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
Date of Report (Date of earliest event reported) December 31, 1997
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TOWER REALTY TRUST, INC.
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(Exact name of registrant as specified in its charter)
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Maryland 1-13375 13-393855
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
292 Madison Avenue, 3rd Floor, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 448-1864
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(Former name or former address, if changed since last report.)
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant hereby amends the following items, financial statements, exhibits
or other portions of its Current Report on Form 8-K, dated December 31, 1997, as
set forth in the pages attached hereto.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
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Included herewith are the following financial statements reflecting
the acquisition of 810 Seventh Avenue.
(a) Financial Statements
Report of Frank J. Stella, Jr., CPA, Independent Auditor, dated
February 4, 1998...................................................F-1
Statement of Revenues and Certain Operating Expenses for the
period from January 1, 1997 to October 22 (unaudited) and
the year ended December 31, 1996...................................F-2
Notes to Statement of Revenues and Certain Operating Expenses......F-3
(b) Pro forma condensed consolidated statements (unaudited):
Introduction to Pro forma Condensed Consolidated Financial
Statements.........................................................F-6
Pro forma condensed consolidated balance sheet as of September
30, 1997...........................................................F-7
Pro forma condensed consolidated statement of income for the nine
months ended September 30, 1997 and the pro forma condensed
consolidated statement of income for the year ended December 31,
1996...............................................................F-9
Notes to Pro forma condensed consolidated financial statements....F-13
(c) Exhibits.
23.1 Consent of Frank J. Stella, Jr., C.P.A.
FRANK J. STELLA, JR.
CERTIFIED PUBLIC ACCOUNTANT
305 NORTHERN BOULEVARD
GREAT NECK, NEW YORK 10021
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TEL. (516) 487-1012
FAX. (516) 487-1093
To the Board of Directors of
Tower Realty Trust, Inc.
We have audited the accompanying statement of revenues and certain operating
expenses of the property located at 810 Seventh Avenue, New York, NY (the
"Property") for the year ended December 31, 1996. This statement of revenues and
certain operating expenses is the responsibility of the management of the
property. Our responsibility is to express an opinion on this 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 historical statement of revenues and certain
operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the 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 statement of revenues and certain operating expenses. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain operating expenses was
prepared for the purpose of complying with rules and regulations of the
Securities and Exchange Commission (for inclusion in the Form 8K/A of Tower
Realty Trust, Inc.) as described in Note A and is not intended to be a complete
presentation of the property's revenues and expenses.
In our opinion, the statement of revenues and certain operating expenses
referred to above presents fairly, in all material respects, the revenues and
certain operating expenses of 810 Seventh Avenue, New York, N.Y. as described in
Note A, for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
FRANK J. STELLA, JR., C.P.A.
/S/ Frank J. Stella, Jr.
Great Neck, NY
February 4, 1998
F-1
<PAGE>
810 SEVENTH AVENUE
STATEMENT OF REVENUES AND
CERTAIN OPERATING EXPENSES
For The Period
January 1, 1997
To Year Ended
October 22, 1997 December 31, 1996
------------------ -----------------
(Unaudited)
Revenues
Rental income $15,115,196 $17,457,278
Other income 308,653 255,225
----------- -----------
Total Revenues 15,423,849 17,712,503
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Certain Operating Expenses
Property operating and maintenance 4,615,319 5,123,523
Real estate taxes 2,804,898 3,685,907
Other expenses 237,375 315,500
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Total Expenses 7,657,592 9,125,930
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Excess of Revenues Over Certain $7,766,257 $8,586,573
Operating Expenses ========== ==========
The Notes to Financial Statements are an integral part of this statement.
F-2
<PAGE>
810 SEVENTH AVENUE
NOTES TO STATEMENT OF REVENUES AND
CERTAIN OPERATING EXPENSES
NOTE A - FINANCIAL PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL PRESENTATION
810 Seventh Avenue, LLC ("810") was the owner and operator of the
property located at 810 Seventh Avenue, New York, N.Y. (the
"Property") during the periods presented in the accompanying
financial statements. On October 22, 1997, 810 sold the property
to 810 Partners, LLC which subsequently sold it to Tower Realty
Trust, Inc. on December 31, 1997
The accompanying statements of revenues and certain operating
expenses have been presented on an historical cost basis because
the assets and liabilities were sold by 810. These statements
have been prepared in accordance with the rules and regulations
of the Securities and Exchange Commission and are not
representative of the actual operations of the property for the
periods presented. Interest, depreciation and amortization and
certain other expenses have been excluded because they are not
directly related to the future operations of the property and may
not be comparable to the expenses expected to be incurred in such
future operations.
REVENUE RECOGNITION
Space is leased to tenants under leases ranging from 1 to 19
years. Rental income is recognized over the terms of the leases
as it is earned.
FUTURE RENTAL INCOME
The future minimum lease payments to be received by the property
as of December 31, 1996, under non cancelable operating leases
expiring on various dates through 2016, are as follows:
1997 $ 15,380,000
1998 15,200,000
1999 14,241,000
2000 13,580,000
2001 11,606,000
Thereafter 46,504,000
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$116,511,000
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F-3
<PAGE>
810 SEVENTH AVENUE
NOTES TO STATEMENT OF REVENUES AND
CERTAIN OPERATING EXPENSES
NOTE A - FINANCIAL PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES (CONT'D)
FUTURE RENTAL INCOME (CONT'D)
At December 31, 1996 and October 22, 1997, no tenant occupied
more than 15% of the total space or provided more than 15% of the
property's total revenue.
USE OF ESTIMATES
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
on the statements of revenues and certain operating expenses.
Actual results could differ from those estimates.
NOTE B - UNAUDITED INTERIM STATEMENT
The statement of revenues in excess of certain operating expenses
for the period January 1, 1997 to October 22, 1997 is
unaudited. In the opinion of management, all adjustments
necessary for a fair presentation have been included. The results
of operations presented on this statement are not necessarily
indicative of the property's operations for the year ended
December 31, 1997.
F-4
<PAGE>
Tower Realty Trust, Inc.
Information Pursuant To Rule 3-14 Regulation S-X
MANAGEMENT ASSESSMENT
Management's assessment of the property prior to the acquisition includes,
but is not limited to, the quality of the tenant base, regional demographics,
the competitive environment, operating expenses and local property taxes. In
addition, the physical aspects of the property, location, condition and quality
of design and construction are evaluated. Management also conducts engineering
and environmental studies. All factors, when viewed in their entirety, have met
management's acquisition criteria. Management is not aware of any material
factors relating to the acquisitions other than those discussed above.
ESTIMATES OF TAXABLE OPERATING INCOME AND FUNDS GENERATED FROM OPERATIONS.
No income taxes have been provided because Tower Realty Trust, Inc. (the
"Company") is taxed as a real estate investment trust under the provisions of
the Internal Revenue Code. Accordingly, the Company does not pay Federal income
tax whenever income distributed to shareholders is equal to at least 95% of real
estate investment trust taxable income and certain other conditions are met.
The following presents an estimate of funds generated from operations from
810 Seventh Avenue for the year ended December 31, 1996 based on the Statements
of Revenues and Certain Operating Expenses. These estimated results do not
purport to present expected results of operations for the Property in the future
and were prepared on the basis described in the accompanying notes which should
be read in conjunction herewith.
Funds generated from Operations for
the year ended December 31, 1996 $8,587,000
F-5
<PAGE>
Tower Realty Trust, Inc.
Proforma Condensed Consolidated Financial Statements
(Unaudited)
The following pro forma condensed consolidated balance sheet at September
30, 1997 reflected the acquisition of 810 Seventh Avenue as if the transaction
had occurred on that date.
The pro forma condensed consolidated statements of operations for the year
ended December 31, 1996 and the nine months ended September 30, 1997 assumes the
acquisition of 810 Seventh Avenue as if it had occurred on January 1, 1996. This
pro forma information is based on the historical statements of the Company and
Tower Predecessor after giving effect to the acquisition of this property.
The unaudited pro forma condensed consolidated financial statements have
been prepared by the Company's management. The unaudited pro forma condensed
consolidated statements of operations may not be indicative of the results that
would have actually occurred had the acquisitions been made on the dates
indicated. Also, they may not be indicative of the results that may be achieved
in the future. The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the Company's and Tower
Predecessor's unaudited financial statements as of September 30, 1997 and for
the period then ended as reported on Form 10Q, and the audited financial
statements of Tower Predecessor for the year ended December 31, 1996 as reported
in the Company's registration statement on Form S-11, and the Statement of
Revenues and Certain Operating Expenses appearing elsewhere in this document and
the accompanying notes.
F-6
<PAGE>
Tower Realty Trust, Inc.
Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Previously
The Reported Previously 810 Seventh
Company Predecessor Pro Forma Reported Ave. Pro Forma
Historical Historical Adjustments Pro Forma Acquisition (1)
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<S> <C> <C> <C> <C> <C> <C>
Assets:
Real Estate, net $128,077 $326,595 $454,672 $150,144 $604,816
Deferred Charges, net 11,200 11,779 (9,926) 13,053 1,276 14,329
Receivables, net 190 4,343 (1,333) 3,200 132 3,332
Unbilled Rent Receivable 14,230 (14,230) 0 0 0
Escrowed funds 765 (765) 0 514 514
Cash and cash equivalents 66 4,947 46,161 51,174 (49,914) 1,260
Investments in joint ventures 188 4,725 (2,627) 2,286 2,286
Other Assets 2,648 472 3,120 1,724 4,844
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Total Assets $11,644 $171,514 $344,347 $527,505 $103,876 $631,381
==================================================================================
Liabilities and Shareholders' Equity (Deficit)
Debt on real estate $12,299 $194,638 ($95,937) $111,000 $100,000 $211,000
Accounts payable and other liabilities 487 26,384 (13,919) 12,952 3,876 16,828
Amounts due to affiliates (749) 10,723 (9,974) 0 0 0
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Total Liabilities $12,037 $231,745 ($119,830) $123,952 $103,876 $227,828
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Minority Interest in Operating Partnership $34,646 $34,646 $34,646
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F-7
<PAGE>
<CAPTION>
Previously
The Reported Previously 810 Seventh
Company Predecessor Pro Forma Reported Ave. Pro Forma
Historical Historical Adjustments Pro Forma Acquisition (1)
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<S> <C> <C> <C> <C> <C> <C>
Shareholders' Equity:
Preferred Shares 50,000,000 shares
authorized, none issued and
outstanding
Common shares, $.01 par value, 150,000,000
shares authorized; 16,920,465 shares issued
and outstanding (historical) and 16,920,455
shares issued and outstanding (pro forma) $1 $168 $169 $169
Additional paid in capital 368,432 368,432 368,432
Distribution in excess of accumulated earnings 0 0 0
Owners' equity (deficit) (394) (60,231) 60,931 306 306
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Total shareholders' equity (deficit) ($393) ($60,231) $429,531 $368,907 $0 $368,907
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Total Liabilities and Shareholders' Equity
(deficit) $11,644 $171,514 $344,347 $527,505 $103,876 $631,381
==================================================================================
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
F-8
</TABLE>
<PAGE>
Tower Realty Trust, Inc.
Pro Forma Condensed Consolidated Income Statement
For the nine months ended September 30, 1997
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
810 Seventh
Previously Ave.
The Reported Previously Acquisition
Company Pro Forma Reported Pro Forma
Historical Adjustments Pro Forma Adjustments Pro Forma
(3) (4) (5)(7) (2)
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<S> <C> <C> <C> <C> <C>
Revenues:
Rental income 36,473 56,286 14,024 70,310
Other revenues 1,180 (1,738) 322 287 609
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Total Revenues 1,180 34,735 56,608 14,311 70,919
Expenses:
Property operating and maintenance 10,219 14,428 4,282 18,710
Real Estate Taxes 4,775 8,268 2,603 10,871
General office and administration 1,532 (706) 2,956 220 3,176
Interest Expense 229 (4,972) 6,029 5,040 11,069
Depreciation and Amortization 5,027 10,282 2,250 12,532
Ground rent and air rights expense 449 449
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Total Expenses 1,761 14,343 42,412 14,395 56,807
Equity in income of joint ventures 188 15 288 288
Income before minority interest (393) 20,407 14,484 (84) 14,400
Minority interest in Operating Partnership (1,185) (1,185) 7 (1,178)
F-9
<PAGE>
<CAPTION>
810 Seventh
Previously Ave.
The Reported Previously Acquisition
Company Pro Forma Reported Pro Forma
Historical Adjustments Pro Forma Adjustments Pro Forma
(3) (4) (5)(7) (2)
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<S> <C> <C> <C> <C> <C>
Net Income (393) 19,222 13,299 (77) 13,222
Net income per common share - basic $0.78
Net income per common share - dilutive $0.78
Weighted average number of common shares
outstanding 16,920
------
Effect of dilutive shares 0
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Weighted average number of dilutive shares 16,920
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outstanding
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
</TABLE>
F-10
<PAGE>
Tower Realty Trust, Inc.
Pro Forma Condensed Consolidated Income Statement
For the year ended December 31, 1996
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
810 Seventh
Previously Ave.
Reported Previously Acquisition Other
Predecessor Pro Forma Reported Pro Forma Pro Forma
Historical Adjustments Pro Forma Adjustments Adjustments Pro Forma
(3) (4) (5) (6) (2)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $26,138 46,801 72,939 17,458 (2,680) 87,717
Other revenues 2,596 (893) 1,703 255 (274) 1,684
-----------------------------------------------------------------------------------------
Total Revenues 28,734 45,908 74,642 17,713 (2,954) 89,401
Expenses:
Property operating and maintenance 5,481 13,032 18,513 5,124 (1,146) 22,591
Real Estate Taxes 4,722 4,659 9,381 3,686 (783) 13,914
General office and administration 3,494 (5,872) (2,378) 316 124 3,803
Interest Expense 15,511 6,789 22,300 6,720 950 15,710
Depreciation and Amortization 6,853 6,853 3,000 (1,019) 15,623
Ground rent and air rights expense 599 599 599
Total Expenses 36,660 18,608 55,268 18,846 (1,874) 72,240
Equity in income of joint ventures 461 (63) 398 12 410
Income before minority interest (7,465) 27,237 19,772 (1,133) (1,068) 17,571
Minority interest in Operating Partnership 1,878 1,701 (97) (93) 1,511
Net Income $(7,465) 25,359 18,071 $(1,036) $(975) 16,060
=========================================================================================
F-11
<PAGE>
<CAPTION>
Pro Forma
(2)
---------
<S> <C> <C> <C> <C> <C>
Net income per common share - basic $ .95
Net income per common share - dilutive $ .95
Weighted average number of common shares
outstanding 16,920
Effect of dilutive shares 0
---------
Weighted average number of dilutive shares 16,920
---------
outstanding
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
</TABLE>
F-12
<PAGE>
TOWER REALTY TRUST, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENT
(UNAUDITED)
810 Seventh Avenue was acquired on December 31, 1997 through a combination
of a $100 million mortgage payable and working capital of the Company. The
purchase price was approximately $150 million, including closing and other costs
of approximately $6.7 million.
The Pro forma Condensed Consolidated Financial Statements are based on the
following:
(1) The Pro forma Condensed Consolidated Balance Sheet as of September 30,
1997, as presented in the Company's Report on Form 10Q, adjusted to
incorporate the acquisition of 810 Seventh Avenue as of September 30,
1997.
(2) The Pro forma Condensed Consolidated Income Statements for the periods
ended September 30, 1997 and December 31, 1996 as presented in the
Company's Report on Form 10Q and the registration statement as
presented on Form S-11 dated as of October 9, 1997, respectively,
adjusted for the acquisition of 810 Seventh Avenue as of January 1,
1996.
(3) Interest on the $100,000,000 mortgage note at 6.72% per annum.
(4) Depreciation expense on the building on a straight line basis over 40
years.
(5) Minority Interest at 8.6%, consistent with the percentage of minority
interest in the Company.
(6) Adjustments made for changes which occurred subsequent to registration
statement as presented on Form S-11 dated as of October 9, 1997 (e.g.,
overallotment of shares, interest rate assumption on debt).
(7) Amounts derived from the Statement of Revenues and Certain Operating
Expenses, adjusted to September 30, 1997.
F-13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
TOWER REALTY TRUST, INC.
(Registrant)
Date: March 2, 1998 /s/ Lawrence H. Feldman
-----------------------------
By: Lawrence H. Feldman
Chairman of the Board, Chief Executive Officer
and President
<PAGE>
Exhibit Index
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The following exhibits are filed as part of this Current Report on Form
8-K/A.
Exhibit No. Description
- ----------- -----------
23.1 Consent of Frank J. Stella, Jr., C.P.A.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANT
I consent to the inclusion in this Amended Current Report on Form 8-K/A of
my report, dated February 4, 1998, on my audit of the financial statements of
the property located at 810 Seventh Avenue, New York, New York (the "Property")
for the year ended December 31, 1996, and my report on the unaudited interim
financial statements of the Property for the period January 1, 1997 to October
22, 1997. I also consent to the reference to myself under the captions "Experts"
and "Financial Statements and Exhibits."
/s/ Frank J. Stella, Jr.
FRANK J. STELLA, JR., CPA
Great Neck, New York
March 2, 1998