UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
-----------------------------------------------
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 22, 1998
OCWEN ASSET INVESTMENT CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 001-14043 65-0736120
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
THE FORUM, SUITE 1000
1675 PALM BEACH LAKES BOULEVARD, WEST PALM BEACH, FLORIDA 33401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(561) 681-8000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by
Ocwen Asset Investment Corp. (the "Company") on August 6, 1998. It provides the
financial statements and pro forma financial information for the Prudential
Building, an existing 488,080 square foot, 22-story office building located at
841 Prudential Drive in the central business district of Jacksonville, Florida
("841 Prudential Drive").
As previously reported, on July 22, 1998 the Company acquired the Prudential
Building for $36.0 million in cash plus closing costs from Prudential Insurance
Co. of America, an unaffiliated third party (the "Seller"). The purchase price
was determined through arms length negotiations between the Seller and Ocwen
Capital Corporation, a wholly-owned subsidiary of Ocwen Financial Corporation
and the manager of the Company. The source of funds for this purchase by the
Company was a $24.1 million advance under an existing line of credit with
Salomon Brothers Realty Corp. and other borrowings. The Company intends to
continue to use the building for rentals.
ITEM 5. OTHER EVENTS
In addition to the Prudential Building, this Current Report on Form 8-K/A
provides the financial statements and pro forma financial information for
certain additional properties acquired by the Company. The following is a list
of those properties:
Description Location Date Acquired
----------- -------- -------------
o 450 Sansome Street San Francisco, California September 23, 1997
o Cortez Plaza Bradenton, Florida November 10, 1997
o Bayers Road Shopping Centre Halifax, Nova Scotia April 9, 1998
Supplementally included in this Current Report on Form 8-K/A is certain
financial data related to the operations of certain other properties acquired by
the Company. The following is a list of those properties:
Description Location Date Acquired
----------- -------- -------------
o 10 UN Plaza San Francisco, California September 3, 1997
o 690 Market Street San Francisco, California January 23, 1998
o Park Center 1 Dayton, Ohio April 3, 1998
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) (i) Financial statements related to the following properties are attached
hereto, and incorporated herein by reference, as Exhibit 99.1:
(1) 841 Prudential Drive
(2) 450 Sansome Street
(3) Cortez Plaza
(4) Bayers Road Shopping Centre
(ii) In addition, supplemental financial data related to the operations of
the following properties is attached hereto, and incorporated herein by
reference, as Exhibit 99.2:
(1) 841 Prudential Drive
(2) 10 UN Plaza
(3) 690 Market Street
(4) Park Center 1
2
<PAGE>
(b) Pro forma financial information related to the properties listed under
Item 7(a)(i) is attached hereto, and incorporated herein by reference,
as Exhibit 99.3.
(c) Exhibits
The following exhibits are filed as part of this report:
2.1 Purchase and Sale Agreement dated June 9, 1998, between
Prudential Insurance Co. of America and Ocwen Capital
Corporation (1)
2.2 Assignment and Assumption Agreement dated July 22, 1998,
between Ocwen Capital Corporation and OAIC Jacksonville, LLC
10.1 Amended and Restated Loan Agreement by and among, inter alia,
OAIC California Partnership, L.P., OAIC California Partnership
II, L.P., Salomon Brothers Realty Corp. and LaSalle National
Bank, dated as of June 10, 1998 (2)
99.1 Financial statements of properties acquired
99.2 Supplemental financial data
99.3 Pro forma financial information
================================================================================
(1) Incorporated by reference to the Current Report on Form
8-K filed by the Company with the commission on August 6,
1998.
(2) Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June
30, 1998.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
OCWEN ASSET INVESTMENT CORP.
(Registrant)
By: /s/ Mark S. Zeidman
---------------------------------------------
Mark S. Zeidman
Senior Vice President and
Chief Financial Officer
Date: September 15, 1998
4
<PAGE>
INDEX TO EXHIBITS FILED HEREWITH
EXHIBIT DESCRIPTION PAGE
------- ----------- ----
2.2 Assignment and Assumption Agreement, dated July 22, 7
1998, between Ocwen Capital Corporation and OAIC
Jacksonville, LLC.
99.1 FINANCIAL STATEMENTS OF PROPERTIES ACQUIRED.
(1) 841 PRUDENTIAL DRIVE 10
----------------------
Statements of Revenue and Certain Expenses For the
Year Ended December 31, 1997 and the Six Months
Ended June 30, 1998 (unaudited), and Report of
Independent Certified Public Accountants.
(2) 450 SANSOME STREET 17
------------------
Statements of Revenue and Certain Expenses For the
Year Ended December 31, 1996 and the Six Months
Ended June 30, 1997 (unaudited), and Report of
Independent Accountants.
(3) CORTEZ PLAZA 24
------------
Statements of Revenue and Certain Expenses For the
Year Ended December 31, 1996 and the Nine Months
Ended September 30, 1997 (unaudited), and Report of
Independent Certified Public Accountants.
(4) BAYERS ROAD SHOPPING CENTRE 31
---------------------------
Statements of Revenue and Certain Expenses
For the Year Ended December 31, 1997 (and the
Three Months Ended March 31, 1998 (unaudited),
the Period from May 14, 1997 to December 31,
1997 (unaudited)), and Independent Auditors'
Report.
5
<PAGE>
99.2 SUPPLEMENTAL FINANCIAL DATA.
(1) 841 PRUDENTIAL DRIVE 40
---------------------
Other Operating Data.
(2) 10 UN PLAZA 41
-----------
Statement of Revenues and Certain Expenses for the
Six Months Ended June 30, 1998 (unaudited), with
accompanying notes.
(3) 690 MARKET STREET 44
-----------------
Statement of Revenues and Certain Expenses for the
Six Months Ended June 30, 1998 (unaudited), with
accompanying notes.
(4) PARK CENTER 1 47
-------------
Statement of Revenues and Certain Expenses for the
Six Months Ended June 30, 1998 (unaudited), with
accompanying notes.
99.3 PRO FORMA FINANCIAL INFORMATION.
(1) Unaudited Pro Forma Consolidated Statements 50
of Financial Condition at June 30, 1998.
(2) Unaudited Condensed Pro Forma Consolidated 52
Statements of Operations for the Period May 14,
1997 to December 31, 1997.
54
(3) Unaudited Condensed Pro Forma Consolidated
Statements of Operations for the Six Months
Ended June 30, 1998.
56
(4) Unaudited Condensed Pro Forma Consolidated
Statements of Operations for the Period July 1,
1997 to June 30, 1998.
6
EXHIBIT 2.2
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS AGREEMENT is made as of the 22nd day of July, 1998, by and
between:
OCWEN CAPITAL CORPORATION, a corporation
organized and existing under the laws of the State of
Florida ("Assignor"); and
OAIC JACKSONVILLE, LLC, a limited liability
company organized under the laws of the State of
Delaware ("Assignee").
WHEREAS, Assignor is the purchaser pursuant to that certain Purchase
and Sale Agreement dated June 9, 1998, and amendments thereto, by and between
The Prudential Insurance Company of America ("Seller"), and Assignor, as
purchaser (the "Purchase Agreement") with respect to the office building located
at 841 Prudential Drive, Jacksonville, Florida (the "Property"); and
WHEREAS, Assignor has agreed to transfer, assign, and convey, and
Assignee has agreed to accept and assume, all of the rights, entitlements,
liabilities, performances and obligations of Assignor in accordance with the
terms of the Purchase Agreement and this Assumption Agreement. All capitalized
terms not otherwise defined herein shall have the meaning ascribed to them in
the Purchase Agreement.
NOW, THEREFORE, WITNESSETH, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
1. ASSIGNMENT
Assignor does hereby grant, convey, assign, sell and transfer unto
Assignee, all of Assignor's right, title to and interest in the Purchase
Agreement, together with all rights, remedies, obligations, liabilities and
performances derived therefrom, occurring in connection therewith or evolving
therefrom by operation of law.
2. ASSUMPTION
In consideration of the grant, conveyance, transfer, sale and
assignment set forth in Section 1 hereof, Assignee hereby accepts all of the
rights, title to and interests of Assignor in the Purchase Agreement, occurring
in connection therewith or evolving therefrom by operation of law, and further
assumes, undertakes and agrees to perform all of the obligations, liabilities
and performances of Assignor under the Purchase Agreement.
3. DEPOSIT
Assignor hereby sets over, conveys, and assigns to Assignee all of
Assignor's right, title to and interest in the Deposit. Assignor shall direct
the Seller to apply any and all Deposits, monies, or other amounts previously
expended by or paid on behalf of Assignor in connection with the Purchase
Agreement to any and all sums now due by Assignee to Seller in connection with
the terms and conditions of the Purchase Agreement.
4. EFFECTIVE DATE
This assignment is effective on, at and as of the date and year first
above written, which date is prior to the expiration of the Due Diligence Period
of the Purchase Agreement.
7
<PAGE>
5. MISCELLANEOUS
(a) This Agreement shall be binding upon and inure to the benefit
of the Assignor and the Assignee and their successors and assigns.
(b) This Agreement shall be interpreted and construed in
accordance with the laws of the State of Florida.
(c) The parties agree to execute any further or additional
documents considered necessary, appropriate, or proper to effectuate the
purposes and intent of this Agreement.
IN WITNESS WHEREOF, the parties have hereto executed this
Agreement under seal as of the day and year first hereinabove written.
WITNESS/ATTEST: OCWEN CAPITAL CORPORATION
a Florida Corporation
/s/ TERYL J. TOLBERT By: /s/ GREGORY BRESKIN (SEAL)
- --------------------------------- ---------------------------------
Name: Gregory Breskin
Title: Vice President
WITNESS/ATTEST: OAIC JACKSONVILLE, LLC
a Delaware limited liability company
/s/ TERYL J. TOLBERT By: /s/ GREGORY BRESKIN (SEAL)
- --------------------------------- ---------------------------------
Name: Gregory Breskin
Title: Vice President
8
<PAGE>
STATE OF FLORIDA
COUNTY OF WEST PALM BEACH, ss.:
I HEREBY CERTIFY that on this 22nd day of July, 1998, before me, the
subscriber, a Notary Public of the jurisdiction aforesaid, personally appeared
Gregory Breskin, who acknowledged himself to be the Vice President of OAIC
Jacksonville, LLC, a Delaware limited liability company, and on behalf of said
limited liability company, did acknowledge that he, as such Vice President,
being authorized to do so, executed the foregoing instrument for the purposes
therein contained, by signing the name of the limited liability company by
himself as such Vice President.
AS WITNESS my hand and Notarial Seal.
/s/ MARIA J. RIOS
---------------------------
Notary Public
My commission expires: (SEAL)
STATE OF FLORIDA
COUNTY OF WEST PALM BEACH, ss.:
I HEREBY CERTIFY that on this 22nd day of July, 1998, before me, the
subscriber, a Notary Public of the jurisdiction aforesaid, personally appeared
Gregory Breskin, who acknowledged himself to be the Vice President of Ocwen
Capital Corporation, a Florida corporation, and on behalf of said corporation,
did acknowledge that he, as such Vice President, being authorized to do so,
executed the foregoing instrument for the purposes therein contained, by signing
the name of the corporation as himself as Vice President.
AS WITNESS my hand and Notarial Seal.
/s/ MARIA J. RIOS
---------------------------
Notary Public
My commission expires: (SEAL)
9
EXHIBIT 99.1
841 PRUDENTIAL DRIVE
STATEMENTS OF REVENUE AND
CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
10
<PAGE>
841 Prudential Drive
INDEX TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
PAGE
Report of Independent Certified Public Accountants ...................... 12
Statements of Revenues and Certain Expenses
For the Year Ended December 31, 1997 ............................ 13
For the Six Months Ended June 30, 1998 (unaudited) .............. 14
Notes to Statements of Revenues and Certain Expenses .................... 15
11
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Ocwen Asset Investment Corp.
We have audited the accompanying statement of revenues and certain expenses for
the property known as 841 Prudential Drive for the year ended December 31, 1997.
This financial statement is the responsibility of the property's management. Our
responsibility is to express an opinion on this financial statement 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 financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared using
the basis described in Note 2, 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 of Ocwen Asset Investment Corp.) and is not intended
to be a complete presentation of the revenues and expenses of the property known
as 841 Prudential Drive.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses for 841 Prudential Drive
on the basis described in Note 2 for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
- -----------------------------------------------
PricewaterhouseCoopers LLP
Tampa, Florida
July 23, 1998
12
<PAGE>
841 PRUDENTIAL DRIVE
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
REVENUES
Base rents ............................................ $ 103,329
CERTAIN EXPENSES
Real estate and property taxes ........................ 694,282
Utilities ............................................. 812,812
Janitorial ............................................ 471,115
Repairs and maintenance ............................... 1,026,677
Security .............................................. 455,908
Grounds and parking ................................... 247,339
Other operating expenses .............................. 368,911
Property management and administrative expenses ....... 346,787
-------------
4,423,831
-------------
CERTAIN EXPENSES IN EXCESS OF REVENUES ................... $ (4,320,502)
-------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
841 PRUDENTIAL DRIVE
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1998
- --------------------------------------------------------------------------------
REVENUES
Base rents ............................................ $ 53,954
CERTAIN EXPENSES
Real estate and property taxes ........................ 347,141
Utilities ............................................. 366,466
Janitorial ............................................ 269,477
Repairs and maintenance ............................... 353,269
Security .............................................. 292,114
Grounds and parking ................................... 205,964
Other operating expenses .............................. 230,207
Property management and administrative expenses ....... 155,116
-------------
2,219,754
-------------
CERTAIN EXPENSES IN EXCESS OF REVENUES ................... $ (2,165,800)
-------------
The accompanying notes are an integral part of these financial
statements.
14
<PAGE>
841 PRUDENTIAL DRIVE
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY:
For the purpose of the accompanying statements of revenues and certain
expenses (the "financial statements"), 841 Prudential Drive (the
"Property") is a 22 story, 488,080 square foot office building and adjacent
parking lot located in Jacksonville, Florida, which was acquired by Ocwen
Asset Investment Corp. (the "Company") on July 22, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the accrual
basis of accounting.
The accompanying financial statements are not representative of the actual
operations for the periods presented, as certain revenues and expenses
which may not be comparable to the revenues and expenses to be earned or
incurred by the Company in the future operations of the Property have been
excluded. Revenues excluded consist of Prudential Insurance Company of
America ("Prudential") tenant rental income and other revenues unrelated to
the continuing operations of the Property. Expenses excluded consist of
depreciation of the building and improvements, Prudential corporate charges
and other expenses not directly related to the future operations of the
Property.
INTERIM FINANCIAL STATEMENT
The interim financial statement for the six months ended June 30, 1998 is
unaudited. However, in the opinion of the Property's management, the
interim financial statement includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results
for the interim period. The results for the period presented are not
necessarily indicative of the results to be expected for the full year or
any other period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Base rents are recognized on a straight-line basis over the terms of the
lease agreements as required under generally accepted accounting
principles.
REPAIRS AND MAINTENANCE
Expenditures for repairs and maintenance are charged to operations as
incurred. Betterments that improve or extend the life of the asset beyond
its original condition are capitalized.
15
<PAGE>
841 PRUDENTIAL DRIVE
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
3. TENANT LEASES:
Leases for the Property have various remaining lease terms of up to three
years with options to certain tenants for renewal.
As of December 31, 1997, 100 percent of the total rentable area of the
Property was either occupied by Prudential or leased under executed lease
agreements. As of December 31, 1997, approximately 2 percent of the total
rentable area of the Property had been leased under executed lease
agreements. Future base rentals to be received under these executed lease
agreements as of December 31, 1997 are as follows:
YEAR ENDING DECEMBER 31, AMOUNT
1998 ............................ $ 66,615
1999 ............................ 40,371
2000 ............................ 9,349
2001 and thereafter ............. --
------------
$ 116,335
------------
For the year ended December 31, 1997 and for the six months ended June 30,
1998 (unaudited), Prudential was the lessee responsible for 98 percent of
total base rents. For purposes of these financial statements, rental income
earned from Prudential tenants of $6,427,200 for the year ended December
31, 1997 and $3,133,265 for the six months ended June 30, 1998 (unaudited)
was excluded, resulting in certain expenses in excess of revenues of
$4,320,502 and $2,165,800 (unaudited), respectively.
1. PROPERTY MANAGEMENT AND ADMINISTRATIVE EXPENSES:
The Property incurs salary and benefit expenses for full-time employees. In
addition, the Property incurred management fees which totaled $67,500 for
the year ended December 31, 1997 and $50,472 for the six months ended June
30, 1998 (unaudited).
2. RELATED PARTY:
Prudential, the current owner of the Property, is also the Property's
primary tenant. Current administrative and other operating expenses of the
Property reflect economies of scale gained by Prudential. There can be no
guarantee that future owners of the Property will be able to maintain
administrative and other operating expenses at levels obtained in these
financial statements.
16
<PAGE>
450 SANSOME STREET
STATEMENTS OF REVENUE AND
CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31,
1996 AND THE SIX MONTHS ENDED
JUNE 30, 1997 (UNAUDITED)
17
<PAGE>
450 SANSOME STREET
INDEX TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
PAGE
Report of Independent Accountants ...................................... 19
Statements of Revenue and Certain Expenses
For the year ended December 31, 1996 ........................... 20
For the six months ended June 30, 1997 (unaudited) ............. 21
Notes to Statements of Revenue and Certain Expenses .................... 22
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Ocwen Asset Investment Corp.
We have audited the accompanying statement of revenue and certain expenses for
the property known as 450 Sansome Street for the year ended December 31, 1996.
This financial statement is the responsibility of the property's management. Our
responsibility is to express an opinion on this financial statement 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 financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was prepared using
the basis described in Note 2, 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 of Ocwen Asset Investment Corp.) and is not intended
to be a complete presentation of the revenues and expenses of the property known
as 450 Sansome Street.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses for 450 Sansome Street
on the basis described in Note 2 for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
- -------------------------------------------
PricewaterhouseCoopers LLP
San Francisco, CA
June 26, 1998
19
<PAGE>
450 SANSOME STREET
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
REVENUE
Rental income (Note 3) .................................. $2,183,717
Other Income ............................................ 71,908
----------
2,255,625
----------
CERTAIN EXPENSES
Real estate and property taxes .......................... 120,842
Utilities ............................................... 390,229
Janitorial .............................................. 232,219
Other operating expenses ................................ 356,195
Property management and administrative expenses (Note 4). 121,281
----------
1,220,766
----------
REVENUE IN EXCESS OF CERTAIN EXPENSES ..................... $1,034,859
----------
See accompanying notes to financial statements.
20
<PAGE>
450 SANSOME STREET
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
REVENUE
Rental income (Note 3) .................................. $982,853
Other Income ............................................ 13,265
--------
996,118
CERTAIN EXPENSES
Real estate and property taxes .......................... 59,901
Utilities ............................................... 152,660
Janitorial .............................................. 80,592
Other operating expenses ................................ 223,163
Property management and administrative expenses (Note 4). 49,028
--------
565,344
--------
REVENUE IN EXCESS OF CERTAIN EXPENSES $430,774
--------
See accompanying notes to financial statements.
21
<PAGE>
450 SANSOME STREET
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY:
For the purpose of the accompanying statements of revenue and certain
expenses, 450 Sansome Street (the "Property") is an office building located
in San Francisco, California, which was acquired by Ocwen Asset Investment
Corp. (the "Company") on September 23, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying statements of revenue and certain expenses have been
prepared on the accrual basis of accounting. The accompanying financial
statements are not representative of the actual operations for the periods
presented, as certain expenses which may not be comparable to the expenses
to be incurred by the Company in the future operations of the Property have
been excluded. Expenses excluded consist of interest and other finance
charges, depreciation of the building and improvements, and amortization of
organization and other intangible costs and other expenses not comparable
to future operations of the Property.
INTERIM FINANCIAL STATEMENT
The interim financial statement for the six months ended June 30, 1997 is
unaudited. However, in the opinion of the Property's management, the
interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of revenue and certain expenses
for the interim period. The revenue and certain expenses for the period
presented are not necessarily indicative of the results to be expected for
the full year or any other period.
REVENUE RECOGNITION
Rental income is recognized on a straight-line basis over the terms of the
underlying leases.
REPAIRS AND MAINTENANCE
Expenditures for maintenance and repairs are charged to operations as
incurred. Betterments that improve or extend the life of the asset beyond
its original condition are capitalized.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
22
<PAGE>
450 SANSOME STREET
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
3. TENANT LEASES:
Leases for the Property have various remaining lease terms of up to ten
years with options to certain tenants for renewal. In addition to base
rents, the leases provide for the tenants to pay their proportionate share
of real estate taxes and operating expenses in excess of base year amounts.
Future minimum rents to be received from tenants under non-cancelable
leases as of December 31, 1996 are as follows:
YEAR ENDING DECEMBER 31, AMOUNT
1997 .................................... $1,551,783
1998 .................................... 1,353,848
1999 .................................... 1,358,606
2000 .................................... 1,281,262
2001 .................................... 463,171
Thereafter .............................. 403,559
----------
$6,412,229
----------
4. PROPERTY MANAGEMENT AND ADMINISTRATIVE EXPENSES:
The Property incurs salary and benefit expenses for full-time employees. In
addition, the Property incurred management fees which totaled $46,631 for
the year ended December 31, 1996 and $16,500 for the six months ended June
30, 1997 (unaudited).
23
<PAGE>
CORTEZ PLAZA
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE NINE MONTHS
ENDED SEPTEMBER 30, 1997 (UNAUDITED)
24
<PAGE>
CORTEZ PLAZA
INDEX TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
PAGE
Report of Independent Certified Public Accountants .................... 26
Statements of Revenues and Certain Expenses
For the Year Ended December 31, 1996 .......................... 27
For the Nine Months Ended September 30, 1997 (unaudited) ...... 28
Notes to Statements of Revenues and Certain Expenses .................. 29
25
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Ocwen Asset Investment Corp.
We have audited the accompanying statement of revenues and certain expenses for
the property known as Cortez Plaza for the year ended December 31, 1996. This
financial statement is the responsibility of the property's management. Our
responsibility is to express an opinion on this financial statement 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 financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenues and certain expenses was prepared using
the basis described in Note 2, 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 of Ocwen Asset Investment Corp.) and is not intended
to be a complete presentation of the revenues and expenses of the property known
as Cortez Plaza.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain expenses for Cortez Plaza on the
basis described in Note 2 for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ PricewaterhouseCoopers LLP
- -------------------------------------------
PricewaterhouseCoopers LLP
Tampa, Florida
June 19, 1998
26
<PAGE>
CORTEZ PLAZA
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
REVENUES
Base rents ........................................ $2,294,264
Common area maintenance and property tax recoveries 521,601
----------
2,815,865
----------
CERTAIN EXPENSES
Real estate and property taxes .................... 282,942
Utilities ......................................... 29,121
Land lease ........................................ 60,720
Insurance ......................................... 97,421
Other operating expenses .......................... 193,128
Property management and administrative expenses ... 112,437
----------
775,769
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES .............. $2,040,096
----------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
CORTEZ PLAZA
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
REVENUES
Base rents ........................................ $1,658,913
Common area maintenance and property tax recoveries 391,447
----------
2,050,360
----------
CERTAIN EXPENSES
Real estate and property taxes .................... 246,467
Utilities ......................................... 27,150
Land lease ........................................ 60,834
Insurance ......................................... 77,146
Other operating expenses .......................... 150,854
Property management and administrative expenses ... 90,240
----------
652,691
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES .............. $1,397,669
----------
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
CORTEZ PLAZA
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY:
For the purpose of the accompanying statements of revenues and certain
expenses (the "financial statements"), Cortez Plaza (the "Property") is a
289,686 square foot shopping center located in Bradenton, Florida, which
was acquired by Ocwen Asset Investment Corp. (the "Company") on November
10, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the accrual
basis of accounting.
The accompanying financial statements are not representative of the actual
operations for the periods presented, as certain revenues and expenses
which may not be comparable to the revenues and expenses to be earned or
incurred by the Company in the future operations of the Property have been
excluded. Revenues excluded consist of miscellaneous revenues unrelated to
the continuing operations of the Property. Expenses excluded consist of
depreciation of the building and improvements and other expenses not
directly related to the future operations of the Property.
INTERIM FINANCIAL STATEMENT
The interim financial statement for the nine months ended September 30,
1997 is unaudited. However, in the opinion of the Property's management;
the interim financial statement includes all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement of the
results for the interim period. The results for the period presented are
not necessarily indicative of the results to be expected for the full year
or any other period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Base rents are recognized on a straight-line basis over the terms of the
lease agreements as required under generally accepted accounting
principles.
REPAIRS AND MAINTENANCE
Expenditures for repairs and maintenance are charged to operations as
incurred. Betterments that improve or extend the life of the asset beyond
its original condition are capitalized.
29
<PAGE>
CORTEZ PLAZA
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
3. TENANT LEASES:
REVENUES
As of December 31, 1996, approximately 97 percent of the total rentable
area of the shopping center had been leased under executed lease
agreements. Future base rentals to be received under these lease agreements
as of December 31, 1996 are as follows:
YEAR ENDING DECEMBER 31, AMOUNT
1997 $ 2,224,052
1998 2,318,903
1999 2,200,339
2000 1,904,088
2001 1,795,029
Thereafter 4,948,647
-----------
$15,391,058
-----------
For the year ended December 31, 1996, the Property received approximately
$1,379,000, or 60 percent of total base rentals from five leases. For the
nine months ended September 30, 1997, the Property received approximately
$1,068,000, or 64 percent (unaudited) of total base rentals from five
leases.
Certain lease agreements contain provisions, which enable the Property to
increase the tenants' base rental in accordance with the consumer price
index.
In addition to base rents, the leases provide for the tenants to pay their
proportionate share of common area maintenance and property taxes ("common
area expenses"). Common area expenses are charged back to tenants as
defined in each tenant's lease agreement (primarily pro rata based upon
square footage) and recorded as revenue in Common area maintenance and
property tax recoveries.
EXPENSES
Land lease expenses consist of costs associated with the leases of land on
which the Property resides. These costs are expensed on a straight-line
basis over the terms of the lease agreements.
Future lease commitments are approximately $62,000 in 1997 and $41,000 in
1998 and thereafter, subject to certain lease adjustments based on
increases in the consumer price index.
1. PROPERTY MANAGEMENT AND ADMINISTRATIVE EXPENSES:
The Property incurred management fees which totaled $112,437 for the year
ended December 31, 1996 and $90,240 for the nine months ended September 30,
1997 (unaudited).
30
<PAGE>
BAYERS ROAD SHOPPING CENTRE
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 (AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998 (UNAUDITED) AND THE PERIOD FROM MAY 14,
1997 TO DECEMBER 31, 1997 (UNAUDITED))
31
<PAGE>
BAYERS ROAD SHOPPING CENTRE
INDEX TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
PAGE
Auditors' Report ......................................................... 33
Statements of Revenue and Certain Expenses
For the Year Ended December 31, 1997 ............................. 34
For the Three Months Ended March 31, 1998 (unaudited) ............ 35
For the Period from May 14, 1997 to December 31, 1997 (unaudited). 36
Notes to Statements of Revenue and Certain Expenses ...................... 37
32
<PAGE>
AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
OCWEN ASSET INVESTMENT CORP.
We have audited the accompanying statement of revenue and certain expenses for
the property known as Bayers Road Shopping Centre for the year ended December
31, 1997. This financial statement is the responsibility of Ocwen Asset
Investment Corp. Our responsibility is to express an opinion on this financial
statement 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 financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statement.
The accompanying statement of revenue and certain expenses was prepared using
the basis described in Note 2, 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 of Ocwen Asset Investment Corp.) and is not intended
to be a complete presentation of the revenues and expenses of the property known
as Bayers Road Shopping Centre.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses for Bayers Road Shopping
Centre on the basis described in Note 2 for the year ended December 31, 1997 in
conformity with generally accepted accounting principles in the United States.
/s/ PricewaterhouseCoopers
- --------------------------------------------------
PricewaterhouseCoopers
CHARTERED ACCOUNTANTS
Toronto, Ontario
June 23, 1998
33
<PAGE>
BAYERS ROAD SHOPPING CENTRE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
REVENUE
Rental (Note 3) ........................................ $4,699,923
Recoveries ............................................. 2,126,254
----------
6,826,177
CERTAIN EXPENSES
Real estate and property taxes ......................... 1,284,317
Utilities .............................................. 530,700
Janitorial ............................................. 269,906
Other operating expenses ............................... 580,404
Property management and administrative expenses (Note 4) 656,609
Repairs and maintenance ................................ 318,680
----------
3,640,616
----------
REVENUE IN EXCESS OF CERTAIN EXPENSES .................... $3,185,561
----------
See accompanying notes to financial statements.
34
<PAGE>
BAYERS ROAD SHOPPING CENTRE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
REVENUE
Rental (Note 3) ........................................ $1,062,801
Recoveries ............................................. 467,686
----------
1,530,487
CERTAIN EXPENSES
Real estate and property taxes ......................... 298,832
Utilities .............................................. 131,379
Janitorial ............................................. 67,668
Other operating expenses ............................... 184,366
Property management and administrative expenses (Note 4) 130,901
Repairs and maintenance ................................ 58,973
----------
872,119
----------
REVENUE IN EXCESS OF CERTAIN EXPENSES .................... $ 658,368
----------
See accompanying notes to financial statements.
35
<PAGE>
BAYERS ROAD SHOPPING CENTRE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE PERIOD FROM MAY 14, 1997 TO DECEMBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
REVENUE
Rental (Note 3) ........................................ $2,948,793
Recoveries ............................................. 1,164,312
----------
4,113,105
CERTAIN EXPENSES
Real estate and property taxes ......................... 761,445
Utilities .............................................. 296,469
Janitorial ............................................. 172,353
Other operating expenses ............................... 308,772
Property management and administrative expenses (Note 4) 392,776
Repairs and maintenance ................................ 247,819
----------
2,179,634
----------
REVENUE IN EXCESS OF CERTAIN EXPENSES .................... $1,933,471
----------
See accompanying notes to financial statements.
36
<PAGE>
BAYERS ROAD SHOPPING CENTRE
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
DECEMBER 31, 1997
1. ORGANIZATION AND OPERATION OF PROPERTY:
For the purpose of the accompanying statements of revenue and certain
expenses, Bayers Road Shopping Centre (the "property") is a shopping center
located in Halifax, Nova Scotia, which was acquired through foreclosure by
Ocwen Asset Investment Corp. (the "REIT") on April 9, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statement is expressed in Canadian dollars and is prepared in
accordance with accounting principles generally accepted in the United
States.
BASIS OF PRESENTATION
The accompanying statement of revenue and certain expenses has been
prepared on the accrual basis of accounting.
The financial statement is not representative of the actual operations for
the periods presented, as certain revenues and expenses which may not be
comparable to the revenues and expenses to be earned or incurred by the
REIT in the future operations of the property have been excluded. Revenues
excluded consist of interest and other revenues unrelated to the continuing
operations of the property. Expenses excluded consist of interest and other
finance charges, depreciation of the building and improvements,
amortization of organization and other intangible costs, capital taxes and
other expenses not directly related to the future operations of the
property.
INTERIM FINANCIAL STATEMENTS
The interim financial data for the three months ended March 31, 1998 and
the period from May 14, 1997 (the date of inception of the REIT) to
December 31, 1997 is unaudited. However, in the opinion of the REIT, the
interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the interim
period. The results for the period presented are not necessarily indicative
of the results to be expected for the full year or any other period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Rental revenues are recognized on a straight-line basis required under
generally accepted accounting principles.
REPAIRS AND MAINTENANCE
Expenditures for maintenance and repairs are charged to operations as
incurred. Betterments that improve or extend the life of the asset beyond
its original condition are capitalized.
37
<PAGE>
BAYERS ROAD SHOPPING CENTRE
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES...CONTINUED
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
3. TENANT LEASES:
Leases for the property have various remaining lease terms of up to nine
years with options to certain tenants for renewal.
Future minimum rents to be received from tenants as at December 31, 1997
are as follows:
YEAR ENDING DECEMBER 31, AMOUNT
1998 ............................. $ 3,907,000
1999 ............................. 3,080,000
2000 ............................. 2,307,000
2001 ............................. 1,884,000
2002 ............................. 1,320,000
Thereafter ....................... 3,299,000
-----------
$15,797,000
-----------
For the year ended December 31, 1997, one lessee was responsible for 13
percent of rental revenue. For the three months ended March 31, 1998 and
the period from May 14, 1997 to December 31, 1997 (unaudited), the one
lessee was responsible for 14 percent and 11 percent of rental revenue,
respectively. This one lessee can terminate its lease agreement if the
property's vacancy exceeds a certain level.
4. PROPERTY MANAGEMENT AND ADMINISTRATIVE EXPENSES:
The property incurs salary and benefit expenses for full-time employees. In
addition, the property incurred management fees which totaled $208,800 for
the year ended December 31, 1997, $46,400 for the three months ended March
31, 1998 (unaudited) and $132,717 for the period from May 14, 1997 to
December 31, 1997 (unaudited).
38
EXHIBIT 99.2
OCWEN ASSET INVESTMENT CORP.
SUPPLEMENTAL FINANCIAL DATA
39
<PAGE>
841 PRUDENTIAL DRIVE BUILDING
OTHER OPERATING DATA
- --------------------------------------------------------------------------------
DEPRECIATION. For federal income tax purposes, the basis, net of
accumulated depreciation, of the 841 Prudential Drive property aggregated
approximately $32.7 million at July 22, 1998. A land only valuation of this
property has been ordered, which may modify the tax basis of this property. The
real property associated with the 841 Prudential Drive property (other than
land) generally will be depreciated for federal income tax purposes over 39
years using the straight-line method. For financial reporting purposes, the 841
Prudential Drive property is recorded at its historical cost and is depreciated
using the straight-line method over its estimated useful life, which is
estimated to be 39 years.
REAL ESTATE TAXES. The 1997 annual real estate taxes paid on the 841
Prudential Drive property were approximately $631,729. The Duval county real
estate tax is 1.92 percent of assessed value.
OCCUPANCY. At June 30, 1998, the 841 Prudential Drive property was
leased to three tenants engaged in insurance and food services. Information
about the occupancy rate and the average effective annual rental per square foot
for the 841 Prudential Drive property for the last five years is not meaningful.
The building was substantially occupied by its owner, Prudential Insurance Co.
of America, during this period.
LEASE EXPIRATIONS. The following table sets forth a summary schedule of
the total lease expirations for the 841 Prudential Drive property for leases in
place as of July 22, 1998, assuming that none of the tenants exercise renewal
options or termination rights, if any, at or prior to the scheduled expirations.
<TABLE>
<CAPTION>
Year of 2008
Lease and
Expiration 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Beyond
- ---------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
No. of Leases
Expiring ............ 0 0 1 1 1 0 0 0 0 0 0
Square
Footage of
Expiring Leases ..... 0 0 2,917 2,832 474,570 0 0 0 0 0 0
Percent of Total
Leased Square Feet .. 0% 0% 0.6% 0.6% 98.8% 0% 0% 0% 0% 0% 0%
Annualized Rent of
Expiring Leases ..... $0 $0 $ 30,874 $43,324 $7,555,154 0 $0 $0 $0 $0 $0
Percent of Total
Annualized Rent ..... 0% 0% 0.4% 0.6% 99% 0% 0% 0% 0% 0% 0%
Annualized
Rent per Square
Ft. of Expiring
Leases .............. $0 $0 $ 10.58 $ 15.30 $ 15.92 0 $0 $0 $0 $0 $0
</TABLE>
At July 22, 1998, the only tenant of the 841 Prudential Drive property
which occupied ten percent or more of the rentable square footage in the
building was Prudential Insurance Company of America ("Prudential"), which is
engaged in the insurance business. Prudential leases 474,570 rentable square
feet on 22 floors. The other two minor leases totaling 5,749 square feet,
provide support services for Prudential.
40
<PAGE>
10 UN PLAZA
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
REVENUES
Rental income ................................. $575,534
Lease termination income ...................... 230,000
Recoveries .................................... 33,067
Other ......................................... 41,947
--------
880,548
CERTAIN EXPENSES
Real estate and property taxes ................ 41,666
Utilities ..................................... 44,183
Janitorial .................................... 44,147
Service expenses .............................. 55,598
Repairs and maintenance ....................... 21,095
Depreciation and amortization ................. 98,012
Property management and administrative expenses 212,524
--------
517,225
--------
REVENUE IN EXCESS OF CERTAIN EXPENSES ............. $363,323
--------
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
10 UN PLAZA
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY:
For the purpose of the accompanying statement of revenues and certain
expenses (the "financial statements"), 10 UN Plaza (the "Property") is
a 71,636 square foot, six-story, Class B office building located in the
civic center district of San Francisco, which was acquired by Ocwen
Asset Investment Corp. (the "Company") on September 3, 1997. The
Company purchased the Property, which was built in 1982, for $9.1
million. At the date of acquisition, the Property was substantially
leased and the average rent per square foot was $13.76, which the
Company believes is below current market levels. The Property was 45
percent leased as of June 30, 1998, and over 93 percent of total
rentable space will become available by September 1998. Short-term
holdover agreements were negotiated with two of the Property's largest
tenants to allow them time to relocate from the Property, with rental
rates during the holdover terms ranging from $25.00 to $38.00 per
square foot. The Property is currently being marketed for lease to
tenants with full floor or full building space requirements, and the
Company is under active negotiation with several companies for rents in
the upper $20 per square foot range. The Company is investing
approximately $3.5 million in this property to fund cosmetic
improvements to enhance the lobby and hallways, install upgrades to
conform with the Americans with Disabilities Act, fund deferred
maintenance and tenant improvements and pay leasing commissions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying financial statement has been prepared on the accrual
basis of accounting.
INTERIM FINANCIAL STATEMENT
The interim financial statement for the six months ended June 30, 1998
is unaudited. However, in the opinion of the property's management, the
interim financial statement includes all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement of the
results for the interim period. The results for the period presented
are not necessarily indicative of the results to be expected for the
full year or any other period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and
expenses during the period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Base rents are recognized on a straight-line basis over the terms of
the lease agreements as required under generally accepted accounting
principles.
REPAIRS AND MAINTENANCE
Expenditures for repairs and maintenance are charged to operations as
incurred. Betterments that improve or extend the life of the asset
beyond its original condition are capitalized.
42
<PAGE>
10 UN PLAZA
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
3. TENANT LEASES:
Approximately 45 percent of the total rentable area of the office
building had been leased under executed lease agreements as of June 30,
1998, and over 93 percent of total rentable space will become available
by September 1998. Future base rentals to be received under these lease
agreements as of December 31, 1998 are as follows:
YEAR ENDING SQUARE FEET OCCUPIED AT
DECEMBER 31, DECEMBER 31, (1) RENT (2)
------------ ---------------- --------
1998 6,317 $ 626,086
1999 6,317 109,201
2000 5,160 92,880
2001 5,160 92,880
2002 5,160 7,740
Thereafter 0 0
(1) The square feet projections are based on existing leases only
and assume no renewals or new leases.
(2) Rent projections are based on 12 months and assume rent is
recognized on a straight-line basis.
For the six months ended June 30, 1998 (unaudited), the property
received approximately $575,534, or 65.4 percent of total rental
revenue from four leases.
4. PROPERTY MANAGEMENT AND ADMINISTRATIVE EXPENSES:
The property incurred management fees, which totaled $13,151 for the
six months ended June 30, 1998. In addition, during the six months
ended June 30, 1998 the property incurred salary and benefit expenses
for full time employees of $68,832 and other property administrative
costs of $130,541.
43
<PAGE>
690 MARKET STREET
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
REVENUES
Rental income ................................. $823,687
Lease termination income ...................... --
Recoveries .................................... 72,772
Other ......................................... 13,608
--------
910,067
CERTAIN EXPENSES
Real estate and property taxes ................ 54,588
Utilities ..................................... 61,886
Janitorial .................................... 43,386
Service expenses .............................. 52,607
Repairs and maintenance ....................... 22,765
Depreciation and amortization ................. 116,602
Property management and administrative expenses 213,821
--------
565,655
--------
REVENUE IN EXCESS OF CERTAIN EXPENSES ............. $344,412
--------
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
690 MARKET STREET
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY:
For the purpose of the accompanying statement of revenues and certain
expenses (the "financial statement"), 690 Market Street (the
"Property") is a 124,692 square foot, 16-story, Class C office building
located in the financial district of San Francisco, California, which
was acquired by Ocwen Asset Investment Corp. (the "Company") on January
23, 1998. The Property was purchased for $13.7 million. The Property
was originally constructed in 1888 and has undergone numerous
renovations. At the date of acquisition, approximately 41 percent of
the building was available for re-leasing by the end of 1998 and
existing rents for this occupied space averaged $14.06 per square foot,
which the Company believes is below current market levels. The building
was 72 percent leased as of June 30, 1998. The Company is investing
approximately $4.3 million to install structural upgrades, a sprinkler
system and upgrades to conform with the Americans with Disabilities
Act, fund deferred maintenance and tenant improvements, and pay leasing
commissions. The Company is currently implementing a new leasing
program at the property to coincide with the renovation schedule and
has renewed existing leases in the mid $20 per square foot range, which
represents an approximately 30 percent increase.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying financial statement has been prepared on the accrual
basis of accounting.
INTERIM FINANCIAL STATEMENT
The interim financial statement for the six months ended June 30, 1998
is unaudited. However, in the opinion of the property's management; the
interim financial statement includes all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement of the
results for the interim period. The results for the period presented
are not necessarily indicative of the results to be expected for the
full year or any other period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and
expenses during the period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Base rents are recognized on a straight-line basis over the terms of
the lease agreements as required under generally accepted accounting
principles.
REPAIRS AND MAINTENANCE
Expenditures for repairs and maintenance are charged to operations as
incurred. Betterments that improve or extend the life of the asset
beyond its original condition are capitalized.
45
<PAGE>
690 MARKET STREET
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
3. TENANT LEASES:
Approximately 72 percent of the total rentable area of the office
building had been leased under executed lease agreements as of June 30,
1998, and approximately 41 percent of total rentable space will become
available for re-leasing by the end of 1998. Future base rentals to be
received under these lease agreements as of December 31, 1998 are as
follows:
YEAR ENDING SQUARE FEET OCCUPIED AT
DECEMBER 31, DECEMBER 31, (1) RENT (2)
------------ ---------------- --------
1998 77,514 $1,999,678
1999 66,723 1,552,106
2000 61,545 1,441,904
2001 49,819 1,326,171
2002 31,351 1,141,926
Thereafter 31,351 1,369,604
(1) The square feet projections are based on existing leases only
and assume no renewals or new leases.
(2) Rent projections are based on 12 months and assume rent is
recognized on a straight-line basis.
For the six months ended June 30, 1998 (unaudited), the property
received approximately $823,687, or 90.5 percent of total rental
revenue from 59 leases.
4. PROPERTY MANAGEMENT AND ADMINISTRATIVE EXPENSES:
The property incurred management fees, which totaled $20,634 for the
six months ended June 30, 1998. In addition, during the six months
ended June 30, 1998 the property incurred salary and benefit expenses
for full time employees of $84,377 and other property administrative
costs of $108,810.
46
<PAGE>
PARK CENTER 1
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
- --------------------------------------------------------------------------------
REVENUES
Rental income ................................. $ --
Other ......................................... --
--------
CERTAIN EXPENSES
Depreciation and amortization ................. 3,278
Property management and administrative expenses 56,542
--------
59,820
--------
REVENUE IN EXCESS OF CERTAIN EXPENSES ............. $(59,820)
--------
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
PARK CENTER 1
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
- --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATION OF PROPERTY:
For the purpose of the accompanying statement of revenues and certain
expenses (the "financial statements"), Park Center I (the "Property")
is an approximately 44,000 square foot, four-story, suburban office
building located on a frontage road to Interstate 75 in Dayton, Ohio,
which was acquired by Ocwen Asset Investment Corp. (the "Company") on
April 3, 1998. The Property was constructed in 1981, and the Property
was acquired by foreclosure on the loan secured by the Property, which
was acquired by the Company at a discount in September 1997. The
building is currently vacant and configured for single tenant use, but
may be converted to multi-tenant use. The Company currently is
preparing an operating plan for this investment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying financial statement has been prepared on the accrual
basis of accounting.
INTERIM FINANCIAL STATEMENT
The interim financial statement for the six months ended June 30, 1998
is unaudited. However, in the opinion of the property's management, the
interim financial statement includes all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement of the
results for the interim period. The results for the period presented
are not necessarily indicative of the results to be expected for the
full year or any other period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and
expenses during the period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Base rents are recognized on a straight-line basis over the terms of
the lease agreements as required under generally accepted accounting
principles.
REPAIRS AND MAINTENANCE
Expenditures for repairs and maintenance are charged to operations as
incurred. Betterments that improve or extend the life of the asset
beyond its original condition are capitalized.
3. TENANT LEASES:
Currently, the building is vacant and configured for single tenant use,
but may be converted to multi-tenant use. The Company currently is
preparing an operating plan for this investment.
4. PROPERTY MANAGEMENT AND ADMINISTRATIVE EXPENSES:
The property incurred management fees and administrative expenses,
which totaled $56,542 for the six months, ended June 30, 1998.
48
EXHIBIT 99.3
OCWEN ASSET INVESTMENT CORP.
PRO FORMA FINANCIAL INFORMATION
49
<PAGE>
<TABLE>
<CAPTION>
OCWEN ASSET INVESTMENT CORP.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT JUNE 30, 1998
(IN THOUSANDS)
HISTORICAL PRO FORMA TOTAL
COMPANY (1) ADJUSTMENTS PRO FORMA
----------- ----------- ---------
ASSETS
<S> <C> <C> <C>
Cash and amounts due from depository institutions ..... $ 11,764 $ -- $ 11,764
Interest bearing deposits ............................. 1,337 -- 1,337
Securities available for sale, at market value ........ 415,933 -- 415,933
Loan portfolio, net ................................... 183,535 -- 183,535
Discount loan portfolio, net .......................... 8,512 -- 8,512
Investment in real estate, net ........................ 176,925 32,710 (2) 209,635
Principal and interest receivable ..................... 13,158 -- 13,158
Deposits on pending asset acquisitions ................ 504 -- 504
Other assets .......................................... 10,382 153 (3) 10,535
--------- ---------- ---------
$ 822,050 $ 32,863 $ 854,913
========= ========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Securities sold under agreements to repurchase ........ $ 223,820 $ -- $ 223,820
Obligation outstanding under line of credit ........... 154,179 8,398 (2) 162,577
Obligation outstanding under lines of credit secured
by real estate ..................................... 115,236 24,123 (2) 139,359
Dividends and distributions payable ................... 10,179 -- 10,179
Accrued expenses, payables and other liabilities ...... 15,069 342 (4) 15,411
--------- ---------- ---------
518,483 32,863 551,346
========= ========== =========
Minority interest ..................................... 29,886 -- 29,886 (5)
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; 25,000,000 shares
Authorized; 0 shares issued and outstanding ........ -- -- --
Common Stock, $.01 par value; 200,000,000 shares
Authorized; 18,965,000 shares issued and
outstanding ........................................ 190 -- 190
Additional paid-in capital ............................ 294,461 -- 294,461
Distributions in excess of earnings ................... (19,999) -- (19,999)
Unrealized gain (loss) on securities available for sale 81 -- 81
Cumulative translation adjustment ..................... (1,052) -- (1,052)
--------- ---------- ---------
Total shareholder's equity .......................... 273,681 -- 273,681
--------- ---------- ---------
$ 822,050 $ 32,863 $ 854,913
========= ========== =========
</TABLE>
50
<PAGE>
OCWEN ASSET INVESTMENT CORP.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT JUNE 30, 1998
(1) All other acquisitions for which pro forma financial information is
disclosed were acquired prior to June 30, 1998 and hence, are reflected
in the Historical Company column.
(2) Represents the purchase on July 22, 1998 of 841 Prudential Drive. The
purchase of 841 Prudential Drive was funded by a $24.1 million loan from
Salomon Brothers Realty Corp. at LIBOR plus 175 basis points (7.41
percent at July 22, 1998) and from $8.4 million of borrowings from other
sources at 11.50 percent.
(3) Represents $152,615 of deferred loan expense related to the $24.1 million
loan from Salomon Brothers Realty Corp. related to the purchase of 841
Prudential Drive.
(4) Represents $342,387 of estimated 1998 real estate taxes for 841
Prudential Drive for the period of January 1, 1998 through June 30, 1998.
The estimated taxes were calculated based on the 1997 tax assessment.
(5) Minority interest at June 30, 1998 has not been adjusted for the
historical income of the acquired properties or the pro forma adjustments
reflected in the unaudited condensed pro forma consolidated statement of
operations. For purposes of the pro forma financial information,
properties are treated as if acquired at June 30, 1998.
51
<PAGE>
<TABLE>
<CAPTION>
OCWEN ASSET INVESTMENT CORP.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD MAY 14, 1997 TO DECEMBER 31, 1997
(IN THOUSANDS)
Historical (1)
------------------------------- Other Pro Forma Total
Company Bush Street Prudential Acquisitions(2) Adjustments(3) Pro Forma
-------- ----------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest income ................... $ 13,462 $ -- $ -- $ -- $ -- $ 13,462
Interest expense .................. -- -- -- -- 6,461 6,461
-------- -------- -------- -------- -------- --------
NET INTEREST INCOME (EXPENSE)
BEFORE PROVISION FOR LOAN LOSSES . 13,462 -- -- -- (6,461) 7,001
Provision for loan losses ......... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET INTEREST INCOME (EXPENSE) AFTER
PROVISION FOR LOAN LOSSES ....... 13,462 -- -- -- (6,461) 7,001
Real estate-operating income ...... 2,223 5,196 65 6,264 4,949 18,697
Real estate-operating expenses .... 728 1,936 2,992 2,996 2,432 11,084
-------- -------- -------- -------- -------- --------
REAL ESTATE-OPERATING INCOME
(EXPENSE), NET .................. 1,495 3,260 (2,927) 3,268 2,517 7,613
Other expenses .................... 3,155 -- -- -- 995 4,150
(Loss) gain on securities held for
trading ......................... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
(LOSS) INCOME BEFORE MINORITY
INTEREST ........................ 11,802 3,260 (2,927) 3,268 (4,939) 10,464
Minority interest in net (income)
loss of operating partnership.... (9) -- -- -- 1 (4) (8)
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS) ................. $ 11,793 $ 3,260 $ (2,927) $ 3,268 $ (4,938) $ 10,456
======== ======== ======== ======== ======== ========
FUNDS FROM OPERATIONS $ 11,971 $ 13,067
======== ========
</TABLE>
52
<PAGE>
OCWEN ASSET INVESTMENT CORP.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD MAY 14, 1997 TO DECEMBER 31, 1997
(1) Historical results are based on the actual results of operations from May
14, 1997 through December 31, 1997.
(2) The following table summarizes the "other acquisitions":
Purchase
Acquisition Price
PROPERTY NAME Date ($ in 000's)
--------------- -------------
450 Sansome Street ............. 9/23/97 $ 17,200
Cortez Plaza ................... 11/10/97 19,050
Bayers Road Shopping Centre .... 4/9/98 16,311
(1) Pro forma adjustments include 221 Bush Street pro forma adjustments
previously filed with the Commission on June 12, 1998 on Current Report on
Form 8-K/A.
Pro forma adjustments:
Interest Depreciation
Expense Expense Other Expense
PROPERTY NAME ($ in 000's) ($ in 000's) ($ in 000's)
------------ ------------ -------------
450 Sansome Street ............ $ -- $ 135 $ 64
Cortez Plaza .................. -- 258 101
221 Bush Street ............... 4,697 1,300 626
Bayers Road Shopping Centre ... -- 266 --
841 Prudential Drive .......... 1,764 473 204
--------- ---------- ---------
Total ..................... $ 6,461 $ 2,432 $ 995
========= ========== =========
(a) Interest expense is based on the following assumptions:
221 BUSH STREET
Salomon Brothers Realty Corp. $75.0 million loan at LIBOR plus 175
basis points (7.44 percent at April 8, 1998) and from $25.2 million of
borrowings from other sources at approximately the same rate. If LIBOR
rate were to change by 12.5 basis points, interest expense would change
approximately $123,000 during a one-year period.
841 PRUDENTIAL DRIVE
Salomon Brothers Realty Corp. $24.1 million loan at LIBOR plus 175
basis points (7.41 percent at July 22, 1998) and from $8.6 million of
borrowings from other sources at 11.50 percent. If LIBOR rate were to
change by 12.5 basis points, interest expense would change
approximately $30,200 during a one-year period.
(b) Depreciation expense is based on a 39 year useful life.
(c) Other expense represents management fees paid to Ocwen Capital
Corporation. This fee is calculated as .25 percent of invested assets
per quarter.
(1) Minority interest in net (income) loss of the operating partnership, which
includes historical results for Bush Street, 841 Prudential Drive, and the
other acquisitions, as well as the pro forma adjustments, is calculated by
using the weighted average minority interest percentage for the period May
14, 1997 through December 31, 1997.
(2) Prior to the acquisition by the company, 841 Prudential Drive was primarily
owner occupied. For purposes of the pro forma, real estate operating income
is based upon the annual rental income to be paid by the tenants subsequent
to the acquisition date.
53
<PAGE>
<TABLE>
<CAPTION>
OCWEN ASSET INVESTMENT CORP.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
Historical (1)
------------------------------- Other Pro Forma Total
Company Bush Street Prudential Acquisitions(2) Adjustments(3) Pro Forma
-------- ----------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest income ................... $ 19,679 $ -- $ -- $ -- $ -- $ 19,679
Interest expense .................. 6,240 -- -- -- 3,468 9,708
-------- -------- -------- -------- -------- --------
NET INTEREST INCOME (EXPENSE)
BEFORE PROVISION FOR LOAN LOSSES.. 13,439 -- -- -- (3,468) 9,971
Provision for loan losses ......... 206 -- -- -- -- 206
-------- -------- -------- -------- -------- --------
NET INTEREST INCOME (EXPENSE) AFTER
PROVISION FOR LOAN LOSSES ........ 13,233 -- -- -- (3,468) 9,765
Real estate-operating income ...... 6,576 2,417 54 1,159 3,958 (5) 14,164
Real estate-operating expenses .... 6,028 741 2,220 668 1,057 10,714
-------- -------- -------- -------- -------- --------
REAL ESTATE-OPERATING INCOME
EXPENSE), NET .................... 548 1,676 (2,166) 491 2,901 3,450
Other expenses .................... 3,360 -- -- -- 499 3,859
(Loss) gain on securities held for
trading .......................... (13,958) -- -- -- -- (13,958)
-------- -------- -------- -------- -------- --------
(LOSS) INCOME BEFORE MINORITY
INTEREST ......................... (3,537) 1,676 (2,166) 491 (1,066) (4,602)
Minority interest in net (income)
loss of operating partnership .... (321) -- -- -- 75 (4) (246)
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS) ................. $ (3,858) $ 1,676 $ (2,166) $ 491 $ (991) $ (4,848)
======== ======== ======== ======== ======== ========
FUNDS FROM OPERATIONS $ 11,163 $ 11,230
======== ========
</TABLE>
54
<PAGE>
OCWEN ASSET INVESTMENT CORP.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(1) Historical results are based on the actual results of operations for the
six months ended June 30, 1998.
(2) The following table summarizes the "other acquisitions":
Purchase
Acquisition Price
PROPERTY NAME Date ($ in 000's)
------------- ----------
450 Sansome Street .................. 9/23/97 $ 17,200
Cortez Plaza ........................ 11/10/97 19,050
Bayers Road Shopping Centre ......... 4/9/98 16,311
(1) Pro forma adjustments include 221 Bush Street pro forma adjustments
previously filed with the Commission on June 12, 1998 on Current Report
on Form 8-K/A.
Pro forma adjustments:
Interest Depreciation
Expense Expense Other Expense
PROPERTY NAME ($ in 000's) ($ in 000's) ($ in 000's)
------------ ------------ -------------
450 Sansome Street ............ $ -- $ -- $ --
Cortez Plaza .................. -- -- --
221 Bush Street ............... 2,067 564 271
Bayers Road Shopping Centre ... -- 114 64
841 Prudential Drive .......... 1,401 379 164
--------- ---------- ---------
Total ..................... $ 3,468 $ 1,057 $ 499
========= ========== =========
(a) Interest expense is based on the following assumptions:
221 BUSH STREET
Salomon Brothers Realty Corp. $75.0 million loan at LIBOR plus 175
basis points (7.44 percent at April 8, 1998) and from $25.2 million of
borrowings from other sources at approximately the same rate. If LIBOR
rate were to change by 12.5 basis points, interest expense would change
approximately $123,000 during a one-year period.
841 PRUDENTIAL DRIVE
Salomon Brothers Realty Corp. $24.1 million loan at LIBOR plus 175
basis points (7.41 percent at July 22, 1998) and from $8.6 million of
borrowings from other sources at 11.50 percent. If LIBOR rate were to
change by 12.5 basis points, interest expense would change
approximately $30,200 during a one-year period.
(b) Depreciation expense is based on a 39 year useful life.
(c) Other expense represents management fees paid to Ocwen Capital
Corporation. This fee is calculated as .25 percent of invested assets
per quarter.
(1) Minority interest in net (income) loss of the operating partnership, which
includes historical results for 221 Bush Street, 841 Prudential Drive, and
the other acquisitions, as well as the pro forma adjustments, is calculated
by using the weighted average minority interest percentage for the period
January 1, 1998 through June 30, 1998.
(2) Prior to the acquisition by the company, 841 Prudential Drive was primarily
owner occupied. For purposes of the pro forma, real estate operating income
is based upon the annual rental income to be paid by the tenants subsequent
to the acquisition date.
55
<PAGE>
<TABLE>
<CAPTION>
OCWEN ASSET INVESTMENT CORP.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD JULY 1, 1997 TO JUNE 30, 1998
(IN THOUSANDS)
Historical (1)
------------------------------- Other Pro Forma Total
Company Bush Street Prudential Acquisitions(2) Adjustments(3) Pro Forma
-------- ----------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest income ................... $ 30,658 $ -- $ -- $ -- $ -- $ 30,658
Interest expense .................. 6,240 -- -- -- 8,609 14,849
-------- -------- -------- -------- -------- --------
NET INTEREST INCOME (EXPENSE)
BEFORE PROVISION FOR LOAN LOSSES. 24,418 -- -- -- (8,609) 15,809
Provision for loan losses ......... 206 -- -- -- -- 206
-------- -------- -------- -------- -------- --------
NET INTEREST INCOME (EXPENSE) AFTER
PROVISION FOR LOAN LOSSES ....... 24,212 -- -- -- (8,609) 15,603
Real estate-operating income ...... 8,799 6,602 108 5,443 7,919 (5) 28,871
Real estate-operating expenses .... 6,756 2,280 4,688 2,817 3,017 19,558
-------- -------- -------- -------- -------- --------
REAL ESTATE-OPERATING INCOME
(EXPENSE), NET .................. 2,043 4,322 (4,580) 2,626 4,902 9,313
Other expenses .................... 6,092 -- -- -- 1,399 7,491
(Loss) gain on securities held for
trading ........................ (13,958) -- -- -- -- (13,958)
-------- -------- -------- -------- -------- --------
(LOSS) INCOME BEFORE MINORITY
INTEREST ........................ 6,205 4,322 (4,580) 2,626 (5,106) (3,467)
Minority interest in net (income)
loss of operating partnership ... (330) -- -- -- 66 (4) (264)
-------- -------- -------- -------- -------- --------
NET INCOME (LOSS) ................. $ 5,875 $ 4,322 $ (4,580) $ 2,626 $ (5,040) $ 3,203
======== ======== ======== ======== ======== ========
FUNDS FROM OPERATIONS $ 21,075 $ 21,375
======== ========
</TABLE>
56
<PAGE>
OCWEN ASSET INVESTMENT CORP.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD JULY 1, 1997 TO JUNE 30, 1998
(1) Historical results are based on the actual results of operations for the
twelve month period from July 1, 1998 through June 30, 1998.
(2) The following table summarizes the "other acquisitions":
Acquisition Purchase Price
PROPERTY NAME Date ($ in 000's)
----------------- ----------------
450 Sansome Street ............. 9/23/97 $ 17,200
Cortez Plaza ................... 11/10/97 19,050
Bayers Road Shopping Centre .... 4/9/98 16,311
(3) Pro forma adjustments include 221 Bush Street pro forma adjustments
previously filed with the Commission on June 12, 1998 on Current Report on
Form 8-K/A.
Pro forma adjustments:
Interest Depreciation
Expense Expense Other Expense
PROPERTY NAME ($ in 000's) ($ in 000's) ($ in 000's)
------------ ------------ -------------
450 Sansome Street ........... $ -- $ 113 $ 54
Cortez Plaza ................. -- 172 67
221 Bush Street .............. 5,806 1,648 772
Bayers Road Shopping Centre .. -- 326 179
841 Prudential Drive ......... 2,803 758 327
--------- ---------- ---------
Total .................... $ 8,609 $ 3,017 $ 1,399
========= ========== =========
(a) Interest expense is based on the following assumptions:
221 BUSH STREET
Salomon Brothers Realty Corp. $75.0 million loan at LIBOR plus 175
basis points (7.44 percent at April 8, 1998) and from $25.2 million of
borrowings from other sources at approximately the same rate. If LIBOR
rate were to change by 12.5 basis points, interest expense would change
approximately $123,000 during a one-year period.
841 PRUDENTIAL DRIVE
Salomon Brothers Realty Corp. $24.1 million loan at LIBOR plus 175
basis points (7.41 percent at July 22, 1998) and $8.6 million of
borrowings from other sources at 11.50 percent. If LIBOR rate were to
change by 12.5 basis points, interest expense would change
approximately $30,200 during a one-year period.
(b) Depreciation expense is based on a 39 year useful life.
(c) Other expense represents management fees paid to Ocwen Capital
Corporation. This fee is calculated as .25 percent of invested assets
per quarter.
(4) Minority interest in net (income) loss of the operating partnership,
which includes historical results for 221 Bush Street, 841 Prudential
Drive, and the other acquisitions, as well as the pro forma
adjustments, is calculated by using the weighted average minority
interest percentage for the period July 1, 1997 through June 30, 1998.
(5) Prior to the acquisition by the company, 841 Prudential Drive was
primarily owner occupied. For purposes of the pro forma, real estate
operating income is based upon the annual rental income to be paid by
the tenants subsequent to the acquisition date.
57
