed the stock repurchase program. The Company repurchased a total of 3,028,276 shares at an average price of $8.26 per share. 17. RENTAL INCOME Leases with tenants are accounted for as operating leases. Certain tenants are required to pay percentage rents based on gross sales exceeding stated amounts. The Company receives reimbursements from tenants for real estate taxes, common area maintenance and other recoverable costs. Rents from tenants are summarized as follows:

E.2001 ~~Thornton~~2000 ~~Anderson~~1999 ~~Thomas~~------- ~~D’Arcy~~------- ~~Patrick~~------- L.Minimum ~~Flinn~~rental ~~Homer~~income B.$68,343 ~~Gibbs~~$66,721 ~~Jr.~~$68,130 W.Percentage ~~Benjamin~~rental ~~Jones~~income 896 1,016 ~~III~~1,018 ~~Samuel~~Other W.rental ~~Kendrick~~income E.15,753 ~~Stanley~~15,770 ~~Kroenke~~13,946 ~~James~~------- G.------- ~~Levy~~------- ~~Thomas~~Total H.rental ~~McAuley~~income ~~Robert~~$84,992 E.$83,507 ~~Mitzel~~$83,094 ~~Bruce~~======= A.======= ~~Morrice~~=======

27 Minimum rents to be received from tenants on noncancellable operating leases for the Company's shopping center, industrial, and land purchase-leaseback investments at December 31, 2001 are as follows:

~~The~~YEAR ~~preceding~~AMOUNT is---------- ~~qualified~~-------- in2002 ~~its~~$ ~~entirety by reference to the Agreement and Plan of Merger~~68,920 ~~Amendment~~2003 ~~No. 1 to Shareholder Protection Rights Agreement~~62, ~~the~~197 ~~forms~~2004 ~~of voting agreements~~54,232 ~~the~~2005 ~~Voting Agreement by and between Equity One~~46, ~~Inc.~~147 ~~and~~2006 ~~E. Stanley Kroenke~~37,922 ~~copies~~Thereafter ~~of which are attached hereto as Exhibits 2.1~~189,982 ~~4.1,~~-------- ~~99.1~~$459,400 99.2, and 99.3, and which are incorporated herein by reference. A copy of the press release jointly issued by Equity One and IRT announcing the signing of the Agreement and Plan of Merger is attached hereto as Exhibit 99.4. ========

18. INCOME TAXES The Company has one subsidiary, IRTCCII, that became wholly-owned by the Company in March 2001. As a result, IRTCCII had federal taxable income of $179 which caused income tax expense of $53. 19. CASH DISTRIBUTIONS AND DIVIDEND REINVESTMENT PLAN The Company has elected since inception to be treated as a REIT under the Code. In accordance with the Code, a REIT must distribute at least 90% (95% prior to 2001) of its taxable income to its shareholders each year. See Note 2 for additional disclosure. The differences between taxable income as reported on the Company's tax return (estimated 2001 and actual 2000 and 1999) and net earnings as reported on the Consolidated Statements of Earnings are as follows:

Item 7.		Financial Statements, Pro Forma Information and Exhibits
(c)		Exhibits

28 The following is a reconciliation between dividends declared and dividends applied in 2000 and 1999 and estimated to be applied in 2001 to meet REIT distribution requirements:

Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated as of October 28, 2002, by and between IRT Property Company and Equity One, Inc.
4.1		Amendment No.1 to Shareholder Protection Rights Agreement, dated as of October 28, 2002, by and between IRT Property Company and SunTrust Bank, Atlanta, as Rights Agent.
99.1		Form of IRT Voting Agreement, dated October 28, 2002, by and among Equity One, Inc. and certain shareholders of IRT Property Company.
99.2		Form of Equity One, Inc. Voting Agreement, dated October 28, 2002, by and among IRT Property Company and certain stockholders of Equity One, Inc.
99.3		Voting Agreement, dated as of October 28, 2002, by and between Equity One, Inc. and E. Stanley Kroenke, in his capacity as a shareholder of IRT Property Company.
99.4		Press Release, dated October 29, 2002.

The taxability of per share distributions paid to shareholders during the years ended December 31, 2001, 2000 and 1999 was as follows:

~~SIGNATURES~~ 2001 2000 1999 -------------------- -------------------- -------------------- AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE ------- ----------- ------- ----------- ------- ----------- Ordinary income $ 0.769 81.8% $ 0.787 83.7% $ 0.787 84.6% Capital gains 0.171 18.2% 0.092 9.8% 0.143 15.4% Return of capital - 0.0% 0.061 6.5% - 0.0% ------- ----------- ------- ----------- ------- ----------- Total rental income $ 0.940 100.0% $ 0.940 100.0% $ 0.930 100.0% ======= =========== ======= =========== ======= ===========

The Company has a Dividend Reinvestment Plan (the "DRIP") which allows shareholders, who own at least 100 shares of the Company's common stock, to elect to reinvest all or a portion of their distributions in newly issued shares of common stock of the Company. The Company did not receive any proceeds under the DRIP in 2001 and 1999 as shares were purchased on the open market to fund the DRIP. In 2000, the Company issued 59,089 treasury shares and received net proceeds of $497. 29 20. EARNINGS PER SHARE Basic earnings per share were computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the year. The effects of the conversion of the 7.3% subordinated debentures have been included in the calculation of diluted earnings per share, as they are dilutive for the year ended December 31, 2001 and 2000. The effects of such conversion of the 7.3% debentures for the year ended December 31, 1999 is excluded, as they are antidilutive. The effects of the conversion of the OP Units have been included in the calculation of diluted earnings per share, as they are dilutive for the years ended December 31, 2001, 2000 and 1999. The effects of the exercise of certain stock options and issuances of restricted stock, using the treasury stock method, have been included in the diluted earnings per share calculation for the year ended December 31, 2001. Also, the effects of the stock options were dilutive for the year ended December 31, 2000. However, the effects of the restricted stock for the year ended December 31, 2000 and the effects of the stock options and restricted stock for the year ended December 31, 1999 were antidilutive and excluded from the calculation.

~~Pursuant~~PER toSHARE INCOME SHARES AMOUNT ------- -------------- ------- (in thousands) For the ~~requirements~~fiscal year ended December 31, 2001 Basic net earnings available to shareholders $25,220 30,322 $ 0.83 Options outstanding - 91 ======= Restricted stock - 3 Minority interest of ~~the~~unitholders ~~Securities~~in ~~Exchange~~operating ~~Act~~partnership 554 816 Conversion of ~~1934~~7.3% debentures 1,799 2,069 ------- -------------- Diluted net earnings available to shareholders $27,573 33,301 $ 0.83 ======= ============== ======= For the ~~registrant~~ ~~has~~fiscal ~~duly~~year ~~caused~~ended ~~this~~December ~~report~~31, 2000 Basic net earnings available to beshareholders ~~signed~~$29,039 on31,536 ~~its~~$ ~~behalf~~0.92 byOptions outstanding - 11 ======= Minority interest of unitholders in operating partnership 596 816 7.3% Convertible Debentures 1,799 2,069 ------- -------------- Diluted net earnings available to shareholders $31,434 34,432 $ 0.91 ======= ============== ======= For the ~~undersigned~~ ~~hereunto~~fiscal ~~duly~~year ~~authorized~~ended December 31, 1999 Basic net earnings available to shareholders $28,331 33,119 $ 0. 86 Minority interest of unitholders in operating partnership 683 785 ======= ------- -------------- Diluted net earnings available to shareholders $29,014 33,904 $ 0.86 ======= ============== =======

30 21. STOCK OPTION AND PURCHASE PLANS Effective May 8, 1989, the Company adopted and its shareholders approved the 1989 Stock Option Plan (the "1989 Plan"). The 1989 Plan includes provisions for a) the granting of both Incentive Stock Options ("ISOs") (as defined in Section 422A of the Code) and nonqualified options to officers and employees and b) the automatic granting of nonqualified options for 1,250 shares to each non-employee director upon the election and each annual re-election of each non-employee director. Under the terms of the 1989 Plan, the option price shall be no less than the fair market value of the optioned shares at the date of grant. The options are automatically vested and expire after ten years. There is a maximum of 1,062,500 shares of common stock reserved under the 1989 Plan. Effective June 18, 1998, the Company adopted and its shareholders approved the 1998 Long-Term Incentive Plan (the "1998 Plan"). The 1998 Plan includes provisions for the granting of ISOs, nonqualified options, stock appreciation rights, performance shares, restricted stock, dividend equivalents and other stock-based awards. Under the terms of the 1998 Plan, the option exercise price shall be no less than the fair market value of the optioned shares at the date of the grant. The options are automatically vested and expire after ten years. There is a maximum of 1,625,000 shares of common stock reserved under the 1998 Plan. The Company also adopted the IRT Property Company 2000 Employee Stock Purchase Plan (the "ESPP"), approved by the shareholders on May 16, 2000. The ESPP allows eligible employees to acquire shares of the Company's stock on a quarterly basis through payroll deductions. A maximum of 300,000 shares of common stock are reserved for issuance under the ESPP. The purchase price of the shares of common stock are 90% of the lesser of the closing price of a share of common stock on the first trading day of the purchase period or the last trading day of the purchase period. The Company initiated the ESPP in 2001 and there were two purchase periods in 2001, which ended on September 30, 2001 and December 31, 2001, respectively. For the purchase period ended September 30, 2001, 1,159 shares were purchased at a price of $9.72 per share. For the purchase period ended December 31, 2001, 1,380 shares were purchased at a price of $9.36 per share. The Company accounts for these plans under APB No. 25, under which no compensation cost has been recognized for stock option grants. Had compensation cost for these plans been determined consistent with SFAS No. 123, the Company's net income and earnings per share would have been reduced to the following pro forma amounts:

		IRT PROPERTY COMPANY
Date: October 30, 2002		By:		/s/ James G. Levy Name: James G. Levy Title: Chief Financial Officer

31 Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. Under SFAS No. 123, the fair value of each option grant and stock purchase right is estimated as of the date of grant and date of purchase, respectively, using the Black-Scholes option pricing model. The weighted average fair value of options granted is $0.40, $0.46 and $0.62 for 2001, 2000 and 1999, respectively. The weighted average fair value of the rights to purchase stock pursuant to the ESPP were $1.98 for 2001. The following weighted-average assumptions were used for option grants and stock purchase rights in 2001, 2000 and 1999, respectively:

~~EXHIBIT~~2001 ~~INDEX~~ 2000 1999 ------ ------ ------ Risk free interest rate 4.98% 6.71% 4.74% Expected dividend yield 11.10% 12.03% 9.50% Expected volatility 21.00% 21.00% 21.00% Expected annual forfeiture rate 0.00% 5.00% 0.00% Expected lives (in years) 5 5 5

Details of the stock option activity during 2001, 2000, and 1999 are as follows:

~~The~~NUMBER ~~following~~OF ~~exhibits~~SHARES ~~are~~---------------------- ~~filed~~OPTION asPRICE aEMPLOYEES ~~part~~DIRECTORS ofPER ~~this~~SHARE ~~Report~~---------- ---------- --------------- Options outstanding at December 31, 1998 485,968 67,500 $ 7. 63 - $14.90 Granted 156,400 - $ 9.69 Granted - 5,000 $ 9.38 Exercised (4,000) - $ 9.25 Expired unexercised (130,500) (10,000) $ 9.25 - $14.90 ---------- ---------- Options outstanding at December 31, 1999 507,868 62,500 $ 7.63 - $13.38 Granted 321,393 - $ 7.81 - $ 8.63 Granted - 5,000 $ 8.75 Exercised (36,800) - $ 7.81 Expired unexercised (107,032) (10,000) $ 7.81 - $12.50 ---------- ---------- Options outstanding at December 31, 2000 685,429 57,500 $ 7.63 - $13.38 Granted 317,627 - $ 8.31 Granted - 25,000 $ 10.30 Exercised (204,818) - $ 7.81 - $10.13 Expired unexercised (25,000) (6,250) $ 7.625 - $10.25 ---------- ---------- Options outstanding at December 31, 2001 773,238 76,250 $ 7.81 - $13.38 ========== ==========

32 The following table summarizes information about stock options outstanding and exercisable at December 31, 2001:

Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated as of October 28, 2002, by and between IRT Property Company and Equity One, Inc.
4.1		Amendment No.1 to Shareholder Protection Rights Agreement, dated as of October 28, 2002, by and between IRT Property Company and SunTrust Bank, Atlanta, as Rights Agent.
99.1		Form of IRT Voting Agreement, dated October 28, 2002, by and among Equity One, Inc. and certain shareholders of IRT Property Company.
99.2		Form of Equity One, Inc. Voting Agreement, dated October 28, 2002, by and among IRT Property Company and certain stockholders of Equity One, Inc.
99.3		Voting Agreement, dated as of October 28, 2002, by and between Equity One, Inc. and E. Stanley Kroenke, in his capacity as a shareholder of IRT Property Company.
99.4		Press Release, dated October 29, 2002.

22. EMPLOYEE RETIREMENT BENEFITS Under the Company's 401(k) Plan, employees who annually work over 1,750 hours and are at least 18 years of age are eligible for participation in the Plan. Employees may elect to make contributions to the Plan as defined by the Internal Revenue Code. The Company matches 100% of such contributions up to 6% of the individual participant's compensation, based on the length of service. The Company contributed approximately $192, $184 and $159 to the 401(k) Plan in 2001, 2000 and 1999, respectively. 23. SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES Significant noncash transactions for the years ended December 31, 2001, 2000 and 1999 were as follows:

24. RELATED PARTY TRANSACTIONS Beginning in 2000, the Company provides management services for two shopping centers owned principally by real estate joint ventures in which an officer of the Company has economic interests. Such services are performed pursuant to management agreements which provide for fees based upon a percentage of gross revenues from the properties and other direct costs incurred in connection with management of the centers. The Consolidated Statements of Earnings include management fee income from these management services of $100 and $14 for the years ended December 31, 2001 and 2000. 33 25. DISCONTINUED OPERATIONS The Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," effective January 1, 2002. SFAS No. 144 requires the Company to report in discontinued operations the results of operations of a property that has either been disposed or is classified as held for sale, unless certain conditions are met. SFAS No. 144 further requires the Company to reclassify results of operations from a property disposed of or held for sale subsequent to December 31, 2001 as income from discontinued operations during prior reported periods. The Company classified the results of operations from a property sold during the nine months ended September 30, 2002, as income from discontinued operations for the three years in the period ended December 31, 2001 in the accompanying consolidated statements of earnings. The effect of the adoption of SFAS No. 144 on the consolidated statements of earnings is shown below.

26. SUBSEQUENT EVENTS On January 22, 2002, one of the Company's tenants, Kmart Corporation, filed for bankruptcy protection. The Company has eight stores leased to Kmart which accounted for 4.5% of the Company's revenues for the year ended December 31, 2001. On January 23, 2002, pursuant to the MTN Program, the Company issued $25,000 of 7.84% senior unsecured notes due January 23, 2012. Proceeds were used to redeem the Company's 7.3% convertible subordinated debentures and to partially prepay a mortgage note payable. On January 24, 2002, the Company redeemed all of the outstanding 7.3% convertible subordinated debentures due August, 2003 at par plus accrued interest. Prior to redemption, 165 bonds were converted into 14,659 shares of common stock. The Company paid $23,220 to redeem the remaining bonds outstanding and recognized an extraordinary loss of $156. On February 19, 2002, the Company acquired Parkwest Crossing, a 85,602 square foot neighborhood shopping center located in the Raleigh-Durham area of North Carolina. The Company acquired the center for approximately $6,600, including an assumption of a $4,800, 8.1% mortgage secured by the property. The mortgage is due and payable in ten years and the principal amortization is based on a thirty year amortization schedule. 34 On March 1, 2002, the Company prepaid a 9.63% mortgage note payable which was due on June 1, 2002 for approximately $5,210. In May 2002, the Company completed an offering of 3,450,000 shares of common stock at $11.79 per share. Net proceeds to the Company were approximately $38,508. On May 30, 2002, 160,000 restricted shares of common stock were granted to certain Company officers as incentives for future services. The restricted shares vest proportionately over 4 years from the date of grant. The restricted shares were valued at the closing price of the Company's common stock on May 30, 2002 of $11.97. On September 25, 2002, LP sold Forest Hills Centre, a 74,180 square foot shopping center, located in Wilson, NC for approximately $6,850 in cash and recognized a gain on the sale of approximately $2,062. On September 30, 2002, the Company prepaid a 7.65% secured loan of approximately $1,989. The loan was due on December 1, 2002. On October 7, 2002, an agreement was signed for the sale of the Lexington Shopping Center in Lexington, VA to close on November 29, 2002. This unsolicited offer was from the single tenant occupying the center. The Company expects to recognize a gain on the sale of approximately $1,400. On October 28, 2002, Equity One, Inc. (NYSE: EQY) and the Company executed a merger agreement pursuant to which Equity One will acquire the Company. In connection with the merger, each of the Company's shareholders may elect to receive for each share of the Company's common stock either $12.15 in cash or 0.9 shares of Equity One common stock, or a combination thereof. The terms of the merger agreement further provide that the holders of no more than 50% of the Company's outstanding common stock may elect to receive cash. Completion of the transaction, which is expected to take place in the first quarter of 2003, is subject to the approval of Equity One's and the Company's shareholders and other customary conditions. The boards of each of the Company and Equity One have unanimously approved the transaction. Additionally, holders of approximately 75% of Equity One's common stock and approximately 8% of the Company's common stock have agreed to vote their shares in favor of the transactions contemplated by the merger. On the 4th business day prior to the shareholder meetings, the Equity One holders may withdraw their voting support, and the Company's board may withdraw its merger recommendation, if Equity One's weighted average stock price for the 30 preceding trading days is less than $12.06 or less than $11.00 for the three preceding trading days. In addition, on the 4th business day prior to the shareholder meetings the Equity One holders may withdraw their voting support if the Company's weighted average stock price for the 30 preceding trading days is less than $10.935 or less than $9.935 for the three preceding trading days. The Company cannot make any assurances that the merger with Equity One will be consummated according to the terms set forth in the merger agreement, if at all. Either the Company or Equity One may terminate the merger agreement if the merger is not consummated by March 31, 2003. The Company will be required to pay a $15 million break-up fee to Equity One in the event that the Company enters into an agreement for a superior transaction or if, under certain circumstances, the Company's board withdraws its recommendation for the transaction. 35 On October 31, 2002, Janet Herszenhorn, an individual stockholder of IRT, purporting to represent a class of holders of IRT common stock, filed a putative class action lawsuit in the Superior Court of Cobb County, Georgia, against IRT, Equity One and each of the directors of IRT. The complaint alleges, among other things, that IRT and its individual directors breached their fiduciary duties by agreeing to the merger between Equity One and IRT and that Equity One aided and abetted such breach. The complaint seeks injunctive relief, an order enjoining consummation of the merger and unspecified damages. On October 31, 2002, John Greaves, an individual stockholder of IRT, purporting to represent a class of holders of IRT common stock, also filed a putative class action lawsuit in the Superior Court of Cobb County, Georgia, against IRT, Equity One and each of the directors of IRT. The complaint alleges, among other things, that IRT and its individual directors breached their fiduciary duties by agreeing to the merger between Equity One and IRT and that Equity One aided and abetted such breach. The complaint seeks injunctive relief, an order enjoining consummation of the merger and unspecified damages. Although the defendants believe that these suits are without merit and intend to defend themselves vigorously, there can be no assurance that the pending litigation will not interfere with the consummation of the merger. IRT and Equity One do not expect that these suits will interfere with the scheduling of their respective shareholder meetings or the consummation of the merger, if approved. 36 27. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following is a summary of the unaudited quarterly financial information for the fiscal years ended December 31, 2001 and 2000.

37 SCHEDULE III

43 SCHEDULE III - CONTINUED Real estate activity is summarized as follows:

44 SCHEDULE IV

Mortgage loan activity is summarized as follows:

45 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized. IRT PROPERTY COMPANY Date: December 9, 2002 /s/ Thomas H. McAuley ----- ------------------ ------------------------ Thomas H. McAuley President & Chief Executive Officer Date: December 9, 2002 /s/ James G. Levy ----- ------------------ -------------------- James G. Levy Executive Vice President & Chief Financial Officer 46 (c) Exhibits Exhibit Number Description -------------- ------------------------------------------------------- 23 Consent of Deloitte & Touche LLP to the incorporation of their report included in this Form 8-K in the Company's previously filed Registration Statements File Nos. 333-64628, 333-59938, 333-64742, 333-66780, 333-62435, 333-38847, 333-53638 and 333-59366. 47

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