1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO 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 15, 1999
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact Name of Registrant as Specified in its Charter)
TEXAS 1-9016 75-6335572
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation or Organization) Identification Number)
6210 NORTH BELTLINE ROAD, SUITE 170, IRVING, TEXAS 75063
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (972) 756-6000
2
The undersigned Registrant hereby amends its Current Report on Form 8-K dated
January 15, 1999, which was filed with the Securities and Exchange Commission
on January 29, 1999, to include the financial statements for the Northern
California & Colorado Portfolio required by Item 7 (a) and the pro forma
financial information required by Item 7 (b).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements: See Index to Financial Statements and Pro Forma
Financial Information appearing on page F-1 of this Form 8-K/A.
(b) Pro Forma Financial Information: See Index to Financial Statements and
Pro Forma Financial Information appearing on page F-1 of this Form
8-K/A.
(c) Exhibits
The following exhibits are filed with this report:
Exhibit
Number Description
10.1 Agreement of Purchase and Sale, dated as of November
12, 1998, by and between Lincoln-Whitehall Realty,
L.L.C., Lincoln-Whitehall Pacific, L.L.C., WHLNF
Real Estate Limited Partnership, WHSUM Real Estate
Limited Partnership (collectively, the "Sellers")
and the Trust.
10.2 Amendment to Agreement of Purchase and Sale, dated
November 23, 1998, by and among the Sellers and the
Trust.
10.3 Second Amendment to Agreement of Purchase and Sale,
dated December 11, 1998, by and among the Sellers
and the Trust.
10.4 Amended and Restated Second Amendment to Agreement
of Purchase and Sale dated December 11, 1998, by and
among the Sellers and the Trust.
10.5 Third Amendment to Agreement of Purchase and Sale,
dated as of December 22, 1998, by and among the
Sellers and the Trust.
10.6 Fourth Amendment to Agreement of Purchase and Sale,
dated as of January 7, 1999, by and among the
Sellers and the Trust.
10.7 Fifth Amendment to Agreement of Purchase and Sale,
dated as of January 11, 1999, by and among the
Sellers and the Trust.
10.8 Sixth Amendment to Agreement of Purchase and Sale,
dated as of January 13, 1999, by and among the
Sellers and the Trust.
23.1 Consent of Ernst & Young LLP
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INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
FINANCIAL STATEMENTS
NORTHERN CALIFORNIA & COLORADO PORTFOLIO
Report of Independent Auditors................................................................... F-2
Combined Historical Summary of Gross Income and Direct Operating
Expenses for the year ended December 31, 1998.................................................... F-3
Notes to Combined Historical Summary of Gross Income and Direct
Operating Expenses............................................................................... F-4
PRO FORMA FINANCIAL INFORMATION........................................................................... F-6
Pro forma condensed consolidated balance sheet as of December 31, 1998........................... F-8
Pro forma condensed consolidated statement of operations for the year
Ended December 31, 1998.......................................................................... F-9
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Northern California & Colorado Portfolio
Combined Historical Summary of
Gross Income and Direct Operating Expenses
For the Year ended December 31, 1998
CONTENTS
Report of Independent Auditors.............................................. F-2
Financial Statements
Combined Historical Summary of Gross Income
and Direct Operating Expenses............................................ F-3
Notes to Combined Historical Summary of Gross Income and
Direct Operating Expenses................................................ F-4
F-1
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Report of Independent Auditors
Board of Trust Managers
American Industrial Properties REIT
We have audited the accompanying Combined Historical Summary of Gross Income and
Direct Operating Expenses (the Combined Historical Summary) of the Northern
California & Colorado Portfolio (the Properties), as described in Note 1 for the
year ended December 31, 1998. This Combined Historical Summary is the
responsibility of the Properties' management. Our responsibility is to express
an opinion on this Combined Historical Summary 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 Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Combined Historical Summary. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Combined
Historical Summary. We believe our audit provides a reasonable basis for our
opinion.
The accompanying Combined Historical Summary has been prepared for the purpose
of complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Current Report on Form 8-K, as amended, of
American Industrial Properties REIT, as described in Note 1 and is not intended
to be a complete presentation of the income and expenses of the properties.
In our opinion, the Combined Historical Summary referred to above presents
fairly, in all material respects, the gross income and direct operating
expenses of the Northern California & Colorado Portfolio, as described in Note
1, for the year ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
March 18, 1999
F-2
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Northern California & Colorado Portfolio
Combined Historical Summary of
Gross Income and Direct Operating Expenses
Year ended December 31, 1998
GROSS INCOME
Rental $12,409,182
Reimbursements 2,068,288
Other 85,514
-----------
Total Gross Income 14,562,984
DIRECT OPERATING EXPENSES
Real estate taxes 1,431,025
Repairs and maintenance 875,910
Management fees 402,811
Utilities 386,227
Insurance 128,514
Other property operating 309,177
-----------
Total Direct Operating Expenses 3,533,664
EXCESS OF GROSS INCOME OVER DIRECT
OPERATING EXPENSES $11,029,320
===========
See accompanying notes.
F-3
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Northern California & Colorado Portfolio
Combined Historical Summary of
Gross Income and Direct Operating Expenses
Year ended December 31, 1998
1. ORGANIZATION AND BASIS OF PRESENTATION
The Northern California & Colorado Portfolio (the Properties) includes three
separate office and six separate industrial flex properties located in the San
Francisco, California, and Denver, Colorado, Metropolitan areas. The Properties,
which are under common management and control, have been summarized as follows:
Property Location Type Square Feet
-------- -------- ---- -----------
Centre Point Office Park Walnut Creek, CA Office 197,424
Baytech Park San Jose, CA Industrial flex 188,825
Bridgeway Technology Center Newark, CA Industrial flex 169,998
310 Interlocken Parkway Broomfield, CO Office 121,970
Junction II Business Park San Jose, CA Industrial flex 77,374
485 Clyde Mountview, CA Industrial flex 61,600
107 Woodmere Folsom, CA Office 57,496
Stewart Plaza Sunnyvale, CA Industrial flex 47,054
3100 Alfred Santa Clara, CA Industrial flex 33,824
The Properties have a weighted average occupancy of 98.6%. On January 15, 1999,
the Properties were sold to American Industrial Properties REIT, a publicly
traded real estate investment trust.
The accompanying Combined Historical Summary has been prepared for the purpose
of complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Current Report on Form 8-K, as amended, of
American Industrial Properties REIT. The Combined Historical Summary is not
intended to be a complete presentation of income and expenses of the Properties
for the year ended December 31, 1998, as certain costs such as depreciation,
amortization, interest and other debt service costs, and asset management fees
have been excluded. These costs are not considered to be direct operating
expenses.
F-4
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Northern California & Colorado Portfolio
Combined Historical Summary of
Gross Income and Direct Operating Expenses (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the Combined Historical Summary in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts included in the Combined Historical
Summary and accompanying notes thereto. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Minimum rents are recognized on the straight-line basis; as such, the rental
revenues for the leases which contain rent abatements and contractual increases
are recognized on a straight-line basis over the initial term of the related
lease. Property operating cost recoveries from tenants of common area
maintenance, real estate taxes and other recoverable costs, are recognized in
the period when the recoveries are billable.
CAPITALIZATION POLICY
Ordinary repairs and maintenance are expensed as incurred; major replacements
and improvements are capitalized.
3. TRANSACTIONS WITH AFFILIATES
An affiliate of the owner of the Properties receives management fees related to
the Properties. The management fee is 3% to 4% of gross annual cash receipts. In
addition, a reimbursement for salaries is paid to the affiliate when dedicated
on-site personnel are utilized at the Properties. Salary reimbursements for the
year ended December 31, 1998 were $106,437.
4. OPERATING LEASES
The Properties' minimum future rentals are as follows:
1999 $13,742,721
2000 13,566,867
2001 11,141,809
2002 7,749,971
2003 6,172,754
Thereafter 6,705,507
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$59,079,629
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F-5
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
The following Pro Forma Condensed Consolidated Balance Sheet of the
American Industrial Properties REIT (the "Trust") as of December 31, 1998 has
been prepared as if the purchase of the Northern California & Colorado Portfolio
had occurred as of December 31, 1998. The Northern California & Colorado
Portfolio is defined as a portfolio of nine affiliated properties consisting of
955,568 square feet of office and industrial flex space.
The properties in the Northern California & Colorado Portfolio are as
follows:
PROPERTY LOCATION TOTAL SQUARE FEET
- -------- ------------------------ -----------------
Centre Point Office Park Walnut Creek, California 197,424
Baytech Park San Jose, California 188,825
Bridgeway Technology Center Newark, California 169,998
310 Interlocken Parkway Broomfield, Colorado 121,970
Junction II Business Park San Jose, California 77,374
485 Clyde Mountview, California 61,600
107 Woodmere Folsom, California 57,496
Stewart Plaza Sunnyvale, California 47,057
3100 Alfred Santa Clara, California 33,824
The following Pro Forma Condensed Consolidated Statement of Operations of
the Trust for the year ended December 31, 1998 has been prepared as if each of
the following transactions had occurred as of January 1, 1998: (i) (a) the
acquisition of North Austin; (b) the acquisition, through AIP Operating, L.P.,
a limited partnership in which the Trust has a 99% controlling ownership
interest, of Spring Valley #6; and (c) the acquisition of the Spieker
Portfolio, all of which are defined and described in Amendment No. 1 to the
Current Report on Form 8-K/A of the Trust dated April 30, 1998 and filed with
the SEC on July 13, 1998 (the "April 30, 1998 Form 8-K/A"), which is
incorporated herein by reference; (ii) the acquisition of Norfolk Commerce Park
("Norfolk"), a 323,731 square foot light industrial project consisting of three
buildings in Norfolk, Virginia; (iii) the acquisition of a portfolio consisting
of five affiliated industrial properties (the "A&A Portfolio"); (iv) the
acquisition of four unrelated properties (the "Other Recent Acquisitions"); (v)
the acquisition, through DDR/Tech 29 Limited Partnership, a limited
partnership in which the Trust has a controlling ownership interest, of Tech 29
("Tech 29"), a 290,991 square foot light industrial project consisting of three
buildings in Silver Spring, Maryland; (vi) the acquisition of five properties
through the merger of the Trust and a subsidiary of Developers Diversified
Realty Corporation ("DDR"), a real estate investment trust which owns
approximately 45% of the Common Shares of the Trust, and the concurrent
issuance to DDR of 1,278,471 Common Shares at $15.50 per share; (vii) the
purchase of the Northern
F-6
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California & Colorado Portfolio (i through vii, collectively, the "Recent
Transactions"); and (viii) the sale to DDR of 2,815,192 Common Shares at $15.50
per share and concurrent repayment of loans made by DDR in favor of the Trust
(the "DDR Debt Conversion").
The Pro Forma Condensed Balance Sheet as of December 31, 1998 and the Pro
Forma Condensed Consolidated Statement of Operations of the Trust for the year
ended December 31, 1998 exclude any effect of the option of the Trust to
require DDR to purchase additional shares with a total purchase price not to
exceed $200 million to fund property acquisitions, as no further probable
acquisitions have been identified by the Trust.
The Pro Forma Financial Information of the Trust has been prepared using
the purchase method of accounting for the acquisition of the Recent
Transactions and other property acquisitions, whereby the assets and
liabilities of the properties were adjusted to estimated fair value, based upon
preliminary estimates, which are subject to change as additional information is
obtained. The allocations of purchase costs are subject to final determination
based upon estimates and other evaluations of fair value. Therefore, the
allocations reflected in the following Pro Forma Financial Information may
differ from the amounts ultimately determined.
Such Pro Forma Financial Information is based in part upon (i) the
Consolidated Financial Statements of the Trust for the year ended December 31,
1998 included in the Trust's Annual Report on Form 10-K for the year ended
December 31, 1998; (ii) the Combined Statement of Revenue and Certain Expenses
of Developers Diversified Realty Corporation Properties for the six months ended
June 30, 1998 filed with the SEC with Amendment No. 1 to the Trust's Current
Report on Form 8-K, dated July 30, 1998; (iii) the Combined Statement of Revenue
and Certain Expenses of the Norfolk Commerce Park Properties for the six months
ended June 30, 1998 filed with the SEC with the Trust's Current Report on Form
8-K, dated July 30, 1998; (v) the combined statement of revenue and certain
expenses of The A&A Virginia Properties for the nine months ended September 30,
1998 filed with the SEC with Amendment No. 1 to the Trust's Current Report on
Form 8-K, dated October 14, 1998; (vi) the Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Northern California & Colorado
Portfolio, included elsewhere herein, and (vii) the Pro Forma Financial
Information presented in the April 30, 1998 Form 8-K/A.
The Pro Forma Financial Information is presented for information purposes
only and is not necessarily indicative of the financial position or results of
operations of the Trust that would have occurred if such transactions had been
completed on the dates indicated, nor does it purport to be indicative of future
financial position or results of operations. In the opinion of the Trust's
management, all material adjustments necessary to reflect the effect of these
transactions have been made.
F-7
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(IN THOUSANDS)
(UNAUDITED)
ASSETS
Trust Recent Pro
Historical (A) Transactions (B) Forma
---------- ------------ ---------
Real estate, net $ 471,683 $ 127,300 $ 598,983
Cash - unrestricted 6,145 -- 6,145
Cash - restricted 5,422 -- 5,422
Other assets, net 17,080 -- 17,080
--------- ----------- ---------
$ 500,330 $ 127,300 $ 627,630
========= =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 252,481 $ 75,500 $ 327,981
Related party notes payable 14,058 -- 14,058
Accrued interest payable 1,477 -- 1,477
Accounts payable, accrued
expenses and other 17,651 -- 17,651
Tenant security deposits 2,138 -- 2,138
--------- ----------- ---------
287,805 75,500 363,305
Minority interests 6,946 -- 6,946
Shareholders' equity:
Shares of beneficial interest
($0.10 par value) 1,721 341 2,062
Additional paid-in capital 330,031 51,459 381,490
Less Shares in treasury, at cost (2,226) -- (2,226)
Accumulated distributions (68,756) -- (68,756)
Accumulated loss from operations
and extraordinary gains (losses) (58,502) -- (58,502)
Accumulated net realized gain on
sales of real estate 3,311 -- 3,311
--------- ----------- ---------
205,579 51,800 257,379
--------- ----------- ---------
$ 500,330 $ 127,300 $ 627,630
========= =========== =========
(A) Represents the historical financial position of the Trust as of December
31, 1998.
(B) Represents adjustments for the acquisition of the Northern California &
Colorado Portfolio, $75,500 of which was financed with borrowings on the
Trust's acquisition line of credit (the "Credit Facility"), which bears
interest at the 30 day LIBOR rate plus 1.75% and which matures in July 1999
and $51,800 which was financed with the proceeds of the sale of 3,410,615
Common Shares to DDR.
F-8
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AMERICAN INDUSTRIAL PROPERTIES REIT
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
Trust Recent DDR Debt Pro Forma
Historical (A) Transactions (B) Conversion (C) Total
---------- ------------ ---------- ---------
INCOME
Rents and tenant reimbursements $ 48,357 $ 33,016 -- $ 81,373
Interest and other income 705 120 -- 825
---------- ------------ ---------- ---------
49,062 33,136 -- 82,198
---------- ------------ ---------- ---------
EXPENSES
Property operating expenses 16,046 8,147 -- 24,193
Depreciation and amortization 8,383 5,460 (D) -- 13,843
Interest expense 15,139 13,846 (E) (3,889) (F) 25,096
General and administrative 3,729 213 -- 3,942
---------- ------------ ---------- ---------
Total expenses 43,297 27,666 (3,889) 67,074
---------- ------------ ---------- ---------
Income (loss) from operations before
minority interest 5,765 5,470 3,889 15,124
Minority interest 28 -- -- 28
---------- ------------ ---------- ---------
Income (loss) from operations $ 5,793 $ 5,470 3,889 $ 15,152
========== ============ ========== =========
Income from operations per share:
Basic and diluted $ 0.46 $ 0.73
========== =========
Weighted average number of
Common Shares outstanding - basic 12,252 5,951 2,499 20,702
========== ============ ========== =========
(A) Represents the historical results of operations of the Trust for the year
ended December 31, 1998.
(B) Represents adjustments for the Recent Transactions which are derived from
the historical operating results of the respective properties, except for
depreciation and interest, which are based on the Trust's investment in the
acquisitions and method of financing the acquisitions.
(C) Represents adjustments for the DDR Debt Conversion. Since the intent of the
pro forma condensed statement of operations is to reflect the expected
continuing impact of the DDR Debt Conversion, the one-time adjustment for
payments to management under the Change in Control Agreements has been
excluded. Upon consummation of the DDR Debt Conversion, this expense was
recognized on the Trust's statements of operations.
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(D) Represents adjustment for depreciation which is calculated based on the
allocation of the purchase price, with buildings depreciated using the
straight-line method over a 40-year period.
(E) Represents adjustments for interest expense related to mortgages assumed
and borrowings under the Trust's Credit Facility and the unsecured loans
from DDR in connection with the Recent Transactions, The assumed mortgages
bear interest at fixed rates ranging from 7.28% to 8.13%, the Credit
Facility bears interest at a floating rate of the average 30-day LIBOR rate
plus 1.75%, (7.38% at December 31, 1998) and the unsecured loans from DDR
bears interest at a fixed rate of 10.25%.
(F) Represents adjustments for the reduction in interest expense from the
repayment of unsecured loans from DDR with proceeds received from the sale
of 2,815,192 Common Shares to DDR for net proceeds of $42,742.
F-10
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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.
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/ CHARLES W. WOLCOTT
-----------------------------------
Charles W. Wolcott
President and Chief Executive
Officer
March 30, 1999
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EXHIBIT LIST
Exhibit
Number Description
------- -----------
*10.1 Agreement of Purchase and Sale, dated as of November 12, 1998, by and between Lincoln-Whitehall Realty,
L.L.C., Lincoln-Whitehall Pacific, L.L.C., WHLNF Real Estate Limited Partnership, WHSUM Real Estate
Limited Partnership (collectively, the "Sellers") and the Trust.
*10.2 Amendment to Agreement of Purchase and Sale, dated November 23, 1998, by and among the Sellers and the
Trust.
*10.3 Second Amendment to Agreement of Purchase and Sale, dated December 11, 1998, by and among the Sellers
and the Trust.
*10.4 Amended and Restated Second Amendment to Agreement of Purchase and Sale dated December 11, 1998, by and
among the Sellers and the Trust.
*10.5 Third Amendment to Agreement of Purchase and Sale, dated as of December 22, 1998, by and among the
Sellers and the Trust.
*10.6 Fourth Amendment to Agreement of Purchase and Sale, dated as of January 7, 1999, by and among the
Sellers and the Trust.
*10.7 Fifth Amendment to Agreement of Purchase and Sale, dated as of January 11, 1999, by and among the
Sellers and the Trust.
*10.8 Sixth Amendment to Agreement of Purchase and Sale, dated as of January 13, 1999, by and among the
Sellers and the Trust.
*23.1 Consent of Ernst & Young LLP
---------------------
*Filed herewith