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): August 19, 1996
COMMERCIAL NET LEASE REALTY, INC.
(Exact Name of Registrant as Specified in Charter)
Maryland 0-12989 56-1431377
(State or other juris- (Commission File Number) (IRS Employer
diction of incorporation) Identification No.)
400 East South Street, Suite 500 32801
Orlando, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 422-1574
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
- ------
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
- ------
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
- ------
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
- -------
Not applicable.
ITEM 5. OTHER EVENTS.
- -------
On July 20, 1995, Commercial Net Lease Realty, Inc. (the "Company")
filed a shelf registration statement on Form S-3, File No. 33-61165, with the
Securities and Exchange Commission that permits the issuance of a combination
of debt and equity securities of up to $200 million. Pursuant to a prospectus
supplement filed as part of this registration statement on August 19, 1996,
the Company intends to offer 3 million shares of common stock from the shelf
registration (the "Offering"). The net proceeds from the Offering are
estimated to be approximately $39.1 million at an assumed Offering price of
$14.00 per share (approximately $45.0 million if the underwriters' over
allotment option to purchase up to 450,000 additional shares is exercised in
full), after deducting estimated offering expenses and underwriting discounts.
To secure long-term fixed rate financing, the Company entered into a
$52.6 million mortgage loan with Principal Mutual Life Insurance Company (the
"Principal Mortgage"), the proceeds of which were used to pay down the balance
on the Company's $100 million credit facility. The Principal Mortgage is
secured by 42 properties designated in the loan documents. The Principal
Mortgage consists of two loans that bear interest at a fixed weighted average
rate of approximately 7.26 percent and have a weighted average maturity of
approximately seven years. The first loan of $13.2 million was closed on
December 14, 1995 and the second loan of $39.4 million was closed on January
29, 1996.
In addition to the Principal Mortgage, in June 1996, the Company
acquired three properties subject to mortgages with an aggregate principal
balance outstanding as of June 30, 1996, of approximately $6.8 million (the
"Acquired Mortgages" and collectively with the Principal Mortgage, the
"Mortgages"). The Acquired Mortgages bear interest at a weighted average rate
of 8.6% and have a weighted average maturity of approximately eight years.
The Company intends to purchase nine properties which will be
acquired periodically through the end of September 1996 ( the "Acquisition
Properties"). The total purchase price of the Acquisition Properties is
expected to be approximately $34.6 million. The Company anticipates that the
purchase of the Acquisition Properties will be funded by the net proceeds from
the Offering.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS.
- -------
Not applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
- -------
INDEX TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
-------------------------------------------------
Page
----
COMMERCIAL NET LEASE REALTY, INC.
Pro Forma Financial Information (unaudited):
Pro Forma Balance Sheet as of June 30, 1996 4
Pro Forma Statement of Earnings for the
six months ended June 30, 1996 5
Pro Forma Statement of Earnings for the
year ended December 31, 1995 6
Notes to Pro Forma Financial Statements for the
six months ended June 30, 1996 and the year
ended December 31, 1995 7
PRO FORMA FINANCIAL INFORMATION
The pro forma information of the Company gives effect to (i) $49.0
million in net proceeds from the sale of 4,025,000 shares in the prior
offering (the "Prior Offering Transaction"), and (ii) the completion and sale
of 3,000,000 shares of common stock offered hereby at an estimated Offering
Price of $14.00 per share and the application of the net proceeds therefrom,
the receipt of $52.6 million of proceeds from the Principal Mortgage, the
assumption of approximately $6.8 million of Acquired Mortgages, the purchase
of the Acquisition Properties for approximately $34.6 million and the
repayment of approximately $4.5 million previously drawn under the Company's
$100 million credit facility (the "Credit Facility") (collectively, the
"Offering Transactions").
The pro forma statements of earnings for the year ended December 31,
1995 and the six months ended June 30, 1996 give effect to the Prior Offering
Transaction and the Offering Transactions as if such transactions had occurred
on January 1, 1995. Such pro forma statements of earnings also treat all
properties acquired during the year ended December 31, 1995 and the six months
ended June 30, 1996 and the Acquisition Properties as if they had been
acquired and fully leased as of January 1, 1995. The Pro Forma Balance Sheet
as of June 30, 1996, gives effect to the Offering Transactions as if such
transactions had occurred on June 30, 1996.
The pro forma information does not purport to represent what the
Company's financial position or results of operations actually would have been
if the transactions reflected had in fact occurred on the date or at the
beginning of the period indicated, or to project the Company's financial
position or results of operations at any future date or any future period.
COMMERCIAL NET LEASE REALTY, INC.
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1996
(In thousands, except per share data)
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- ------------ ---------
Land and buildings on operating
leases, net of accumulated
depreciation (c) $227,551 $ 34,655 (a) $262,206
Net investment in direct financing
leases (c) 83,139 83,139
Cash and cash equivalents 777 77 (a) 854
Receivables 334 334
Prepaid expenses 159 159
Loan costs, net of accumulated
amortization 1,978 1,978
Accrued rental income 3,170 3,170
Other assets 345 (33)(b)
(132)(a) 180
-------- -------- --------
$317,453 $ 34,567 $352,020
======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Notes payable $ 72,200 $ 34,600 (a)
(39,090)(b) $ 67,710
Long term debt 58,904 58,904
Accrued interest payable 327 327
Accounts payable and accrued
expenses 119 119
Real estate taxes payable 103 103
Due to related parties 222 222
Rents paid in advance and tenant
deposits 162 162
-------- -------- --------
Total liabilities 132,037 (4,490) 127,547
-------- -------- --------
Stockholders' equity:
Common stock 157 30 (b) 187
Capital in excess of par value 187,572 39,027 (b) 226,599
Accumulated dividends in excess
of net earnings (2,313) (2,313)
-------- -------- --------
185,416 39,057 224,473
-------- -------- --------
$317,453 $ 34,567 $352,020
======== ======== ========
See accompanying notes to unaudited pro forma
financial statements.
COMMERCIAL NET LEASE REALTY, INC.
UNAUDITED PRO FORMA STATEMENT OF EARNINGS
SIX MONTHS ENDED JUNE 30, 1996
(In thousands, except per share data)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from operating
leases (2) $10,649 $ 4,054 (1) $14,703
Earned income from direct
financing leases (2) 3,478 1,005 (1) 4,483
Contingent rental income 357 357
Interest and other income 71 57 (3) 128
------- ------- -------
14,555 5,116 19,671
------- ------- -------
Expenses:
General operating and
administrative 672 5 (4) 677
Advisory fees to related party 650 168 (5) 818
Interest 3,062 1,642 (6) 4,704
Taxes 93 69 (7) 162
Depreciation and amortization 1,554 482 (8)
8 (9) 2,044
------- ------- -------
6,031 2,374 8,405
------- ------- -------
Net Earnings $ 8,524 $ 2,742 $11,266
======= ======= =======
Earnings per share of common stock $ 0.57 $ 0.60
======= =======
Funds from operations (10) $ 9,764 $12,988
======= =======
Weighted average number of shares
outstanding 15,000 18,689
======= =======
See accompanying notes to unaudited pro forma
financial statements.
COMMERCIAL NET LEASE REALTY, INC.
UNAUDITED PRO FORMA STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
(In thousands, except per share data)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from operating
leases (2) $14,455 $14,950 (1) $29,405
Earned income from direct
financing leases (2) 5,267 3,700 (1) 8,967
Contingent rental income 746 746
Interest and other income 112 142 (3) 254
------- ------- -------
20,580 18,792 39,372
------- ------- -------
Expenses:
General operating and
administrative 722 84 (4) 806
Advisory fees to related party 1,001 637 (5) 1,638
Interest 3,834 5,931 (6) 9,765
Taxes 258 249 (7) 507
Depreciation and amortization 2,058 1,708 (8)
306 (9) 4,072
------- ------- -------
7,873 8,915 16,788
------- ------- -------
Net Earnings $12,707 $ 9,877 $22,584
======= ======= =======
Earnings per share of common stock $ 1.09 $ 1.21
======= =======
Funds from operations (10) $14,443 $26,028
======= =======
Weighted average number of shares
outstanding 11,664 18,689
======= =======
See accompanying notes to unaudited pro forma
financial statements.
COMMERCIAL NET LEASE REALTY, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
(Dollars in thousands)
Pro Forma Balance Sheet:
- -----------------------
(a) Represents draw on the Company's Credit Facility used to acquire the
Acquisition Properties for approximately $34,655 (approximately $132 of
which had been paid in miscellaneous acquisition costs and deposits as
of June 30, 1996). Per the Credit Facility agreement, draws must be
made in increments of $100, and as a result, approximately $77 of the
draw was added to working capital.
(b) Represents estimated gross proceeds of $42,000 from the issuance of 3
million shares of stock from the Offering used to pay down the Credit
Facility and to pay stock issuance costs of $2,910 ($33 of which had
been paid in deferred offering costs as of June 30, 1996).
(c) In accordance with generally accepted accounting principles, leases in
which the present value of the future minimum lease payments equals or
exceeds 90 percent of the value of the related properties are treated as
direct financing leases rather than as land and buildings. The
categorization of the lease has no effect on the rental revenues
received.
Pro Forma Statements of Earnings:
- --------------------------------
(1) Represents rental income as if the properties acquired during the year
ended December 31, 1995 and the six months ended June 30, 1996 (the "New
Properties") and the Acquisition Properties had been acquired and fully
leased on January 1, 1995.
(2) See Note (c) under "Pro Forma Balance Sheet" above.
(3) Represents adjustments to interest income due to the increase in the
amount of cash available for investment in interest bearing accounts
from the receipt of rental income before dividends are paid to
shareholders as a result of the Prior Offering Transaction and the
Offering Transactions. The adjusted pro forma interest income does not
include interest income from the investment of offering proceeds.
Interest income on interest bearing accounts is assumed to be earned at
a rate of four percent per annum based on the previous experience of the
Company.
(4) Represents additional expenses due to incremental expenses associated
with additional shares of common stock outstanding.
(5) Represents adjustment to advisory fees due to the increase in rental
revenues and funds from operations (as defined in the Company's advisory
agreement with its advisor).
(6) Represents adjustment in interest expense and other loan costs primarily
as a result of the pro forma increase in indebtedness in connection
with the Offering Transactions. Pro forma interest expense for the six
months ended June 30, 1996 and the year ended December 31, 1995, was
based on the average 30-day LIBOR rates in effect for those periods of
5.443% and 5.969%, respectively, plus 1.70% relating to the Credit
Facility, a weighted average interest rate of approximately 7.26%
relating to the Principal Mortgage and a weighted average interest rate
of 8.6% relating to the Acquired Mortgages.
(7) Represents additional expenses assumed to have been incurred as a result
of additional state income and franchise taxes based on additional
rental revenue.
(8) Represents adjustment to depreciation expense for the New Properties and
the Acquisition Properties as if the properties had been acquired and
fully leased on January 1, 1995. The building portion of the properties
accounted for as operating leases are depreciated using the straight-
line method over their estimated useful lives which is generally 40
years.
(9) Represents adjustment to amortization expense in connection with
amortization of loan costs associated with the Principal Mortgage.
(10) Funds from operations has been calculated in accordance with the
definition of "funds from operations" recently clarified by the National
Association of Real Estate Investment Trusts (NAREIT) defined as net
income, computed in accordance with generally accepted accounting
principles, excluding gains or losses from debt restructurings and sales
of property, plus depreciation and after adjustments for unconsolidated
partnerships and joint ventures. Funds from operations should not be
considered as a substitute for net income as an indication of the
Company's performance or as a substitute for cash flow as a measure of
its liquidity.
ITEM 8. CHANGE IN FISCAL YEAR.
- -------
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf
by the undersigned thereunto duly authorized.
COMMERCIAL NET LEASE REALTY, INC.
Dated: August 19, 1996 By: /s/ Gary M. Ralston
--------------------------
GARY M. RALSTON, President