SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): January 22, 1999
USP REAL ESTATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
Iowa 0-7589 42-6149662
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) No.) Identification No.)
4333 Edgewood Road N.E., 52499
Cedar Rapids, Iowa (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (319) 398-8975
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events.
On January 22, 1999, the Board of Trustees elected Mr. Richard
Osborne as a Trustee. This event was reported in a news release
dated January 25, 1999. The news release also included a report
on operating results for the fourth quarter and year ended
December 31, 1998, as well as a distribution to shareholders of
$.08 per share, payable February 16, 1999 to shareholders of
record February 4, 1999. A copy of the news release is included
herein as an exhibit to this report.
On January 28, 1999, the Trust became aware of an unsolicited
offer from a company identified as Sutter Opportunity Fund, LLC
to purchase for cash up to 175,000 shares of the Trust
(approximately 4.5% of the total outstanding) for $3.25 per share
less any distributions paid after November 15, 1998. USP
encouraged shareholders to reject the offer based on comparison
of the offer price with recent trading prices on the NASDAQ
SmallCap Market. This event was reported in a news release dated
February 3, 1999. A copy of the news release is included herein
as an exhibit to this report.
On February 1, 1999, the Trust prepaid the mortgage loan on
Presidential Drive Business Park, the principal balance of which
was $706,483. On February 5, 1999, the Trust prepaid the
mortgage loan on First Tuesday Mall, the principal balance of
which was $463,644. Fees paid to the lenders in connection with
the prepayments totaled $11,776. The total monthly debt service
on the two loans was $18,561. The source of funds for the loan
prepayments was cash the Trust had invested in a money market
fund.
The Trust is in process of refinancing the mortgage loans on
Mendenhall Commons and North Park Plaza shopping centers. Both
loans mature on March 1, 1999. The Mendenhall loan has a
principal balance of about $3,930,000 and monthly debt service of
$38,533, including interest at 10.25%. The North Park Plaza loan
has a principal balance of about $3,945,000 and monthly debt
service of $39,334, including interest at 10.5%. While the Trust
is still negotiating with a third-party lender to secure
permanent financing on both projects, interim financing has been
arranged through AEGON USA Realty Advisors, the Trust's advisor,
at an interest rate of 200 basis points (2%) over three-month
LIBOR, with monthly debt service based on twenty-year
amortization.
The prepayment of loans on Presidential Drive and First Tuesday,
and the refinancing of loans on Mendenhall Commons and North Park
Plaza, should have a positive impact on the Trust's earnings and
cash flow in 1999.
The discussion in this report concerning prepayment and
refinancing of mortgage loans and the potential impact on
earnings and cash flow contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Actual
results and the timing of certain events could differ materially
from those stated in the forward-looking statements.
Certain information contained in this report is included in a
letter dated February 5, 1999 that will accompany the
aforementioned distribution to shareholders payable February 16,
1999. A copy of the letter is included herein as an exhibit to
this report.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(99) News release dated January 25, 1999.
(99.1) News release dated February 3, 1999.
(99.2) Letter to Shareholders dated February 5, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
USP REAL ESTATE INVESTMENT TRUST
/s/ Alan F. Fletcher
Alan F. Fletcher
Vice President and Treasurer
(principal financial officer)
/s/ Roger L. Schulz
Roger L. Schulz
Controller
(principal accounting officer)
Dated: February 5, 1999
EXHIBIT INDEX
Exhibit Item Title or Description
99 News release dated January 25, 1999
99.1 News release dated February 3, 1999
99.2 Letter to Shareholders dated February 5, 1999
EXHIBIT 99
CONTACT: Alan F. Fletcher
Vice President and Treasurer
(319) 398-8849
FOR IMMEDIATE RELEASE
USP TRUST REPORTS ANNUAL RESULTS FOR 1998
CEDAR RAPIDS, IOWA--January 25, 1999--USP Real Estate Investment
Trust reported net earnings of $738,861 ($.19 per share) for the
fourth quarter ended December 31, 1998, bringing annual net
earnings to $1,472,257 ($.38 per share). The fourth quarter and
annual net earnings for 1998 include a net gain on sale of
$528,282 ($.14 per share). In 1997, net earnings were $500,659
($.13 per share) and $896,286 ($.23 per share) for the three and
twelve month periods, respectively. The fourth quarter and
annual net earnings for 1997 include a realized gain on sale of
$259,157 ($.07 per share). Funds from operations (earnings from
operations plus depreciation) were $1,775,307 for fiscal year
1998 compared to $1,443,462 in 1997.
Net earnings and funds from operations increased from 1997 to
1998 primarily due to the sale of a property and higher revenue.
Geneva Square in Lake Geneva, Wisconsin was sold in December 1998
and the gain from this sale was $528,282 compared to a realized
gain on sale of $259,157 in 1997 which was previously deferred
from the installment sale of College Square in 1990. Rents at
Geneva Square increased significantly from 1997 to 1998, due to
the receipt of settlements in the amount of $333,000 from two
previous tenants.
The Board of Trustees declared a fourth quarter distribution of
$.08 per share payable, February 16, 1999 to shareholders of
record February 4, 1999. Quarterly distributions are dependent
upon earnings, cash flow, the financial condition of the Trust
and other factors reviewed periodically by the Board of Trustees.
In other news, Richard M. Osborne was elected to the Board of
Trustees. He is President and Chief Executive Officer of OsAir,
Inc., a real property developer and manufacturer of industrial
gases. Mr. Osborne is also the sole manager of Turkey Vulture
Fund XIII, Ltd., which owns 551,081 shares of USP.
USP Real Estate Investment Trust is headquartered in Cedar
Rapids, Iowa. Shares are traded over-the-counter on The NASDAQ
System under the symbol USPTS.
USP Real Estate Investment Trust
Results of Operations
(Unaudited)
Per Per
Quarter ended December 31, 1998 Share 1997 Share
Revenue $ 1,211,850 $ 1,247,892
Expenses 1,001,271 1,006,390
Earnings from operations $ 210,579 .05 $ 241,502 .06
Net gain on sale of property 528,282 .14 $ 259,157 .07
Net earnings* $ 738,861 .19 $ 500,659 .13
Funds from operations** $ 417,565 .11 $ 441,528 .11
Dividends to shareholders $ 310,400 .08 $ 310,400 .08
Per Per
Year ended December 31, 1998 Share 1997 Share
Revenue $ 5,331,955 $ 5,012,087
Expenses 4,387,980 4,374,958
Earnings from operations $ 943,975 .24 $ 637,129 .16
Net gain on sale of property $ 528,282 .14 $ 259,157 .07
Net earnings* $ 1,472,257 .38 $ 896,286 .23
Funds from operations** $ 1,775,307 .46 $ 1,443,462 .37
Dividends to shareholders $ 1,241,600 .32 $ 1,241,600 .32
*Net earnings per share are on a basic and diluted basis.
**Represents earnings from operations plus depreciation.
EXHIBIT 99.1
CONTACT: Alan F. Fletcher
Vice President and Treasurer
(319) 398-8849
FOR IMMEDIATE RELEASE
USP ENCOURAGES SHAREHOLDERS TO REJECT OFFER
CEDAR RAPIDS, IOWA_February 3, 1999--USP Real Estate
Investment Trust has recently become aware of an unsolicited
offer from a company identified as Sutter Opportunity Fund,
LLC to purchase for cash up to 175,000 shares of USP for
$3.25 per share less any distributions paid after November
15, 1998. Total shares issued and outstanding are
3,880,000.
Information obtained by USP indicates the offer commenced on
or about January 19, 1999, though USP did not learn of it
until January 28, 1999. USP is not affiliated with Sutter
Opportunity Fund and has no other information about Sutter.
The price being offered is approximately 15-30% less than
the market value of the shares based on recent trading
prices on the NASDAQ SmallCap Market, ranging from $3.75 to
$4.25 since the offer commenced. USP encourages
shareholders to reject the offer based on comparison of such
prices with the offer price.
USP Real Estate Investment Trust is headquartered in Cedar
Rapids, Iowa. Shares are traded on the NASDAQ SmallCap
Market under the symbol USPTS.
EXHIBIT 99.2
To Our Shareholders:
Net earnings were $738,861 ($.19 per share) for the fourth
quarter ended December 31, 1998, bringing annual net
earnings to $1,472,257 ($.38 per share) for 1998. The
fourth quarter and annual net earnings include a net gain on
sale of $528,282 ($.14 per share) from the sale of Geneva
Square Shopping Center in December 1998. Net earnings for
the fourth quarter and year ended December 31, 1997 were
$500,659 ($.13 per share) and $896,286 ($.23 per share),
respectively, including a net gain of $259,157 ($.07 per
share) realized from a previously deferred installment sale.
Funds from operations (net earnings less net gain on sale
plus depreciation expense) were $1,775,307 in 1998 compared
to $1,443,462 in 1997. The increase is due to rent
settlements collected in 1998 from two previous tenants at
Geneva Square.
On February 1, 1999, the Trust prepaid the mortgage loan on
Presidential Drive Business Park, the principal balance of
which was $706,483. On February 5, 1999, the Trust prepaid
the mortgage loan on First Tuesday Mall, the principal
balance of which was $463,644. Fees paid to the lenders in
connection with the prepayments totaled $11,776. The total
monthly debt service on the two loans was $18,561. The
source of funds for the loan prepayments was cash the Trust
had invested in a money market fund.
The Trust is in process of refinancing the mortgage loans on
Mendenhall Commons and North Park Plaza shopping centers.
The Mendenhall loan has a principal balance of $3,930,000
and monthly debt service of $38,533, including interest at
10.25%. The North Park loan has a principal balance of
$3,945,000 and monthly debt service of $39,334, including
interest at 10.5%. The Trust is negotiating with a third-
party lender to secure permanent financing on both projects.
However, since the loans mature on March 1, 1999, interim
financing has been arranged through AEGON USA Realty
Advisors, the Trust's advisor, at an interest rate of 200
basis points (2%) over three-month LIBOR, with monthly debt
service based on twenty-year amortization and prepayment
allowed at any time without penalty.
The prepayment of loans on Presidential Drive and First
Tuesday, and the refinancing of loans on Mendenhall Commons
and North Park Plaza, should have a positive impact on the
Trust's earnings and cash flow in 1999. The discussion
concerning refinancing of mortgage loans and the potential
impact on earnings and cash flow contains forward-looking
statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results and timing of certain
events could differ materially from those stated in the
forward-looking statements.
On January 22, 1999, the Board of Trustees elected Richard
M. Osborne as a Trustee. Mr. Osborne is President and Chief
Executive Officer of OsAir, Inc., a real property developer
and manufacturer of industrial gases. He is also a director
of several other publicly-held companies and the sole
manager of Turkey Vulture Fund XIII, Ltd., which owns
551,081 shares (approximately 14.2%) of USP.
On January 28, 1999, USP became aware of an unsolicited
offer from a company identified as Sutter Opportunity Fund,
LLC to purchase for cash up to 175,000 shares of the Trust
(approximately 4.5% of the total outstanding) for $3.25 per
share less any distributions paid after November 15, 1998.
According to information obtained by USP, the offer
commenced on or about January 19, 1999 and will expire on
February 19, 1999. USP encouraged shareholders to reject the
offer based on comparison of the offer price with then-
current trading prices on the NASDAQ SmallCap Market.
The Board of Trustees declared a distribution of $.08 per
share, payable February 16, 1999 to shareholders of record
February 4, 1999. Quarterly distributions are dependent
upon earnings, cash flow, the financial condition of the
Trust and other factors reviewed periodically by the Board
of Trustees.
David Blankenship
President
February 5, 1999