1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): DECEMBER 16, 1998
SUMMIT PROPERTIES PARTNERSHIP, L.P.
(Exact name of Registrant as specified in charter)
DELAWARE 0-22411 56-1857809
- ---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS employer
of incorporation) identification no.)
212 SOUTH TRYON STREET, SUITE 500, CHARLOTTE, NC 28281
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(Address of principal executive offices) (Zip Code)
(704) 334-9905
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Summit Properties Partnership, L.P., a Delaware limited
partnership (the "Partnership"), is the entity through which
Summit Properties Inc., a Maryland corporation (together with the
Partnership, "Summit Properties") conducts substantially all of
its business and owns (either directly or through subsidiaries)
substantially all of its assets. On December 16, 1998, Summit
Properties (i) sold five communities (the " Sold Communities") to
Hollow Creek, L.L.C., a newly-formed North Carolina limited
liability company, and (ii) contributed two communities (together
with the Sold Communities, the "Communities") to Station Hill,
L.L.C., a newly-formed North Carolina limited liability company
(the "LLC"), for a total sales price of approximately $90 million.
On the same date, Hollow Creek, L.L.C. contributed the Sold
Communities to the LLC. The LLC is a joint venture limited
liability company, the membership of which is comprised of Summit
Properties and a wholly owned subsidiary of a major financial
services company (the "Joint Venture Member"). The disposition was
effected pursuant to a Real Estate Sale Agreement dated November
20, 1998 between the Partnership and the Joint Venture Member and
pursuant to the Operating Agreement of the LLC, also dated
November 20, 1998. Proceeds from the sale will be used to pay down
Summit Properties' unsecured line of credit and fund its ongoing
development efforts.
Summit Properties' net cash contribution to the LLC (approximately
$5 million) represents a 25 percent equity interest in the LLC. In
addition, Summit Properties is the managing member of the LLC and
will also retain management of the Communities through a
management agreement with the LLC. The cash flow of the LLC will
be distributed pro rata to each member based on its equity
contribution until certain economic benchmarks are achieved, at
which point Summit Properties will receive an escalated portion of
the cash flow and residual interest. The LLC has obtained five
separate mortgages totaling $70,150,000 from Fannie Mae. These
mortgages have a ten-year maturity and a 6.70% interest rate.
The Communities involved in the transaction were Summit Green in
Charlotte, North Carolina, Summit Hollow I and II in Charlotte,
North Carolina, Summit Creek in Charlotte, North Carolina, Summit
Hill I and II in Raleigh, North Carolina and Summit Station in
Tampa, Florida. In total, these Communities include 1,433
apartment homes, translating into an average sales price of
approximately $63,000 per home.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements under Rule 3-14 of Regulation S-X
Not Applicable
(b) Pro Forma Financial Information
Summit Properties Partnership, L.P.
Pro Forma Condensed Combined Balance Sheet as of
September 30, 1998 (Unaudited)
Pro Forma Condensed Combined Statement of Earnings for
the Nine Months Ended September 30, 1998 (Unaudited)
Pro Forma Condensed Combined Statement of Earnings for
the Year Ended December 31, 1997 (Unaudited)
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(c) Exhibits:
2.1 Real Estate Sale Agreement dated November 20, 1998 Between
Summit Properties Partnership, L.P. and Hollow Creek, L.L.C.
Exhibits to this Agreement which have been omitted shall be
supplementally furnished to the Commission upon request.
(filed herewith).
10.1 Operating Agreement dated November 20, 1998 Between Summit
Properties Partnership, L.P., Hollow Creek, L.L.C. and Station
Hill L.L.C. Exhibits to this Agreement which have been omitted
shall be supplementally furnished to the Commission upon
request. (filed herewith).
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
BASIS OF PRESENTATION TO PROFORMA CONDENSED
COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
The Pro Forma Condensed Combined Balance Sheet gives effect to (i) the sale of
five communities to Hollow Creek LLC (which were concurrently contributed by
Hollow Creek LLC to Station Hill LLC) and concurrent contribution of two
communities to Station Hill LLC, in which the Operating Partnership maintains a
25% ownership interest (the "Joint Venture Disposition"), (ii) the acquisition
of a portfolio of multifamily properties in Texas (the "Ewing Acquisition")
through a merger with Ewing Industries Inc. and affiliates thereof ("Ewing
Industries") on November 4, 1998 and (iii) the sale of communities formerly
known as Summit Springs and Summit Old Town. The Ewing Acquisition was funded
through (i) the issuance to Ewing Industries of 489,622 shares of common stock
("Shares") of Summit Properties Inc. and 141,921 units of limited partnership
interest ("Units") of the Operating Partnership with the Shares and Units valued
at Summit Properties' approximate market value of $18.00 on the consummation
date, (ii) the assumption of $79.9 million of debt, and (iii) the payment of
$50.6 million in cash. In addition, Summit Properties has committed to issue
519,365 Shares as a deposit for a property currently in lease-up, with respect
to which payment of the final consideration is contingent upon the property
reaching stabilization (the "Contingent Property"). The current estimate of
additional consideration to be paid at such time is (i) 1,030,009 Shares of
common stock and 36,629 Units (each Share and Unit valued at $18.00) and (ii)
cash in the amount of $1,314,144. The Joint Venture Disposition, the Ewing
Acquisition, excluding the Contingent Property, and the sale of Summit Springs
and Summit Old Town have been presented as if the transactions had occurred on
September 30, 1998. The Pro Forma Condensed Combined Balance Sheet gives effect
to the Ewing Acquisition under the purchase method of accounting in accordance
with Accounting Principles Board Opinion No. 16. In the opinion of management,
all significant adjustments necessary to reflect the effects of the Joint
Venture Disposition and the Ewing Acquisition have been made.
The Pro Forma Condensed Combined Balance Sheet is presented for comparative
purposes only and is not necessarily indicative of what the actual combined
financial position resulting from the Joint Venture Disposition, the Ewing
Acquisition and the Operating Partnership at September 30, 1998 would be, nor
does it purport to represent the future combined financial position of Ewing
Industries and the Operating Partnership. This Pro Forma Condensed Combined
Balance Sheet should be read in conjunction with, and is qualified in its
entirety by, the historical financial statements and notes thereto of the
Operating Partnership as included in the Form 10-K for the year ended December
31, 1997 and the Operating Partnership's Form 10-Q for the nine months ended
September 30, 1998.
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
BALANCE
BEFORE
OTHER EWING JOINT VENTURE JOINT VENTURE PRO FORMA
HISTORICAL DISPOSITIONS ACQUISITION DISPOSITION DISPOSITION COMBINED
---------- ------------ ----------- ------------- ----------- --------
(A) (B) (C) (D)
Assets:
Real estate assets, net $964,476 $ (15,904) $147,692 $ 1,096,264 $ (63,078) $1,033,186
Cash 4,823 -- -- 4,823 12,736 17,559
Restricted cash 7,702 24,046 -- 31,748 67,718 99,466
Other assets 12,999 (15) 1,713 14,697 (71) 14,626
-------- --------- -------- ----------- --------- ----------
Total assets $990,000 $ 8,127 $149,405 $ 1,147,532 $ 17,305 $1,164,837
======== ========= ======== =========== ========= ==========
Liabilities:
Notes payable $601,872 $133,303 $735,175 $ (2,549) $ 732,626
Other liabilities 41,005 $ (282) 4,734 45,457 (1,143) 44,314
-------- --------- -------- ----------- --------- ----------
Total liabilities 642,877 (282) 138,037 780,632 (3,692) 776,940
Partners' equity 347,123 8,409 11,368 366,900 20,997 387,897
-------- --------- -------- ----------- --------- ----------
Total liabilities and
partners' equity $990,000 $ 8,127 $149,405 $ 1,147,532 $ 17,305 $1,164,837
======== ========= ======== =========== ========= ==========
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO PRO FORMA CONDENSED COMBINED
BALANCE SHEET
SEPTEMBER 30, 1998
(UNAUDITED)
ADJUSTMENTS:
A. Reflects the Summit Properties Partnership, L.P. Consolidated Balance
Sheet as of September 30, 1998.
B. Reflects the sale of Summit Springs and Summit Old Town on October 23,
1998 and November 12, 1998 respectively. The sales are summarized as
follows:
Net sales proceeds after disposition costs $ 24,046
Net book value of assets sold (15,904)
Cost of other assets sold (15)
Liabilities assumed by buyer 282
--------
Gain on sale $ 8,409
========
Proceeds were put in escrow in accordance with Internal Revenue Service
like-kind exchange rules. Accordingly, proceeds are classified as
restricted cash.
C. Reflects the Ewing Acquisition which occurred on November 4, 1998. The
purchase is summarized as follows:
Loan escrow acquired $ 1,713
Mortgage notes payable assumed $(79,852)
Borrowings on the Operating Partnership's unsecured credit facility (50,575)
Adjustment to mortgage notes assumed to reflect estimated fair value (2,876) (133,303)
--------
Other net liabilities assumed (4,734)
Issuance of Units to Summit Properties Inc. for issuance of
similar number of Shares to seller (489,622) (8,768)
Issuance of Units to seller (141,921) (2,600)
---------
Purchase price including acquisition costs $(147,692)
=========
D. Reflects the Joint Venture Disposition. The sale of five communities
and the concurrent contribution of an additional two communities into
a new entity, in which the Operating Partnership has a 25% ownership
interest, is summarized below:
Sale of Assets
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Net sales proceeds after disposition costs $ 88,625
Net book value of assets sold (63,078)
Cost of other assets sold (356)
Liabilities assumed by buyer 1,143
--------
Gross gain on sale 26,334
Operating Partnership's retained interest (25%) (6,584)
Cash received in excess of remaining basis 1,247
--------
Gain on sale $ 20,997
========
Investment Restricted
Formation of Joint Venture in JV Cash Cash
-------------------------- --------- -------- ----------
Investment in joint venture $ 5,337 $ (5,337)
Operating Partnership's retained interest (25%) (6,584) --
Cash received in excess of remaining basis 1,247
Proceeds -- 20,622 $68,003
Restricted cash transferred to joint venture (285)
Payoff of mortgage in conjunction with sale -- (2,549) --
-------- -------- -------
$ -- $ 12,736 $67,718
======== ======== =======
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
BASIS OF PRESENTATION TO PRO FORMA CONDENSED
COMBINED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
THE YEAR ENDED DECEMBER 31, 1997
The Pro Forma Condensed Combined Statements of Earnings for the nine months
ended September 30, 1998 and the year ended December 31, 1997 are presented as
if the following transactions had occurred on January 1, 1997:
(i) The sale of five communities to Hollow Creek LLC (which were
concurrently contributed by Hollow Creek LLC to Station Hill LLC) and
the concurrent contribution of two communities to Station Hill LLC, in
which the Operating Partnership maintains a 25% ownership interest
(the "Joint Venture Disposition").
(ii) The acquisition of Ewing Industries, as further described in the Basis
of Presentation to the Pro Forma Combined Condensed Balance Sheet.
Adjustments related to the Contingent Property are not included in the
pro forma statements as it was in construction in 1997 and a portion of
1998 and its operations are not material to the Pro Forma Condensed
Combined Statements of Earnings. In addition, the Operating Partnership
has a cash flow management contract with a surviving affiliate of Ewing
Industries to manage such property until the property reaches
stabilization. In consideration for managing the property, such
affiliates retain all net cash flows for the property. Certain of the
properties acquired in the Ewing Acquisition were in lease up in 1998
and/or 1997. The operations of such lease-up properties are not
reflective of fully stabilized properties.
(iii) The sale of Summit Old Town, Summit Springs, Summit Providence and
Summit Charleston on November 12, 1998, October 23, 1998, May 18, 1998
and May 14, 1997, respectively.
(iv) The purchase of Summit Lenox on July 8, 1998. The purchase of Summit
Club at Dunwoody and Summit St. Clair on May 22, 1998 and March 1,
1998, respectively, are shown as if they were acquired on January 1,
1998. These two properties were under construction during 1997 and
would not have had a material effect on 1997 operations.
(v) The purchase of Summit Fair Oaks, Summit Windsor II, Summit Sand Lake
and Summit Portofino ("1997 Acquisitions") on December 31, 1997, July
18, 1997, February 20, 1997 and January 6, 1997, respectively.
The Pro Forma Condensed Combined Statements of Earnings give effect to the
Ewing Acquisitions under the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16. In the opinion of management, all
significant adjustments necessary to reflect the effects of these transactions
have been made.
The Pro Forma Condensed Combined Statements of Earnings are presented for
comparative purposes only and are not necessarily indicative of what the actual
combined results of the above transactions and the Operating Partnership for the
nine months ended September 30, 1998, and the year ended December 31, 1997 would
be, nor do they purport to be indicative of the results of operations in future
periods. The Pro Forma Condensed Combined Statements of Earnings should be read
in conjunction with, and are qualified in their entirety by, the historical
financial statements and notes thereto of the Operating Partnership as included
in the Form 10-K for the year ended December 31, 1997 and the Operating
Partnership's Form 10-Q for the nine months ended September 30, 1998.
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
BALANCE
BEFORE
JOINT JOINT
OTHER OTHER EWING VENTURE VENTURE PRO FORMA
HISTORICAL ACQUISITIONS DISPOSITIONS ACQUISITION DISPOSITION DISPOSITION CONSOLIDATED
---------- ------------ ------------ ----------- ----------- ----------- ------------
(A) (B) (C) (D) (E)
Revenues:
Rental $ 99,047 $4,006 ($3,974) $ 12,399 $111,478 ($8,475) $ 103,003
Other property income 5,733 162 (221) 590 6,264 (399) 5,865
Interest and other 1,286 -- -- -- 1,286 -- 1,286
----------- ------ ------- -------- -------- ------- -----------
Total revenues 106,066 4,168 (4,195) 12,989 119,028 (8,874) 110,154
----------- ------ ------- -------- -------- ------- -----------
Expenses:
Property operating and maintenance 26,948 1,485 (1,283) 3,345 30,495 (2,434) 28,061
Real estate taxes and insurance 10,251 316 (392) 2,227 12,402 (798) 11,604
Depreciation 20,774 885 (696) 3,068 24,031 (1,869) 22,162
Interest 23,351 2,178 (1,878) 7,166 30,817 (4,289)(F) 26,528
General and administrative expenses 2,726 -- -- -- 2,726 -- 2,726
Loss on equity investments 95 -- -- -- 95 27 (G) 122
----------- ------ ------- -------- -------- ------- -----------
Total expenses 84,145 4,864 (4,249) 15,806 100,566 (9,363) 91,203
----------- ------ ------- -------- -------- ------- -----------
Income before gain on real estate
assets and extraordinary item 21,921 (696) 54 (2,817) 18,462 489 18,951
Gain on sale of real estate assets 8,731 -- (8,731) -- -- -- --
----------- ------ ------- -------- -------- ------- -----------
Income before extraordinary item $ 30,652 ($696) ($8,677) ($2,817) $ 18,462 $ 489 $ 18,951
=========== ====== ======= ======== ======== ======= ===========
Per unit data:
Income before extraordinary
items -basic and diluted (H) $ 1.06 $ 0.64
=========== ===========
Weighted average units - basic 28,808,330 29,543,050
=========== ===========
Weighted average units - diluted 28,825,095 29,559,815
=========== ===========
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
ADJUSTMENTS:
A. Reflects the Summit Properties Partnership, L.P. Consolidated Statement of
Earnings for the nine months ended September 30, 1998.
B. Reflects the operations of Summit St. Clair acquired effective March 1,
1998, Summit Club at Dunwoody acquired May 22, 1998 and Summit Lenox
acquired July 8, 1998, from January 1, 1998 to date of acquisition.
C. Reflects the operations of Summit Providence sold on May 18, 1998 from
January 1, 1998 to date of sale. Reflects Summit Springs and Summit Old
Town sold on October 23, 1998 and on November 12, 1998, respectively, from
January 1, 1998 to September 30, 1998. In addition, the gain on sale of
real estate assets has been eliminated for pro forma presentation.
D. Reflects the operations of the communities acquired in the Ewing
Acquisition for the nine months ended September 30, 1998. Pro forma
effects of the Contingent Property have not been included in the Pro Forma
Condensed Combined Statement of Earnings as such property was substantially
under construction for the period presented and, therefore, its effect on
pro forma earnings is not significant.
E. Reflects the operations for the nine months ended September 30, 1998 of the
Joint Venture Disposition properties. Does not include the gain on sale of
real estate assets related to the Joint Venture Disposition.
F. Reflects the saving in interest costs of $4.1 million from using the net
proceeds of the sale to reduce the Operating Partnership's credit facility
outstanding balance at the weighted average interest rate for the nine
months ended September 30, 1998 of 6.73%. In addition, reflects savings in
interest expense of mortgage notes that did not transfer to the joint
venture of $195,000.
G. Reflects the Operating Partnership's equity loss in the joint venture for
the nine months ended September 30, 1998. The joint venture operations
include depreciation calculated based upon the joint ventures basis in the
assets. In addition, the mortgage note issued by the joint venture is
assumed to be outstanding for the nine months ended September 30, 1998 at
an interest rate of 6.70%.
H. Based upon 29,543,050 and 29,559,815 basic and diluted weighted average
Units issued and outstanding, respectively.
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
BALANCE
BEFORE
JOINT JOINT
OTHER OTHER EWING VENTURE VENTURE PRO FORMA
HISTORICAL ACQUISITIONS DISPOSITIONS ACQUISITION DISPOSITION DISPOSITION CONSOLIDATED
---------- ------------ ------------ ----------- ----------- ----------- ------------
(A) (B) (C) (D) (E)
Revenues:
Rental $ 109,827 $ 8,517 $(7,084) $ 14,322 $125,582 $(11,122) $ 114,460
Other property income 6,179 364 (409) 690 6,824 (438) 6,386
Interest and other 671 -- -- -- 671 -- 671
----------- ------- ------- -------- -------- -------- -----------
Total revenues 116,677 8,881 (7,493) 15,012 133,077 (11,560) 121,517
----------- ------- ------- -------- -------- -------- -----------
Expenses:
Property operating and maintenance 31,311 3,160 (2,282) 4,058 36,247 (3,133) 33,114
Real estate taxes and insurance 10,721 755 (758) 2,590 13,308 (874) 12,434
Depreciation 22,652 1,934 (1,404) 3,504 26,686 (2,437) 24,249
Interest 21,959 4,560 (3,725) 8,234 31,028 (5,820)(F) 25,208
General and administrative expenses 2,740 -- -- -- 2,740 -- 2,740
(Income) loss on equity investments (274) -- -- -- (274) 26 (G) (248)
----------- ------- ------- -------- -------- -------- -----------
Total expenses 89,109 10,409 (8,169) 18,386 109,735 (12,238) 97,497
----------- ------- ------- -------- -------- -------- -----------
Income before gain on real estate
assets and extraordinary item 27,568 (1,528) 676 (3,374) 23,342 678 24,020
Gain on sale of real estate assets 4,366 -- (4,366) -- -- -- --
----------- ------- ------- -------- -------- -------- -----------
Net income $ 31,934 $(1,528) $(3,690) $(3,374) $ 23,342 $ 678 $ 24,020
=========== ======= ======= ======== ======== ======== ===========
Per unit data:
Net income - basic and diluted (H) $ 1.17 $ 0.86
=========== ===========
Weighted average units - basic 27,257,637 $27,956,153
=========== ===========
Weighted average units - diluted 27,294,058 27,992,574
=========== ===========
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SUMMIT PROPERTIES PARTNERSHIP, L.P.
NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
ADJUSTMENTS:
A. Reflects the Summit Properties Partnership, L.P. Consolidated Statement of
Earnings for the year ended December 31, 1997.
B. Reflects the operations of the 1997 Acquisitions from January 1, 1997 to
date of acquisition. In addition, reflects the operations of Summit Lenox,
acquired July 8, 1998 for the year ended December 31, 1997. Does not
reflect the operations of Summit St. Clair and Summit Club at Dunwoody
acquired in 1998 as the properties were in construction in 1997 and their
operations for the year ended December 31, 1997 were not significant.
C. Reflects the operations for the year ended December 31, 1997 of Summit
Providence sold on May 18, 1998, Summit Springs sold on October 23, 1998
and Summit Old Town sold on November 12, 1998. Also reflects the
operations of Summit Charleston from January 1, 1997 to date of sale on May
14, 1997. In addition, the gain on sale of real estate assets has been
eliminated from the pro forma presentation.
D. Reflects the operations of the communities acquired in the Ewing
Acquisition for the year ended December 31, 1997. Pro forma affects of the
Contingent Property have not been included in the Pro Forma Condensed
Combined Statement of Earnings as such property was substantially under
construction for the period presented and, therefore, its effect on pro
forma earnings is not significant.
E. Reflects the operations for the nine months ended September 30, 1998 of the
Join Venture Disposition properties. Does not include the gain on sale of
real estate assets related to the Joint Venture Disposition.
F. Reflects the saving in interest costs of $5.4 million from using the net
proceeds of the sale to reduce the Operating Partnership's credit facility
outstanding balance at the weighted average interest rate for the year ended
December 31, 1997 of 6.73%. In addition, reflects savings in interest
expense on mortgage loans that did not transfer to the joint venture of
$386,000.
G. Reflects the Operating Partnership's equity loss in the joint venture for
the year ended December 31, 1997. The joint venture operations include
depreciation calculated based upon the joint ventures basis in the assets.
In addition, the mortgage note issued by the joint venture is assumed to be
outstanding for the year ended December 31, 1997 at an interest rate of
6.70%.
H. Based upon 27,956,153 and 27,992,574 basic and diluted weighted average
Units issued and outstanding, respectively.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following person in the capacity and on the date
indicated. The person set forth below has signed this report as an officer of
Summit Properties Inc., in its capacity as general partner of Summit Properties
Partnership, L.P.
SUMMIT PROPERTIES PARTNERSHIP, L.P.
By: Summit Properties Inc., its General Partner
Date: December 18, 1998 BY: /s/ William F. Paulsen
---------------------------------------------
William F. Paulsen
Chief Executive Officer
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EXHIBIT INDEX
2.1 Real Estate Sale Agreement dated November 20, 1998 Between Summit
Properties Partnership, L.P. and Hollow Creek, L.L.C. (filed herewith).
10.1 Operating Agreement dated November 20, 1998 Between Summit Properties
Partnership, L.P., Hollow Creek, L.L.C. and Station Hill L.L.C. (filed
herewith).