SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A-1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): December 10, 1998 Aegis Realty, Inc. -------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Maryland ---------------------------------------------- (State or other Jurisdiction of Incorporation) 1-13239 13-3967879 - ------------------------ ------------------------------------ (Commission File Number) (IRS Employer Identification Number) 625 Madison Avenue, New York, NY 10022 ---------------------------------------- (Address of Principal Executive Offices) Registrant's telephone number, including area code: (212) 421-5333 Not Applicable ------------------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report Item 2. Acquisition or Disposition of Assets Southgate Shopping Center On December 9, 1998, Aegis Realty Operating Partnership, L.P. ("AROP") whose sole general partner is Aegis Realty, Inc. ("Aegis"), acquired, directly and through a wholly owned subsidiary, 100% of the partnership interests of Southgate Partners Limited Partnership ("SPLP"), an entity which directly owns Southgate Shopping Center ("Southgate"), for $15,100,000. Southgate is a 213,923-square-foot neighborhood shopping center located in Heath, Ohio, is anchored by Big Bear Supermarket and Odd Lots and is currently 99% leased. SPLP, the selling entity, is a limited partnership of which 32.7% of the partnership interests were owned by affiliates of Related Aegis, LP, Aegis' Advisor (the "Advisor"). As an "Affiliated Transaction", approval of the Southgate acquisition was subject to compliance with Article X, Section 2 of Aegis' Amended By-Laws which set forth the following conditions designed to avoid conflicts of interest with respect to the property ("Affiliated Property") to be acquired in the Affiliated Transactions: 1) The acquisition must be consistent with Aegis' business plan; 2) The purchase price must be no greater than the value of the Affiliated Property, as established by a nationally recognized appraisal firm selected by a majority of the Independent Directors; 3) The decision to acquire the Affiliated Property must be specifically approved by a majority of the Independent Directors; 4) Affiliates of the Advisor who have ownership interests in the Affiliated Property must receive Units of Limited Partnership Interest of AROP ("OP Units") rather than cash in exchange for their interest in the Affiliated Property, and the terms of the Affiliated Transaction must be consistent with such pricing and terms as have been negotiated by Aegis with other unaffiliated recipients of OP Units in connection with other reasonably contemporaneous acquisitions by Aegis; and 5) The Advisor must waive the portion of the acquisition fee payable to the Advisor from Aegis attributable to the "Affiliated" portion of the transaction. The Southgate acquisition met with the above listed criteria. The partnership interests acquired from unaffiliated partners in SPLP were not subject to the condition in Item #4 listed above, and therefore the unaffiliated partners could elect to receive either cash or OP Units for their partnership interest. The financing of the Southgate acquisition consisted of the following: I) $1,295,734 in cash, which was provided from borrowings under Aegis' BankBoston $40 million line of credit (the "Facility"); II) $2,715,882 by issuance of 208,914 OP Units of AROP. The OP Units are convertible to shares of common stock of Aegis on a one-to-one basis, subject to adjustment, on the one year anniversary of the closing date. The OP Units were issued at an agreed upon value of $13 per OP Unit. If as of the last trading day prior to the first anniversary of the closing date (the "Post-Closing Adjustment Date"), the Average Price Per Share (the "Average Price Per Share", as defined below) is less than $13, Aegis is obligated to issue additional OP Units to those contributors who received OP Units in the amount of the difference between (i) the quotient obtained by dividing $2,715,882 by the Average Price Per Share as of the Post-Closing Adjustment Date and (ii) 208,914. The "Average Price Per Share" is defined as the average final closing price per share of the common stock of Aegis, during the twenty trading day period ending on the valuation date; III) $10,888,384 by the assumption of the current outstanding balance of an existing first mortgage loan encumbering the property. The mortgage was originated in September 1997 with Merrill Lynch Credit Corp., having an original balance of $11,000,000, an interest rate of 7.73%, a 30 year amortization period and monthly payments of 79,508.79. The loan matures on October 1, 2007; and IV) $200,000 by delivery of an unsecured purchase money note to the seller, which is non-interest bearing, has a one year term and is fully pre-payable without penalty. In addition, AROP made a $1,429,435 loan to Standard Investment Company ("SIC"), a limited liability company that had a 34.99% partnership interest in SPLP. The loan is secured by the 107,974 OP Units that were issued to SIC in exchange for their partnership interest in SPLP. The loan bears an initial interest rate of 7.613% and matures on December 9, 2015 or earlier if Southgate is sold. The principals of SIC executed guarantees for 25% of the total loan amount. In connection with the transaction, AROP agreed not to sell Southgate for a minimum of 10 years except in a transaction that does not result in recognition of gain to the contributors who received OP Units, or if sold to pay the tax on the gain to the contributors there from. AROP has also agreed to maintain for the same 10 year period a minimum of $2,300,000 of indebtedness which will be available for such contributors to guarantee. Southgate will be managed by RCC Property Advisors ("RCCPA"), an affiliate of the Advisor. Crossroads Shopping Center On December 9, 1998, AROP acquired 100% of the members' equity of Crossroads East Shopping Center, Ltd. ("CESC"), an entity which directly owned Crossroads Shopping Center ("Crossroads"), for $4,800,000. Crossroads is a 71,925-square-foot neighborhood shopping center located in Columbus, Ohio, is anchored by Lenscrafters and is currently 78% leased. CESC, the selling entity, is a limited liability company of which 52.5% of the member interests were owned by affiliates of the Advisor. The Crossroads transaction met all the conditions for an Affiliated Transaction as disclosed above. The members' equity acquired from unaffiliated members were not subject to the condition in Item 4 listed above, and therefore the unaffiliated members could elect to receive cash rather than OP Units for their member equity. The financing of the acquisition of the member interest in CESC consisted of the following: I) $2,129,785 in cash, which was provided from borrowings under the Facility; II) $2,165,215 by issuance of 166,555 OP Units of AROP. The OP Units are convertible and subject to adjustment in the same manner as described above for Southgate; III) $230,000 by delivery of an unsecured purchase money note to the seller, which will be non-interest bearing, have a one year term and fully pre-payable without penalty; and IV) $275,000 by delivery of an unsecured purchase money note to the seller, which will be non-interest bearing, have a one year term and fully pre-payable without penalty. In addition, AROP made a $915,401 loan to SIC, who had 40% of the members' equity in CESC. The loan is secured by the 57,055 OP Units that were issued to SIC in exchange for their members' equity in CESC. The loan bears an interest rate of 7.613% and matures on December 9, 2015 or earlier if Crossroads is sold. The principals of SIC executed guarantees for 25% of the total loan amount. In connection with the transaction, AROP agreed not to sell Crossroads for a minimum of 10 years except in a transaction that does not result in recognition of gain to the contributors who received OP Units, or if sold to pay the tax on the gain to the Contributors there from. AROP has also agreed to maintain for the same 10 year period a minimum of $50,000 of indebtedness which will be available for such contributors to guarantee. Crossroads will be managed by managed by RCCPA as well. As a result of the forgoing transactions, as of December , 1998, the officers and directors of Aegis, as well as the employees of the affiliates of the Advisor, have increased their ownership interest in Aegis, assuming conversion of all OP Units to common stock, from 2.8% to 4.9%. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits A. Financial Statements The following financial statements are included in compliance with Staff Accounting Bulletin Number 71/71a. SOUTHGATE SHOPPING CENTER HISTORICAL SUMMARIES OF GROSS INCOME AND DIRECT OPERATING EXPENSES YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 AND INDEPENDENT AUDITORS' REPORT SOUTHGATE SHOPPING CENTER HISTORICAL SUMMARIES OF GROSS INCOME AND DIRECT OPERATING EXPENSES YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 TABLE OF CONTENTS Independent Auditors' Report 1 Historical Summaries of Gross Income and Direct Operating Expenses 2 Notes to Historical Summaries of Gross Income and Direct Operating Expenses 3 INDEPENDENT AUDITORS' REPORT TO THE PARTNERS OF SOUTHGATE PARTNERS, L.P. We have audited the accompanying Historical Summaries of Gross Income and Direct Operating Expenses of SOUTHGATE SHOPPING CENTER for each of the three years in the period ended December 31, 1998. These Historical Summaries are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the Historical Summaries based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summaries are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summaries. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summaries. We believe that our audits provide a reasonable basis for our opinion. The accompanying Historical Summaries were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 2 and are not intended to be a complete presentation of the Shopping Center's revenues and expenses. In our opinion, the Historical Summaries referred to above present fairly, in all material respects, the gross income and direct operating expenses described in Note 2 for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Friedman Alpren & Green LLP New York, New York February 22, 1999 SOUTHGATE SHOPPING CENTER HISTORICAL SUMMARIES OF GROSS INCOME AND DIRECT OPERATING EXPENSES YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 1998 1997 1996 ----------- ----------- ----------- > Revenues Rental income $ 1,831,885 $ 1,589,889 $ 1,031,378 ----------- ----------- ----------- Expenses Leasing 90,406 75,584 42,077 Administrative 204,495 184,311 166,025 Operating 88,414 86,639 102,675 Maintenance and repairs 52,322 28,068 45,120 Real estate taxes 75,151 67,237 93,129 ----------- ----------- ----------- 510,788 441,839 449,026 ----------- ----------- ----------- Excess of gross income over direct operating expenses $ 1,321,097 $ 1,148,050 $ 582,352 =========== =========== =========== See accompanying notes to Historical Summaries of Gross Income and Direct Operating Expenses. SOUTHGATE SHOPPING CENTER NOTES TO HISTORICAL SUMMARIES OF GROSS INCOME AND DIRECT OPERATING EXPENSES YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 1 - ORGANIZATION Southgate Partners, L.P. was formed on July 13, 1995 to acquire, own and operate the Southgate Shopping Center, a shopping mall located in Heath, Ohio. 2 - BASIS OF PRESENTATION The accompanying Historical Summaries were prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and are not intended to be a complete presentation of the Shopping Center's revenues and expenses. Accordingly, the Historical Summaries include the income and direct operating expenses of the Southgate Shopping Center, and exclude interest and dividend income, depreciation, amortization of loan costs, interest expense and other financing charges. B. Pro Forma Financial Information Unaudited Pro Forma Consolidated Financial Data The following tables of unaudited pro forma consolidated data of the Company have been prepared from the historical consolidated financial statements of the Company, as adjusted to give effect to a significant acquisition (the purchase of Southgate Shopping Center). The accompanying pro forma balance sheet of the Company has been prepared as if this investment had been consummated on September 30, 1998. The accompanying pro forma statements of income and other financial date for the year ended December 31, 1997 and the nine months ended September 30, 1998 have been prepared as if this investment had been consummated as of January 1, 1997 and January 1, 1998, respectively. The unaudited pro forma financial data does not purport to be indicative of what the results of the Company would have been had the transactions been completed on the dates assumed, nor is such financial data necessarily indicative of the results of operations of the Company that may exist in the future. The unaudited pro forma financial data must be read in conjunction with the Notes therein and with the historical Consolidated Financial Statements and the related Notes of the Registrant. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 Pro Forma Pro Forma Historical Adjustments Total ----------- ----------- ----------- > Revenues: Rental income $ 7,761,826 $ 1,589,889(a) $ 9,351,715 Recovery of common area maintenance charges 855,843 855,843 Real estate tax reimbursements 1,047,025 1,047,025 Income from equity investments 193,511 193,511 Interest income 751,142 751,142 Other 146,450 146,450 ----------- ----------- ----------- Total revenues 10,755,797 1,589,889 12,345,686 ----------- ----------- ----------- Expenses Repairs and maintenance 931,588 28,068(a) 959,656 Real estate 1,190,345 67,237(a) 1,257,582 Interest 558,994 94,068(b) 1,503,062 850,000(f) General and administrative 1,593,612 259,895(a) 1,910,249 56,742(d) Depreciation and amortization 2,655,049 331,111(c) 2,989,489 3,329(e) Minority interest in income of the Operating Partnership 8,263 11,472(g) 19,735 Other 379,450 86,639(a) 466,089 ----------- ----------- ----------- Total expenses 7,317,301 1,788,561 9,105,862 ----------- ----------- ----------- Net income (loss) $ 3,438,496 $ (198,672) $ 3,239,824 =========== =========== =========== Net income (loss) applicable to common shareholders $ 1,420,370 $ (198,672) $ 1,221,698 =========== =========== =========== Net income (loss) per weighted average shareholders $ .18 $ (.02) $ .15 =========== =========== =========== (a) Represents income and direct operating expenses of Southgate for the period 1/1/97-12/31/97. During this period, Southgate was being renovated and repositioned to increase occupancy and rental rates. There was additional net income resulting from such improvements in 1998 which is when the Company purchased Southgate. (b) Represents interest on funds from the Facility used for the purchase of Southgate. (c) Represents depreciation of Southgate for the period 1/1/97-12/31/97. (d) Represents asset management fee relating to Southgate for the period 1/1/97-12/31/97. (e) Represents amortization of loan costs relating to debt assumed upon purchase of Southgate for the period 1/1/97-12/31/97. (f) Represents interest expense on debt assumed upon purchase of Southgate for the period 1/1/97-12/31/97. (g) Represents minority interest relating to the loss from Southgate. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 Pro Forma Pro Forma Historical Adjustments Total ----------- ----------- ----------- > Revenues: Rental income $ 9,177,921 $ 1,373,914(a) $10,551,835 Recovery of common area maintenance charges 1,078,726 1,078,726 Real estate tax reimbursements 1,415,427 1,415,427 Income from equity investment 307,837 307,837 Interest income 1,557,012 1,557,012 Other 143,589 143,589 ----------- ----------- ----------- Total revenues 13,680,512 1,373,914 15,054,426 ----------- ----------- ----------- Expenses Repairs and maintenance 1,010,755 39,242(a) 1,049,997 Real estate 1,235,942 56,363(a) 1,292,305 Interest 1,202,772 94,068(b) 1,932,593 635,753(f) General and 2,231,801 221,176(a) 2,495,417 administrative 42,440(d) Depreciation 2,649,942 247,653(c) 2,900,085 and amortization 2,490(e) Minority interest in income of the Operating Partnership 54,056 1,263(g) 55,319 Other 795,297 66,311(a) 861,608 ----------- ----------- ----------- Total expenses 9,180,565 1,406,759 10,587,324 ----------- ----------- ----------- Income (loss) before 4,499,947 (32,845) 4,467,102 gain on sale of investment Gain on sale of investment in Partnership 779,893 0 779,893 ----------- ----------- ----------- Net income (loss) $ 5,279,840 $ (32,845) $ 5,246,995 =========== =========== =========== Net income (loss) per weighted average shareholders $ .66 $ .00 $ .65 =========== =========== =========== UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1998 Pro Forma Pro Forma Historical Adjustments Total ------------ ----------- ------------ > ASSETS Real estate, net $142,858,431 $15,131,119(h) $158,372,535 382,985(i) Investment in Partnerships 6,209,166 6,209,166 Mortgage loans receivable 3,278,307 3,278,307 Loan receivable from affiliate 0 0 Cash and cash equivalents 4,294,209 4,294,209 Accounts receivable-tenants, net of allowance for doubtful accounts of $303,000 1,278,563 1,278,563 Deferred costs, net 1,975,224 28,965(h) 2,004,189 Other Assets 925,994 95,116(h) 1,021,110 ------------ ----------- ------------ Total Assets $160,819,894 $15,638,185 $176,458,079 ============ =========== ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable $29,397,157 $12,397,155(h) $42,177,297 382,985(i) Accounts payable and other liabilities 2,660,168 142,163(h) 2,802,331 Due to Advisor and affiliates 355,667 355,667 Distributions payable 1,966,253 1,966,253 ------------ ----------- ------------ Total Liabilities 34,379,245 12,922,303 47,301,548 ------------ ----------- ------------ Minority interest of unitholders in the Operating Partnership 1,948,982 2,715,882(h) 4,664,864 ------------ ----------- ------------ Shareholders' equity: Common stock; $.01 per value; 50,000,000 shares authorized; 8,051,159 shares issued and outstanding 80,511 80,511 Additional paid in capital 125,439,851 125,439,851 Distributions in excess (1,028,695) (1,028,695) ------------ ----------- ------------ Total Shareholders' Equity 124,491,667 124,491,667 ------------ ----------- ------------ Total Liabilities and Shareholders' Equity $160,819,894 $15,638,185 $176,458,079 ============ =========== =========== NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS FOR THE NINE MONTHS ENDED AND AS OF SEPTEMBER 30, 1998 (a) Represents income and direct operating expenses of Southgate for the period 1/1/98-9/30/98. (b) Represents interest on funds from the Facility used for the purchase of Southgate. (c) Represents depreciation of Southgate for the period 1/1/98-9/30/98. (d) Represents asset management fee relating to Southgate for the period 1/1/98-9/30/98. (e) Represents amortization of loan costs relating to debt assumed upon purchase of Southgate for the period 1/1/98-9/30/98. (f) Represents interest expense on debt assumed upon purchase of Southgate for the period 1/1/98-9/30/98. (g) Represents minority interest relating to the loss from Southgate. (h) Represents purchase of Southgate. (i) Represents acquisition fee relating to Southgate which was funded by the Facility. C. Exhibits SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Aegis Realty, Inc. (Registrant) BY: /s/ Stuart J. Boesky ----------------------------- Stuart J. Boesky President February 25, 1999