UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO 001-12211
Date of report (date of earliest event reported): May 28, 1998
ECHELON INTERNATIONAL CORPORATION
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(Exact name of Registrant as specified in its charter)
FLORIDA 59-2554218
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(State of incorporation) (I.R.S. Employer
Identification Number)
ONE PROGRESS PLAZA, SUITE 1500
ST. PETERSBURG, FLORIDA 33701 (813) 803-8200
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(Address of principal executive offices) (Registrant's telephone number)
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ITEM 5. OTHER EVENTS.
In conjunction with the Company's Annual Meeting, to be held on June 2, 1998,
Echelon International Corporation ("Echelon" or the "Company") is conducting
investor information sessions to provide information to the investment
community. The content of the sessions includes information previously disclosed
in the Company's 1997 Form 10-K and March 31, 1998 Form 10-Q. The following
additional information is also included in the sessions.
BUSINESS SUMMARY
COMMERCIAL DEVELOPMENT
/bullet/ During the next five years, Echelon plans to continue to hold its core
office buildings, totaling approximately 1,000,000 square feet. Echelon
has also executed a plan to expand its commercial real estate portfolio
by developing, or acquiring, an additional 750,000 to 1,500,000 square
feet of commercial office space.
/bullet/ Commercial projects under construction, in the pipeline or in the
conceptual design phase in CARILLON PARK include:
CASTILLE AT CARILLON (formerly known as ECHELON AT CARILLON)- a 103,900
square foot office building currently under construction with a
scheduled completion date of early 1999.
700 CARILLON - a 147,100 square foot office building with construction
planned to commence in the third quarter of 1998, assuming anchor
tenants are secured.
CARILLON TOWN CENTER - a development designed to add amenities to
CARILLON PARK. The tenants of CARILLON TOWN CENTER may include
entertainment and retail facilities, office space, a hotel, and an
athletic facility. The ownership structure of CARILLON TOWN CENTER may
include ownership by Echelon, joint ventures, and/or sales of the land
to third parties.
MULTI-FAMILY RESIDENTIAL DEVELOPMENT
/bullet/ The majority of Echelon's capital investment over the next five years
will be dedicated to multi-family residential developments.
/bullet/ The general parameters for a typical multi-family development include
the following assumptions:
- 275 units
- 14 month construction cycle, leasing 25 units per month beginning in
the ninth month of construction
- Target of 9-10% yield on cost, on a cash basis, assuming 75% debt on
a pro-forma basis
- Monthly gross rents of $975 per unit
- 93% stabilized occupancy
- Annual operating expenses of $3,600 per unit
- Net annual operating income of $2,000,000
- Estimated capitalization rate range of 7 1/2% to sub 9% to calculate
the value of a completed project
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FINANCIAL SUMMARY
/bullet/ The Company's core commercial real estate includes the following
properties:
<TABLE>
<CAPTION>
NET OPERATING INCOME
THREE MONTHS ENDED YEAR ENDED NET BOOK VALUE
COMMERCIAL PROPERTIES MARCH 31, 1998 DECEMBER 31, 1997 MARCH 31, 1998
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(in thousands)
<S> <C> <C> <C>
BARNETT TOWER $ 1,032 $ 3,636 $ 35,900
HIGHPOINT CENTER $ 283 $ 1,125 $ 10,000
MCNULTY STATION $ 237 $ 854 $ 8,000
100 CARILLON $ 192 $ 696 $ 6,300
3RD & 3RD $ 115 $ 192 $ 1,800
Other Income Producing Properties(*) $ 54 $ 173 $ 4,800
<FN>
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(*) Other Income Producing Properties only includes the 7th Avenue
Warehouse, the 5th Avenue Warehouse and the Progress Packaging Warehouses.
The net operating income for leases entered into subsequent to March 31,
1998 has not been included in the table above.
</FN>
</TABLE>
The net operating income for the following commercial properties under
construction as of March 31, 1998 has not been included in the table above:
CENTRAL STATION (formerly known as SOUTHCORE COMMERCIAL) is under a 15
year lease effective May 1998 for 100% occupancy of 133,279 rentable
square feet with beginning triple-net rent of $11.82 per square foot, with
2.8% annual rent increases.
BAYBORO STATION is under a 10-year lease effective April 1998 for 100%
occupancy of 80,991 rentable square feet with beginning triple-net rent of
$10.50 per square foot, with 2.8% annual rent increases.
As of March 31, 1998, the estimated costs to complete the construction of
Central Station and Bayboro Station were $4.4 million and $2.6 million,
respectively.
/bullet/ The book values for Echelon's multi-family residential developments
under construction are as follows:
MULTI-FAMILY RESIDENTIAL BOOK VALUE
DEVELOPMENTS UNDER CONSTRUCTION MARCH 31, 1998
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(in thousands)
ECHELON AT BAY ISLE KEY (includes land cost) $8,668
ECHELON AT THE RESERVE (excludes land cost) $ 689
LAND HELD FOR DEVELOPMENT
/bullet/ The Company's land held for development primarily consists of the
following properties:
DEVELOPMENT POTENTIAL
AS OF MARCH 31, 1998
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ACRES FOR NUMBER OF MULTI- BOOK VALUE
LAND HELD FOR DEVELOPMENT DEVELOPMENT FAMILY UNITS MARCH 31, 1998
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(in thousands)
CARILLON PARK 78 N/A $ 22,826
CARILLON PARK 50 1,169 "
9TH STREET 44 596 $ 4,316
4TH STREET 15 228 $ 1,647
<PAGE>
/bullet/ As of March 31, 1998, CARILLON PARK has approximately 78 acres
remaining for commercial development, with entitlements for more than
3,000,000 additional square feet of development. The existing corporate
users currently own land and entitlements for an additional 1,000,000
square feet of expansion. In addition, approximately 50 acres remain
available for multi-family residential development.
The 9th Street and the 4th Street land are zoned for multi-family
residential development.
COMMERICAL AND MULTI-FAMILY RESIDENTIAL DEVELOPMENT PIPELINE
As of March 31, 1998, the Company has a pipeline of 11 multi-family residential
developments. The Company also has a pipeline of commercial projects. Actual
completion of the projects is subject to the completion of the Company's final
due diligence. As of March 31, 1998, the total costs incurred on these potential
projects were $1,820,000.
AFFORDABLE HOUSING TAX CREDITS
During 1996 and 1997, Echelon signed commitments to purchase $25.8 million of
affordable housing tax credits. The expected weighted-average after-tax internal
rate of return on these investments is approximately 12%.
As of March 31, 1998, the Company has funded $18.2 million of these commitments.
LEVERAGED LEASE PORTFOLIO
The Company's net investment in leveraged leases is comprised of the following
components:
BOOK VALUE
MARCH 31, 1998
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(in thousands)
Rentals receivable $ 148,200
Estimated residual value of leased assets 105,600
Less: Unearned income and deferred investment tax credits (65,000)
Delayed equity (16,700)
Deferred taxes arising from leveraged leases (160,600)
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Net investment in leveraged leases $ 11,500
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Upon lease maturity, Echelon will either sell or hold and re-lease the
underlying aircraft or other asset, depending upon which option is determined to
provide the highest return.
<PAGE>
DIRECT FINANCE AND OPERATING LEASES
The Company's direct finance and operating leases are as follows:
NET INVESTMENT
LESSEE LEASED AIRCRAFT MARCH 31, 1998
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(in thousands)
Continental Airlines 1973 DC10-30 $ 20,820
(PPCV Joint Venture)
Southwest Airlines Company 1984 B737-300 $ 13,809
Air Micronesia (a subsidiary
of Continential Airlines) 1981 B727-200 $ 3,809
REAL ESTATE LOAN PORTFOLIO
The Company's real estate loan portfolio is summarized as follows:
BOOK VALUE
BORROWER/PROJECT MARCH 31, 1998
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(in thousands)
Marquardt Company $ 23,465
Vine Street Investors - Capitol View I 5,800
Vine Street Investors - Capitol View II 5,000
Vine Street Associates - Town Square VI 4,500
Madison Building 3,247
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42,012
Less: allowance for loan losses (1,600)
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$ 40,412
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AIRCRAFT LOAN PROTFOLIO
The Company's aircraft loan portfolio is comprised of the following:
BOOK VALUE
BORROWER MARCH 31, 1998
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(in thousands)
Continental Airlines $ 2,365 (*)
American Finance Group 395
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$ 2,760
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(*) Loan paid in full in April 1998.
<PAGE>
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.
ECHELON INTERNATIONAL CORPORATION
Date: MAY 28, 1998
By: /s/ SUSAN G. JOHNSON
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Susan G. Johnson, Esquire
Vice President, Legal Services & Administration
and Corporate Secretary
