Securities Exchange Act of 1934 -- Form 8-K/A
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report :
February 18, 1998
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CBL & ASSOCIATES PROPERTIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-12494 62-1545718
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
6148 Lee Highway, Suite 300, Chattanooga, Tennessee 37421
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(Address of principal executive offices)
Registrant's telephone number, including area code:
(423) 855-0001
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CBL & ASSOCIATES PROPERTIES, INC.
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITION OF ASHEVILLE MALL ASHEVILLE, NORTH CAROLINA
On January 2, 1998, Asheville, LLC, a North Carolina Limited Liability
Corporation (the "Asheville LLC"), a majority-owned subsidiary of CBL &
Associates Properties, Inc. (the "Registrant")acquired Asheville Mall, a
regional shopping mall located in Asheville, North Carolina, containing
approximately 823,916 square feet of total gross leasable area ("GLA")
including 260,581 of mall store GLA from the R.B.R.& S.T. Limited
Partnership, a subsidiary of the R.L. Coleman Company (the "R.L. Coleman
Company") pursuant to a Purchase and Sale Agreement between R.L. Coleman
Company and Asheville LLC (the "Purchase Agreement"). The assets acquired
included, among other things, real property, the buildings, improvements,
and fixtures located thereon, certain lease interests, personal property
and rights related thereto.
The aggregate purchase price, including closing costs, was approximately $65
million and was determined in good faith, arms length negotiations between
Registrant and R.L. Coleman Company, an unrelated third party. In negotiating
the purchase price the Registrant considered, among other facts, the mall's
historical and projected cash flow, the nature and term of existing leases,
the current operating costs, the physical condition of the property, and the
terms and conditions of available financing. There were no independent
appraisals obtained by the Registrant. The purchase price consisted of $65
million in cash. The cash consideration was paid from proceeds from the
Registrant's lines of credit and proceeds from a promissory note in the
amount of $48.9 million which Asheville LLC placed with Wells Fargo Bank
N.A. The Registrant intends to continue operating the mall as currently
operated and leasing space therein to national and local retailers.
The description contained herein of the transaction described above does not
purport to be complete and is qualified in its entirety by reference to the
Purchase and Sale Agreement, which is filed as an exhibit to this document.
2
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ITEM 7 FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of Independent Public Accountants F-1
Statements of the excess of revenues over
specific operating expenses for the year
ended December 31, 1996 and for the nine
months ended September 30, 1997 (unaudited) F-2
Notes to Financial Statements F-3
B) PRO FORMA FINANCIAL INFORMATION OF REGISTRANT
Pro forma consolidated statement of
operations for the nine months ended
September 30, 1997 (unaudited) F-4
Pro forma consolidated statement of
operations for the year ended
December 31, 1996 (unaudited) F-6
Pro forma consolidated balance sheet as of
September 30, 1997 (unaudited) F-8
3
A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of CBL & Associates Properties, Inc.:
We have audited the accompanying statement of the excess of revenues over
specific operating expenses of Asheville Mall for the year ended December 31,
1996. This statement is the responsibility of the Property's management.
Our responsibility is to express an opinion on this statement based on our
audit. We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of the excess of
revenues over specific operating expenses is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the statement. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission and excludes
certain material expenses that would not be comparable to those resulting from
the proposed future operations of the Property described in Note 2 and is not
intended to be a complete presentation of the Property's revenues and
expenses.
In our opinion, the statement referred to above presents fairly, in all
material respects, the excess of revenues over specific operating expenses
(exclusive of expenses described in Note 2) of Asheville Mall for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Chattanooga, Tennessee
December 10, 1997
F-1
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ASHEVILLE MALL
STATEMENTS OF THE EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 (UNAUDITED)
(In Thousands)
Nine
Year Ended Months Ended
December 31, September 30,
1996 1997
------------ ------------
(unaudited)
Revenues:
Rental revenues...................... $ 5,430 $ 4,065
Tenant reimbursements................ 1,594 1,522
------- -------
Total revenues.............. 7,024 5,587
Specific Operating Expenses (Note 2):
Property operating................... 733 450
Real estate taxes.................... 378 284
Maintenance & repairs................ 793 620
------- -------
Excess of revenues over specific
operating expenses................. $ 5,120 $ 4,233
======= =======
The accompanying notes are an integral part of these statements.
F-2
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ASHEVILLE MALL
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. DESCRIPTION OF PROPERTY
On January 2, 1998, Asheville, LLC, as assignee of Development
Options, Inc., a majority-owned subsidiary of CBL & Associates
Properties, Inc., acquired Asheville Mall (the "Property"), a
regional shopping mall located in Asheville, North Carolina,
containing approximately 823,916 square feet of total gross
leasable area.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statements of the excess of revenues over specific
operating expenses are presented on the accrual basis. These
statements have been prepared in accordance with the applicable rules
and regulations of the Securities and Exchange Commission for real
estate properties acquired. Accordingly, the statements exclude
certain historical expenses not comparable to the operations of the
Property after acquisition, such as depreciation, interest expense and
management fees.
REVENUE RECOGNITION
Rental revenue attributable to operating leases is recognized on a
straight-line basis over the initial term of the related leases.
Certain tenants are required to pay additional rent if sales volume
exceeds specified amounts. The Property recognizes this additional
rent as revenue when such amounts become determinable.
TENANT REIMBURSEMENTS
The Property receives reimbursements from tenants for certain costs as
provided in the lease agreements. These costs consist of real estate
taxes, common area maintenance and other recoverable costs. Tenant
reimbursements are recognized as revenue in the period the costs are
incurred.
F-3
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B. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The unaudited pro forma consolidated statements of operations are presented as
if the acquisition of Asheville Mall had taken place as of the beginning of
each period presented. In management's opinion, all adjustments necessary to
present fairly the effects of the acquisition have been made.
The unaudited pro forma consolidated statements of operations are not
necessarily indicative of what the actual results of operations of CBL &
Associates Properties, Inc. (the "Company") would have been assuming the
Company had acquired Asheville Mall as of the beginning of each period
presented, nor do they purport to represent the results of operations for
future periods.
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited And Amounts In Thousands, Except Per Share Amounts)
CBL Asheville Pro Forma Pro Forma
Historical Mall Adjustments Consolidated
---------- --------- ----------- ------------
REVENUES:
Rentals:
Minimum.................... $ 83,266 $ 3,497 $ - $ 86,763
Percentage................. 2,677 568 - 3,245
Other...................... 615 - - 615
Tenant reimbursements......... 36,622 1,522 - 38,144
Management and leasing fees... 1,765 - - 1,765
Interest and other............ 1,998 - - 1,998
-------- ------- ------- -------
Total revenues............. 126,943 5,587 - 132,530
-------- ------- ------- -------
EXPENSES:
Property operating............ 22,038 450 - 22,488
Depreciation and amortization. 23,639 - 1,084(A) 24,723
Real estate taxes............. 10,450 284 - 10,734
Maintenance and repairs....... 7,270 620 - 7,890
General and administrative.... 6,352 - - 6,352
Interest...................... 27,081 - 3,447(B) 30,528
Other......................... 45 - - 45
-------- ------- ------- -------
Total expenses............. 96,875 1,354 4,531 102,760
-------- ------- ------- -------
INCOME FROM OPERATIONS........ 30,068 4,233 (4,531) 29,770
F-4
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GAIN ON SALES OF REAL
ESTATE ASSETS.............. 4,156 - - 4,156
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATES.. 1,514 - - 1,514
MINORITY INTEREST IN EARNINGS:
Operating partnership......... (9,763) - 84(C) (9,679)
Shopping center properties.... (405) - - (405)
-------- ------- ------- --------
INCOME BEFORE EXTRAORDINARY
ITEM....................... 25,570 4,233 (4,447) 25,356
EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT..... (928) - - (928)
-------- ------- ------- -------
Net income......... $ 24,642 $4,233 $(4,447) $24,428
======== ======= ======= =======
EARNINGS PER COMMON SHARE DATA:
Income before extraordinary
item....................... $ 1.06 $ 1.05
Extraordinary loss on
extinguishment of debt..... (0.04) (0.04)
-------- -------
Net income......... $ 1.02 $ 1.01
======== =======
WEIGHTED AVERAGE SHARES
OUTSTANDING................ 24,104 24,104
======== =======
(A) Reflects depreciation expense on the Asheville Mall
acquisition computed on the straight-line method over
the estimated useful life of 40 years.
(B) Reflects interest expense associated with the $48,900
mortgage note payable and the $16,697 of borrowings
under the Company's line of credit agreement, at LIBOR
plus .9% (6.98%) and LIBOR plus 1.0% (7.08%),
respectively, in connection with the acquisition of
Asheville Mall.
(C) Reflects the minority interests' share of the income
from operations of Asheville Mall and the pro forma
adjustments.
F-5
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CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited And Amounts In Thousands, Except Per Share Amounts)
CBL Asheville Pro Forma Pro Forma
Historical Mall Adjustments Consolidated
---------- --------- ----------- ------------
REVENUES:
Rentals:
Minimum.................... $ 93,217 $ 4,564 $ - $ 97,781
Percentage................. 2,724 866 - 3,590
Other...................... 1,758 - - 1,758
Tenant reimbursements......... 42,447 1,594 - 44,041
Management and leasing fees... 2,377 - - 2,377
Development fees.............. 7 - - 7
Interest and other............ 4,275 - - 4,275
-------- ------- ------- --------
Total revenues............ 146,805 7,024 - 153,829
-------- ------- ------- --------
EXPENSES:
Property operating............ 24,232 733 - 24,965
Depreciation and amortization. 25,439 - 1,445(A) 26,884
Real estate taxes............. 11,587 378 - 11,965
Maintenance and repairs....... 8,957 793 - 9,750
General and administrative.... 8,467 - - 8,467
Interest...................... 31,684 - 4,399(B) 36,083
Other......................... 646 - - 646
-------- ------- ------- --------
Total expenses............ 111,012 1,904 5,844 118,760
-------- ------- ------- --------
INCOME FROM OPERATIONS........ 35,793 5,120 (5,844) 35,069
GAIN ON SALES OF REAL
ESTATE ASSETS.............. 13,614 - - 13,614
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATES.. 1,831 - - 1,831
MINORITY INTEREST IN EARNINGS:
Operating partnership......... (15,468) - 225(C) (15,243)
Shopping center properties.... (527) - - (527)
-------- ------- ------- --------
INCOME BEFORE EXTRAORDINARY
ITEM....................... 35,243 5,120 (5,619) 34,744
EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT..... (820) - - (820)
-------- ------- ------- --------
F-6
PAGE
Net income........... $ 34,423 $ 5,120 $(5,619) $ 33,924
======== ======= ======= ========
EARNINGS PER COMMON SHARE DATA:
Income before extraordinary
item...................... $ 1.69 $ 1.66
Extraordinary loss on
extinguishment of debt.... (0.04) (0.04)
Net income........... $ 1.65 $ 1.62
======== ========
WEIGHTED AVERAGE
SHARES OUTSTANDING......... 20,890 20,890
======== ========
(A) Reflects depreciation expense on the Asheville
Mall acquisition computed on the straight-line
method over the estimated useful life of 40 years.
(B) Reflects interest expense associated with the
$48,900 mortgage note payable and the $16,697 of
borrowings under the Company's line of credit
agreement, at LIBOR plus .9% (6.68%) and LIBOR
plus 1.0% (6.78%), respectively, in connection
with the acquisition of Asheville Mall. If
interest rates under the mortgage note payable
and line of credit agreement fluctuated 0.125%,
interest costs on the pro forma indebtedness would
increase or decrease by approximately $82 on an
annualized basis.
(C) Reflects the minority interests' share of the income
from operations of Asheville Mall and the pro forma
adjustments.
F-7
PAGE
PROFORMA CONSOLIDATED BALANCE SHEET
The unaudited pro forma consolidated balance sheet is presented as
if the acquisition of Asheville Mall had occurred as of September 30, 1997.
The unaudited pro forma consolidated balance sheet is not necessarily
indicative of what the actual financial position would have been at
September 30, 1997, nor does it purport to represent the future financial
position of the Company.
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(Unaudited And Dollars In Thousands, Except Per Share Amounts)
Pro Forma
CBL Acquisition Company
Historical Adjustments Pro Forma
---------- ----------- ---------
ASSETS: (A)
Real Estate Assets:
Land............................ $ 152,961 $ 7,349 $ 160,310
Buildings and improvements...... 942,470 57,819 1,000,289
---------- ----------- ----------
1,095,431 65,168 1,160,599
Less: Accumulated depreciation.. (137,407) - (137,407)
---------- ----------- ----------
958,024 65,168 1,023,192
---------- ----------- ----------
Developments in progress........ 149,083 - 149,083
---------- ----------- ----------
Net investment in real
estate assets................ 1,107,107 65,168 1,172,275
Cash and cash equivalents.......... 6,202 - 6,202
Receivables:
Tenant, net of allowance for
doubtful accounts of $788.... 11,829 606 12,435
Other........................... 967 - 967
Mortgage notes receivable.......... 16,638 - 16,638
Other assets....................... 7,895 - 7,895
---------- ----------- ----------
1,150,638 65,774 1,216,412
========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Mortgage and other notes payable... 643,556 65,597 709,153
Accounts payable and
accrued liabilities............. 30,375 177 30,552
---------- ----------- ----------
F-8
PAGE
Total liabilities........... 673,931 65,774 739,705
---------- ----------- ----------
Commitments and contingencies...... - - -
Distributions and losses in excess
ofinvestment in unconsolidated
affiliates...................... 7,142 - 7,142
---------- ----------- ----------
Minority interest.................. 128,096 - 128,096
---------- ----------- ----------
Shareholders' equity:
Preferred stock, $0.01 par value,
5,000,000 shares authorized,
none issued..................... - - -
Common stock, $0.01 par value,
95,000,000 shares authorized,
24,043,890 shares issued and
outstanding at
September 30, 1997.............. 240 - 240
Excess stock, $0.01 par value,
100,000,000 shares authorized,
none issued..................... - - -
Additional paid-in capital......... 359,044 - 359,044
Accumulated deficit................ (17,444) - (17,444)
Deferred compensation.............. (371) - (371)
---------- ----------- ----------
Total shareholders' equity.. 341,469 - 341,469
---------- ----------- ----------
$1,150,638 $ 65,774 $1,216,412
========== =========== ==========
(A) Reflects the acquisition of Asheville Mall
through the issuance of a $48,900 mortgage
note payable, borrowings of $16,697 under
the Company's line of credit agreement, and
the assumption of certain assets and
liabilities.
F-9
PAGE
C) EXHIBITS
Purchase and Sale Agreement dated November 12, 1997 between
R.B.R.& S.T. Limited Partnership, a North Carolina limited
partnership (seller) and Development Options, Inc., a Wyoming
corporation (Purchaser)
Promissory Note between Asheville, LLC and Wells Fargo Bank
National Association in the amount of $48,900,000
Consent of Arthur Andersen LLP
PAGE
SIGNATURE
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 thereunto duly authorized.
CBL & ASSOCIATES PROPERTIES, INC.
John N. Foy
-----------------------------
John N. Foy
Executive Vice President,
Chief Financial Officer and
Secretary
(Authorized Officer of the
Registrant,
Principal Financial Officer and
Principal Accounting Officer)
Date: February 18, 1997
PAGE
EXHIBITS INDEX
Exhibit:
2.1 Purchase and Sale Agreement dated November 12, 1997 between
R.B.R.& S.T. Limited Partnership, a North Carolina limited
partnership (seller) and Development Options, Inc., a Wyoming
corporation (Purchaser)
2.2 Promissory Note between Asheville, LLC and Wells Fargo Bank
National Association in the amount of $48,900,000
2.3 Consent of Arthur Andersen LLP