Securities Exchange Act of 1934 -- Form 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report :
June 24, 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
- ----------------- ------------------ ---------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Indentification Number)
incorporation)
One Park Place, 6148 Lee Highway, 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 OF ASSETS
On June 23, 1998, CBL & Associates Properties, Inc. (the "Registrant"),
through its Operating Partnership, entered into a Contribution and Exchange
Agreement (the "Contribution and Exchange Agreement") with Nashland
Associates, unaffiliated party ("Transferor"), pursuant to which
Transferor contributed two malls, two associated shopping centers and
one community center (the "Properties") to the Operating Partnership in
exchange for the Operating Partnership Units, the agreement of the
Operating Partnership to take title to the Properties subject to certain
existing indebtedness, and the agreement of the Operating Partnership to
refinance such existing indebtedness. The Properties are located in
Nashville, Tennessee and represent in the aggregate approximately 2.5
million square feet of Gross Leasable Area ("GLA"). An affiliate of
J.W. O'Connor & Co. Incorporated is the managing general partner of
Transferor.
The following table contains certain information concerning each of
the Properties:
Mall Store Mall Store
Center Type GLA Space Occupancy(1)
- ------------------ ----------------- --------- --------- ------------
Hickory Hollow Mall 1,095,946 425,757 83%
Rivergate Mall 1,073,970 390,324 85%
The Courtyard at
Hickory Hollow Associated Center 76,460 76,460 100%
Rivergate Village Associated Center 166,366 166,366 96%
Lions Head Village Community Center 93,290 93,290 86%
--------- ---------
Totals 2,506,032 1,152,197 87%(2)
- -------------------
(1) Tenants in occupancy and paying rent on December 31, 1997.
(2) Weighted average occupancy, based on square footage.
The aggregate transaction value was approximately $247.4 million
<before closing costs, deferred maintenance and closing adjustments).
Concurrently with the execution of the Contribution and Exchange Agreement,
the Registrant obtained a financing commitment from Merrill Lynch Mortgage
Capital Inc. and CIGNA Investments Inc. for the refinancing of the
Properties' existing indebtedness with new ten-year, fixed rate loans on
four of the Properties with an aggregate principal amount of approximately
$182.7 million (the "Financing Commitments"). The balance of the required
financing under the Contribution and Exchange Agreement will be provided
from the Registrant's existing lines of credit and cash on hand.
Material factors considered by the Registrant in assessing the
Properties include historical net operating income, the competitive
advantage and dominance in the Nashville, Tennessee real estate markets,
occupancy and rental rates,
2
the prospects for new leasing and the ability to raise occupancy and rental
rates. The Registrant also considered the capital expenditures necessary to
maintain the Properties in class A condition, the capitalization rates for
comparable real estate and the ability to reduce expenses through self
management of the Properties. The registrant after reasonable inquiry is
not aware of any material factors relating the Properties other than those
discussed above that would cause the reported financial information not to
be necessarily indicative of future operating results.
The description contained herein of the acquisition transaction
described above does not purport to be complete and is qualified in its
entirety by reference to the Contribution and Exchange Agreement which is
filed as an exhibit hereto.
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, 1997 and for the three
months ended March 31, 1998 (unaudited) F-2
Notes to Financial Statements F-3
B) PRO FORMA FINANCIAL INFORMATION OF REGISTRANT
Pro forma consolidated statement of
operations for the year ended
December 31, 1997(unaudited) F-5
Pro forma consolidated statement of
operations for the three months ended
March 31, 1998 (unaudited) F-7
Pro forma consolidated balance sheet as of
March 31, 1998 (unaudited) F-9
C) EXHIBITS
Contribution and Exchange Agreement dated June 23,
1998 between Nashland Associates L.P., a Tennessee
limited partnership (Transferor) and CBL &
Associates Limited Partnership, a Delaware limited
partnership (Transferee)
Consent of Arthur Andersen LLP
3
A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of CBL & Associates Properties, Inc.:
We have audited the accompanying combined statement of excess of
revenues over specific operating expenses for Hickory Hollow Mall,
Rivergate Mall, Village at Rivergate, Courtyard at Hickory Hollow and
Lions Head Village (collectively the "Properties") for the year ended
December 31, 1997. This financial statement is the responsibility of
the management of the Properties. Our responsibility is to express an
opinion on this financial 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 combined statement of
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 combined statement
of excess of revenues over specific operating expenses. 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 audit provides a reasonable
basis for our opinion.
As described on Note 2, this combined financial statement excludes certain
expenses that would not be comparable with those resulting from the
operations of the Properties after acquisition by CBL and Associates
Properties, Inc. The accompanying combined financial statement was
prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission (for inclusion in the Form 8-K of
CBL & Associates Properties, Inc.) and is not intended to be a complete
presentation of the Properties' revenues and expenses.
In our opinion, the combined statement referred to above presents fairly,
in all material respects, the excess of revenues over specific operating
expenses of Hickory Hollow Mall, Rivergate Mall, Village at Rivergate,
Courtyard at Hickory Hollow and Lions Head Village for the year ended
December 31, 1997, in conformity with generally accepted accounting
principles.
Arthur Andersen, LLP
New York, New York
June 23, 1998
F-1
PROPERTIES TO BE ACQUIRED BY CBL & ASSOCIATES PROPERTIES, INC.
COMBINED STATEMENT OF EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES (Note 2)
FOR THE YEAR ENDED DECEMBER 31, 1997
AND FOR THE THREE MONTHS ENDED
MARCH 31, 1998 (UNAUDITED)
Three
Year Ended Months Ended
December 31, March 31,
1997 1998
------------ ------------
(UNAUDITED)
REVENUES:
Rental revenues $15,889,454 $4,020,000
Percentage rent 419,227 136,000
Specialty leasing 1,447,866 333,000
Tenant reimbursements 9,968,959 2,407,000
------------ ----------
Total revenues 27,725,506 6,896,000
------------ ----------
SPECIFIC OPERATING EXPENSES:
Property operating 4,288,729 1,242,000
Maintenance & repairs 1,826,421 593,000
Real estate taxes 3,286,758 895,000
Management fees 899,512 223,000
Other expense 25,560
------------ ----------
Total Specific Operating Expenses 10,326,980 2,953,000
------------ ----------
EXCESS OF REVENUES OVER SPECIFIC
OPERATING EXPENSES $ 17,398,526 $ 3,943,000
============ ===========
The accompanying notes are an integral part of these statements.
F-2
PROPERTIES TO BE ACQUIRED BY CBL & ASSOCIATES PROPERTIES, INC.
NOTES TO COMBINED STATEMENT OF EXCESS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
DECEMBER 31, 1997
1. DESCRIPTION OF PROPERTIES AND SIGNIFICANT ACCOUNTING POLICIES
Description of Properties
Hickory Hollow Mall and Rivergate Mall, regional shopping centers,
and Village at Rivergate, Courtyard at Hickory Hollow and Lions Head
Village, community shopping centers, (collectively the "Properties")
are located in the Nashville, Tennessee metropolitan area. The
Properties are owned by Nashland Associates.
The following is a breakdown of the total square feet and the occupancy
percentage for each property as of December 31, 1997:
Total Square Occupancy
Feet Percentage
------------ --------
Hickory Hollow Mall 425,757 83%
Rivergate Mall 390,324 85
Village at Rivergate 166,366 96
Courtyard at Hickory Hollow 76,460 100
Lions Head Village 93,290 86
Revenue Recognition
Minimum rents are recognized on a straight-line basis over the terms
of the related leases. Tenant recoveries and other rents which are
provided for in leases are recognized as income when earned and their
amounts can be reasonably estimated.
Minimum rents recognized on a straight-line basis less than the
contractual amounts due in 1997 amounted to $79,646.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
F-3
2. BASIS OF ACCOUNTING
The accompanying statement of excess of revenues over specific operating
expenses is presented on the accrual basis. This statement has been
prepared in accordance with the applicable rules and regulations of
the Securities and Exchange Commission for real estate properties
acquired. Accordingly, the statement excludes certain historical
expenses not comparable to the operations of the Properties after
acquisition such as depreciation and interest on mortgage debt.
3. LEASES
Minimum future rental revenue from noncancelable leases in effect at
December 31, 1997, is as follows:
For the year ending December 31:
1998 $14,840,628
1999 13,721,791
2000 12,866,826
2001 6,327,005
2002 10,867,579
Thereafter 36,265,758
-----------
Total $94,889,587
===========
Future minimum rentals do not include amounts for renewal periods
or recoveries of certain operating costs which may be received from
tenants.
F-4
B. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The unaudited pro forma consolidated statements of operations are
presented as if the acquisition of the Properties 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 the Registrant would have been assuming the Registrant had acquired
the Properties 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 THREE MONTHS ENDED MARCH 31, 1998
(Unaudited And Amounts In Thousands, Except Per Share Amounts)
CBL The Pro Forma Pro Forma
Historical Properties Adjustments Consolidated
----------- ---------- ----------- ------------
REVENUES:
Rentals:
Minimum $ 36,053 $ 4,020 $ - $ 40,073
Percentage 1,675 136 - 1,811
Other 433 333 - 766
Tenant reimbursements 15,451 2,407 - 17,858
Management, development
and leasing fees 696 - - 696
Interest and other 748 0 - 748
----------- ---------- ----------- -----------
Total revenues 55,056 6,896 - 61,952
----------- ---------- ----------- -----------
EXPENSES:
Property operating 8,844 1,242 - 10,086
Depreciation and amortization 9,155 - 1,296(A) 10,451
Real estate taxes 4,962 895 - 5,857
Maintenance and repairs 3,000 593 - 3,593
General and administrative 3,001 - - 3,001
Interest 13,775 - 3,876(B) 17,651
Other 6 - - 6
----------- ---------- ----------- -----------
Total expenses(D) 42,743 2,730 5,172 50,645
----------- ---------- ----------- -----------
Income from operations 12,313 4,166 (5,172) 11,307
F-5
Gain on sales of real estate
assets 1,931 - - 1,931
Equity in earnings of
unconsolidated affiliates 737 - - 737
Minority interest in earnings:
Operating partnership (4,173) - 302(C) (3,871)
Shopping center properties (209) - - (209)
----------- ---------- ----------- -----------
Net income $ 10,599 $4,166 $ (4,870) $ 9,895
=========== ========== =========== ===========
BASIC PER SHARE DATA:
Net income $ 0.44 $ 0.41
=========== ===========
Weighted average shares
outstanding 24,070 24,070
=========== ===========
DILUTED PER SHARE DATA:
Net income $ 0.44 $ 0.41
=========== ===========
Weighted average and dilutive
potential shares outstanding 24,304 24,304
=========== ===========
(A) Reflects depreciation expense on the Properties computed
on the straight-line method over the estimated useful life
of 40 years.
(B) Reflects interest expense associated with the $182,700
mortgage note payable and the $44,700 of borrowings under
the Company's line of credit agreement, at 6.86% and LIBOR
plus 1.0% (6.66%), respectively, in connection with the
acquisition of the Properties.
(C) Reflects the minority interests' share of the income from
operations of the Properties and the change in minority
interest due to the issuance of Operating Partnership units
and the pro forma adjustments.
(D) Management fees are eliminated in the pro forma presentation.
F-6
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited And Amounts In Thousands, Except Per Share Amounts)
CBL The Pro Forma Pro Forma
Historical Properties Adjustments Consolidated
----------- ----------- ----------- ------------
REVENUES:
Rentals:
Minimum $115,640 $15,889 $ - $131,529
Percentage 3,660 419 - 4,079
Other 1,949 1,448 - 3,397
Tenant reimbursements 51,302 9,969 - 61,271
Management, development
and leasing fees 2,378 - - 2,378
Interest and other 2,675 - - 2,675
----------- ----------- ----------- ------------
Total revenues 177,604 27,725 - 205,329
----------- ----------- ----------- ------------
EXPENSES:
Property operating 30,585 4,314 - 34,899
Depreciation and amortization 32,308 - 5,182(A) 37,490
Real estate taxes 14,859 3,287 - 18,146
Maintenance and repairs 10,239 1,826 - 12,065
General and administrative 9,049 - - 9,049
Interest 37,830 - 15,537(B) 53,367
Other 330 - - 330
----------- ----------- ----------- ------------
Total expenses (D) 135,200 9,427 20,719 165,346
----------- ----------- ----------- ------------
Income from operations 42,404 18,298 (20,719) 39,983
Gain on sales of real estate
assets 6,040 - - 6,040
Equity in earnings of
unconsolidated affiliates 1,916 - - 1,916
Minority interest in earnings:
Operating partnership (13,819) - 726(C) (13,093)
Shopping center properties (508) - - (508)
----------- ----------- ----------- ------------
Income before extraordinary item 36,033 18,298 (19,993) 34,338
Extraordinary loss on
extinguishment of debt (1,092) - - (1,092)
----------- ----------- ----------- ------------
F-7
Net income $ 34,941 $18,298 $(19,993) $33,246
=========== =========== =========== ============
BASIC PER SHARE DATA:
Income before extraordinary item $ 1.50 $ 1.43
Net income $ 1.45 $ 1.38
=========== ============
Weighted average shares
outstanding 24,054 24,054
=========== ============
DILUTED PER SHARE DATA:
Income before extraordinary item $ 1.49 $ 1.42
Net income $ 1.45 $ 1.38
=========== ============
Weighted average and dilutive
potential shares outstanding 24,151 24,151
=========== ============
(A) Reflects depreciation expense on the Properties computed
on the straight-line method over the estimated useful life
of 40 years.
(B) Reflects interest expense associated with the $182,700
mortgage note payable and the $44,700 of borrowings under
the Company's line of credit agreement, at 6.86% and LIBOR
plus 1.0% (6.72%), respectively, in connection with the
acquisition of the Properties.
(C) Reflects the minority interests' share of the income from
operations of the Properties and the change in minority
interest due to the issuance of Operating Partnership
units and the pro forma adjustments.
(D) Management fees are eliminated in the pro forma presentation.
F-8
PRO FORMA CONSOLIDATED BALANCE SHEET
The unaudited pro forma consolidated balance sheet is presented as if
the acquisition of the Properties had occurred as of March 31, 1998.
The unaudited pro forma consolidated balance sheet is not necessarily
indicative of what the actual financial position would have been at
March 31, 1998, nor does it purport to represent the future financial
position of the Company.
CBL & ASSOCIATES PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(Unaudited And Dollars In Thousands, Except Per Share Amounts)
Pro Forma
CBL Acquisition Company
Historical Adjustments Pro Forma
---------- ----------- ----------
ASSETS: (A)
Real Estate Assets:
Land $ 193,853 $ 41,420 $ 235,273
Buildings and improvements 1,210,328 205,980 1,416,308
---------- ---------- ----------
1,404,181 247,400 1,651,581
Less: Accumulated depreciation (154,510) - (154,510)
---------- ---------- ----------
1,249,671 247,400 1,497,071
---------- ---------- ----------
Developments in progress 57,092 - 57,092
---------- ---------- ----------
Net investment in real estate assets 1,306,763 247,400 1,554,163
Cash and cash equivalents 9,008 - 9,008
Receivables:
Tenant, net of allowance for doubtful
accounts of $788 14,380 425 14,805
Other 1,161 - 1,161
Mortgage notes receivable 12,032 - 12,032
Other assets 9,061 - 9,061
---------- ----------- ----------
$1,352,405 $247,825 $1,600,230
========== =========== ==========
F-9
LIABILITIES AND SHAREHOLDERS' EQUITY:
Mortgage and other notes payable $849,845 $227,400 $1,077,245
Accounts payable and accrued
liabilities 25,397 425 25,822
---------- ----------- ----------
Total liabilities 875,242 227,825 1,103,067
---------- ----------- ----------
Commitments and contingencies - - -
Distributions and losses in excess
of investment in unconsolidated
affiliates 7,321 - 7,321
---------- ----------- ----------
Minority interest 128,123 20,000 148,123
---------- ----------- ----------
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,
24,074,732 shares issued and
outstanding at March 31, 1998 241 - 241
Excess stock, $0.01 par value,
100,000,000 shares authorized,
none issued - - -
Additional paid-in capital 359,796 - 359,796
Accumulated deficit (17,834) - (17,834)
Deferred compensation (484) - (484)
---------- ----------- ----------
Total shareholders' equity 341,719 - 341,719
---------- ----------- ----------
$1,352,405 $247,825 $1,600,230
========== =========== ==========
(A) Reflects the acquisition of the Properties through the
issuance of a $182,700 mortgage note payable, borrowings
of $44,700 under the Company's line of credit agreement,
issuance of $20 million of Operating Partnership units
and the assumption of certain assets and liabilities.
F-10
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.
/s/ 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: June 25, 1998
EXHIBITS INDEX
Exhibit:
2.1 Contribution and Exchange Agreement dated June 23, 1998
between Nashland Associates L.P., a Tennessee limited
partnership (Transferor) and CBL & Associates Limited
Partnership, a Delaware limited partnership (Transferee)
2.3 Consent of Arthur Andersen LLP