1
Exhibit 20
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS
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Combined Balance Sheets
Unaudited (In thousands, except shares) June 30, December 31,
1998 1997
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ASSETS
Investments in real estate
Land $ 137,695 $ 109,308
Buildings and improvements 692,827 648,571
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830,522 757,879
Less - Accumulated depreciation (122,992) (113,858)
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Total investments in real estate 707,530 644,021
Investment in joint venture 1,610 1,575
Mortgage loans and notes receivable 5,534 30,686
Other assets
Cash and cash equivalents - unrestricted 7,421 2,582
- restricted 16,959 14,282
Accounts receivable and prepayments 16,216 20,070
Investments 1,624 13,103
Inventory 3,299 3,374
Goodwill, net 63,899 66,560
Management and lease agreements, net 3,048 4,113
Deferred charges and other, net 6,210 6,300
Unamortized debt issue costs 7,655 7,445
Other 5,947 5,910
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Total assets $ 846,952 $ 820,021
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage loans and notes payable $ 343,207 $ 313,537
Senior notes 100,000 100,000
Bank loans 95,294 69,922
Accounts payable and accrued liabilities 41,229 38,000
Deferred obligations 10,613 10,807
Deferred capital gains and other deferred income 1,632 10,646
Other 10,957
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Total liabilities 591,975 553,869
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Minority interest 1,047 1,047
Shareholders' equity
Preferred shares of beneficial interest, $25 liquidation preference,
2,300,000 shares authorized and 1,349,000 outstanding 31,737 54,109
Shares of beneficial interest, $1 par, unlimited authorization, outstanding 31,431 28,179
Paid-in capital 191,877 189,272
Deferred compensation (3) (5,643)
Foreign currency translation adjustment (1,112) (812)
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Total shareholders' equity 253,930 265,105
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$ 846,952 $ 820,021
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2
Exhibit 20
FIRST UNION REAL ESTATE EQUITY and MORTGAGE INVESTMENTS
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Combined Statements of Income
Unaudited (In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
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1998 1997 1998 1997
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Revenues
Rents $ 80,678 $ 56,200 $ 159,782 $ 75,203
Interest - Mortgage loans 356 642 975 1,573
- Short-term investments 455 336 684 684
- Investments 110 124 300 124
Equity in income from joint venture 11 247 35 584
Management fees 80 840 178 1,607
Other income 157 557 247 1,293
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81,847 58,946 162,201 81,068
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Expenses
Property operating 56,006 41,792 113,292 48,706
Real estate taxes 3,068 2,277 6,066 4,616
Depreciation and amortization 6,483 4,218 12,857 7,448
Interest - Mortgage loans 7,124 2,264 13,992 4,690
- Senior notes 2,218 2,218 4,437 4,437
- Bank loans and other 4,005 1,420 6,820 2,031
General and administrative 17,568 2,823 20,828 5,028
Litigation and proxy expenses 3,917 4,848
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100,389 57,012 183,140 76,956
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Income (loss) before capital gains (18,542) 1,934 (20,939) 4,112
Capital gains 8,648 8,648
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Net income (loss) before preferred dividend (9,894) 1,934 (12,291) 4,112
Preferred dividend (708) (1,207) (1,583) (2,415)
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Net income (loss) applicable to shares of
beneficial interest $ (10,602) $ 727 $ (13,874) $ 1,697
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Per share data
Basic weighted average shares 31,017 23,103 30,128 21,504
Stock options, treasury method - 471 1 471
Restricted shares, treasury method 14 226 95 226
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Diluted weighted average shares 31,031 23,800 30,224 22,201
============== ============== ============== ==============
Income (loss) applicable to shares of
beneficial interest before capital gain
or loss, basic and diluted $ (0.62) $ 0.03 $ (0.75) $ 0.08
============== ============== ============== ==============
Net income (loss) applicable to shares of
beneficial interest, basic and diluted $ (0.34) $ 0.03 $ (0.46) $ 0.08
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Statement of Comprehensive Income
Unaudited (In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
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1998 1997 1998 1997
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Net Income (loss) $ (10,602) $ 727 $ (13,874) $ 1,697
Foreign currency translation adjustment (289) (15) (300) (15)
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Comprehensive income $ (10,891) $ 712 $ (14,174) $ 1,682
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3
Exhibit 20
Combined Statements of Changes in Cash
Unaudited (In thousands)
Three Months Six Months
Ended June 30, Ended June 30,
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1998 1997 1998 1997
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Cash provided by operations
Net income (loss) before preferred dividend $ (9,894) $ 1,934 $ (12,291) $ 4,112
Adjustments to reconcile net income (loss) to net
cash provided by operations --
Depreciation and amortization 6,483 4,218 12,857 7,448
Capital gains (8,648) (8,648)
Vesting of restricted shares 5,304 5,304
Decrease in deferred charges and other, net (254) (3,234) (1,234) (3,547)
(Decrease) increase in deferred income (274) 789 (1,296) 789
Increase in deferred interest on mortgage investments (18) (6) (83)
Decrease in deferred obligations (5) (5) (10) (9)
Net changes in other assets and liabilities 2,858 2,250 10,885 4,346
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Net cash provided (used for) by operations (4,430) 5,934 5,561 13,056
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Cash provided (used for) by investing
Repayment of mortgage investment and note payable 18,839 25,045 16,200
Principal received from mortgage investments 31 55 113 102
Proceeds from sale of properties 6,042 6,042 8,988
Purchase of investments (1,635) (1,781)
Investments in properties (374) (60,814)
Investments in capital and tenant improvements (6,976) (4,946) (14,238) (9,089)
Investment in Impark (11,195) (36,574) (11,195) (36,574)
Deposit for property acquisitions (40) (720)
Sale of investments 13,520 13,520
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Net cash provided by (used for) investing 18,212 (41,465) (44,028) (20,373)
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Cash provided by (used for) financing
(Decrease) increase in short-term loans (35,162) 25,371 (25,800)
Increase in mortgage loans 30,000 2,737 30,000 2,737
Repayment of mortgage loans - Normal payments (981) (485) (1,927) (1,207)
- Balloon payments (5,534) (13,835)
Sale of hedge agreement 825 825
Purchase of First Union shares (1,829) (1,829)
Sale of First Union shares 2,594 74,533 2,995 120,998
Debt issue costs paid (852) (788) (960) (811)
Dividends paid to shares of beneficial interest (3,478) (2,379) (6,577) (4,302)
Dividends paid to preferred shares of beneficial interest (709) (1,207) (1,916) (2,455)
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Net cash provided (used for) by financing (9,592) 66,877 45,982 75,325
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Increase in cash and cash equivalents 4,190 31,346 7,515 68,008
Cash and cash equivalents at beginning of period 20,189 39,613 16,864 2,951
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Cash and cash equivalents at end of period $ 24,379 $ 70,959 $ 24,379 $ 70,959
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Income per share of beneficial interest has been computed in accordance with
SFAS 128 (Earnings Per Share). SFAS 128 requires that common share equivalents
be excluded from the weighted average shares outstanding for the calculation of
basic earnings per share. Adjusted shares and per share amounts for 1997 have
been restated accordingly.
In May 1998, the registrant sold its investment in the land beneath the
Huntington Building in Cleveland, Ohio for $6.0 million resulting in a capital
gain of $1.7 million. Additionally, an $18.9 million mortgage investment secured
by the Huntington Building was repaid in 1998 resulting in the recognition of a
$7.7 million capital gain which was deferred when the building was sold in 1982
since the registrant received the mortgage note as consideration. In June 1998,
the registrant sold a forward exchange agreement resulting in a loss of $.8
million. The forward exchange contract was purchased to protect the registrant
from foreign currency fluctuations resulting from notes issued in conjunction
with the acquisition of Impark.