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): May 18, 1998
LNR PROPERTY CORPORATION
(Exact name of Registrant as Specified in its Charter)
Delaware 1-13223 65-0777234
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification Number)
Incorporation)
760 Northwest 107th Avenue
Miami, Florida 33172
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(305) 485-2000
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This Form 8-K/A amends the Form 8-K filed on May 18, 1998 to report the
acquisition of the Affordable Housing Group. This Form 8-K/A includes both the
financial statements of the Affordable Housing Group as well as the pro forma
consolidated financial statements of LNR Property Corporation and subsidiaries
and the Affordable Housing Group.
On February 18, 1998, LNR Property Corporation ("LNR" or the
"Company"), a Delaware corporation, entered into an agreement (the "Purchase and
Sale Agreement") to purchase from Pacific Harbor Capital, Inc., a wholly-owned
subsidiary of PacifiCorp, controlling interests in a group of entities as well
as certain direct partnership interests, known as the Affordable Housing Group
("AHG"), which own multi-family and senior housing properties, many of which
qualify for low-income tax credits under Section 42 of the Internal Revenue
Code.
On May 1, 1998, LNR completed the purchase of certain interests in
entities which own 36 of the properties. Acquisitions of interests in entities
which own the remaining six properties are expected to close during the third
quarter. The aggregate amount of consideration will be approximately $80
million, subject to certain post-closing adjustments, plus the assumption of
approximately $45 million of future equity commitments. The source of funds for
the acquisition is the Company's unsecured revolving credit facility.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Affordable Housing Group
Consolidated Financial Statements for the Year Ended December 31, 1997
and Independent Auditors' Report
(B) PRO FORMA FINANCIAL INFORMATION
(1) Unaudited Pro Forma Consolidated Condensed Financial Information
(2) Unaudited Pro Forma Consolidated Condensed Balance Sheet as of
February 28, 1998
(3) Unaudited Pro Forma Consolidated Condensed Statement of Earnings
for the Three Months Ended February 28, 1998
(4) Unaudited Pro Forma Consolidated Condensed Statement of Earnings for
the Year Ended November 30, 1997
(5) Notes to Unaudited Pro Forma Consolidated Condensed Financial
Information
<PAGE>
AFFORDABLE HOUSING GROUP
CONSOLIDATED FINANCIAL STATEMENTS FOR
THE YEAR ENDED DECEMBER 31, 1997
AND INDEPENDENT AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Affordable Housing Group (a Division of
Pacific Harbor Capital, Inc.):
We have audited the accompanying consolidated balance sheet of Affordable
Housing Group (a Division of Pacific Harbor Capital, Inc.) as of December 31,
1997, and the related consolidated statements of operations, parent company
investment, and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements 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 consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying consolidated financial statements have been prepared from the
separate records maintained by Affordable Housing Group and may not necessarily
be indicative of the conditions that would have existed or the results of
operations if Affordable Housing Group had been operated as an unaffiliated
company. Portions of certain income and expenses represent allocations made from
parent company items applicable to the company as a whole.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Affordable Housing Group at
December 31, 1997, and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
May 15, 1998
<PAGE>
AFFORDABLE HOUSING GROUP
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
- ---------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 3,384,305
Restricted cash 16,307,598
Investments in real estate, net 274,529,039
Other assets 1,332,134
-------------
TOTAL $ 295,553,076
=============
LIABILITIES AND PARENT COMPANY INVESTMENT
LIABILITIES:
Accounts payable and accrued expenses $ 16,824,849
Mortgage notes payable 172,648,884
Developer notes payable 16,589,356
Other liabilities 1,108,681
Deferred revenue 18,618,653
-------------
Total liabilities 225,790,423
MINORITY INTERESTS 27,758,303
PARENT COMPANY INVESTMENT 42,004,350
-------------
TOTAL $ 295,553,076
=============
See notes to consolidated financial statements.
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<PAGE>
AFFORDABLE HOUSING GROUP
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------
REVENUES:
Rental income $ 23,707,088
Interest income 452,266
Other income 6,089,747
------------
Total revenues 30,249,101
------------
COSTS AND EXPENSES:
Cost of rental operations 12,795,799
Depreciation and amortization 8,445,119
General and administrative 3,941,740
------------
Total costs and expenses 25,182,658
------------
OPERATING EARNINGS 5,066,443
INTEREST EXPENSE (10,269,771)
------------
LOSS BEFORE INCOME TAX BENEFIT AND ALLOCATION
OF LOSS TO MINORITY INTERESTS (5,203,328)
ALLOCATION OF LOSS TO MINORITY INTERESTS 1,607,820
------------
LOSS BEFORE INCOME TAX BENEFITS (3,595,508)
INCOME TAX BENEFITS 14,800,777
------------
NET INCOME $ 11,205,269
============
See notes to consolidated financial statements.
- 3 -
<PAGE>
AFFORDABLE HOUSING GROUP
CONSOLIDATED STATEMENT OF PARENT COMPANY INVESTMENT
YEAR ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------
BALANCE AT JANUARY 1, 1997 $ 39,122,403
Net income 11,205,269
Advances to parent company (8,323,322)
------------
BALANCE AT DECEMBER 31, 1997 $ 42,004,350
============
See notes to consolidated financial statements.
- 4 -
<PAGE>
AFFORDABLE HOUSING GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,205,269
Adjustments to reconcile net income to net cash and cash
equivalents provided by operating activities:
Depreciation and amortization 8,445,119
Amortization of syndication revenue (3,384,264)
Minority interests (1,607,820)
Changes in:
Other assets and restricted cash (12,324,096)
Accounts payable and accrued expenses 7,836,382
Other liabilities and deferred revenue 1,378,322
------------
Cash provided by operating activities 11,548,912
------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Additions to investments in real estate (67,876,389)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 64,980,438
Payments on mortgage notes payable (1,387,215)
Capital contributions from minority interests 2,974,087
Advances to parent company (9,083,822)
------------
Cash provided by financing activities 57,483,488
------------
INCREASE IN CASH AND CASH EQUIVALENTS 1,156,011
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,228,294
------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,384,305
============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid for interest (net of capitalized interest) $ 10,269,771
============
See notes to consolidated financial statements.
- 5 -
<PAGE>
AFFORDABLE HOUSING GROUP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Affordable Housing Group (the "Company") is a
division of Pacific Harbor Capital, Inc. ("Pacific Harbor"). Pacific
Harbor is a wholly-owned subsidiary of PacifiCorp Financial Services
Company ("PacifiCorp Financial"), which in turn is wholly-owned by
PacifiCorp Group Holdings ("Group"). Pacific Harbor, PacifiCorp Financial,
and Group are collectively referred to as the "Parent Company." The
Company invests in partnerships (the "Partnerships") that own and operate
low income multi-family residential rental properties mainly in Oregon,
Washington, Idaho, Nevada, Florida, Pennsylvania, and New Mexico (the
"Projects") that qualify for an allocation of Low-Income Housing Tax
Credits under Section 42 of the Internal Revenue Code.
Each of the Projects' buildings has qualified and been allocated
low-income housing tax credits pursuant to Internal Revenue Code Section
42 which regulates the use of the Projects as to occupant eligibility and
unit gross rent, among other requirements. Each building in the Projects
must meet the provisions of these regulations during each of ten
consecutive years in order to continue to qualify to receive the tax
credits. Failure to comply with occupant eligibility and/or unit gross
rent or to correct noncompliance within a specified time period could
result in recapture of previously taken low-income housing tax credits
plus interest.
In May 1998, affiliates of LNR Property Corporation ("LNR") began
acquiring the Parent Company's interests in the Partnerships and other
related entities which comprise the Company.
BASIS OF PRESENTATION - The consolidated financial statements of the
Company have been prepared and are presented to reflect the Company as a
separate entity and have been extracted from the financial statements of
Pacific Harbor using Pacific Harbor's historical results of operations and
historical cost basis of its assets and liabilities of the business being
operated by the Company. The assets, liabilities and results of operations
of partnerships in which the Company has a controlling interest have been
consolidated. All significant intercompany transactions and balances have
been eliminated.
Expenses which related both to the businesses operated by the Company and
the businesses retained by Pacific Harbor have been allocated on a basis
which the Company believes is reasonable. However, the expenses allocated
to the Company are not necessarily the same as those the Company would
have incurred if it had operated independently and, in general, the
results of operations, financial position and cash flows reflected in the
consolidated financial statements of the Company are not necessarily the
same as those which would have been realized if the Company had been
operated independently of Pacific Harbor during the periods to which those
financial statements relate.
INVESTMENTS IN REAL ESTATE - Investments in real estate is recorded at
cost. Depreciation is computed on the straight-line method based on the
estimated useful lives of the individual assets: 27.5 - 40 years for
buildings and improvements and 7 years for furnishings and equipment. For
the year ended December 31, 1997, approximately $1,950,000 of interest has
been capitalized as part of the basis of land and buildings under
construction.
- 6 -
<PAGE>
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, management reviews investments in real estate for
possible impairment whenever events or circumstances indicate the carrying
amount of an asset may not be recoverable. If there is an indication of
impairment, management prepares an estimate of future cash flows
(undiscounted and without interest charges) expected to result from the use
of the asset and its eventual disposition. If these cash flows are less
than the carrying amount of the asset, an impairment loss is recognized to
write down the asset to its estimated fair value. Preparation of estimated
expected future cash flows is inherently subjective and is based on
management's best estimate of assumptions concerning expected future
conditions.
DEFERRED REVENUE - The Company sells interests in certain of its
partnerships to third-party investors. Typically, the Company retains a
20% or less limited partnership interest and acts as the general partner
while providing indemnifications related to qualifications for the federal
low-income housing credits, guarantees of returns, and deficit funding
obligations to the limited partners. No gain is recognized upon sale of
these interests and the partnerships continue to be consolidated.
Consideration is deferred and amortized over the life of the guarantee and
deficit funding obligations.
INCOME TAXES - are accounted for in accordance with SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities, and are measured by
using enacted tax rates expected to apply to taxable income in the years
in which those differences are expected to reverse.
The Company, through Pacific Harbor and PacifiCorp Financial, has entered
into a tax-sharing agreement with the Group. Under the terms of the
agreement, the Group receives or pays the current provision or benefit to
the Company including the low-income housing credits.
RESTRICTED CASH - The Company is required to maintain various cash
accounts through stipulations included in the respective loan and
partnership agreements. At December 31, 1997, the restricted cash
balances, of which $15,178,463 was held by various outside parties such as
trustees, were comprised of the following:
Construction bond proceeds $ 12,604,408
Tenant security deposits 1,069,177
Insurance and tax reserve 1,059,126
Replacement reserve 1,185,840
Other 389,047
------------
Total restricted cash $ 16,307,598
============
FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair values of
financial instruments have been determined by management using available
market information and appropriate valuation methods. Considerable
judgment is required in interpreting market data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize or incur
in a current market exchange. The use of different market assumptions
and/or estimation methods may have a material effect on the estimated fair
value amounts. The Company's financial instruments consist of cash and
cash equivalents, accounts payable, and mortgage and developer notes
payable. The carrying amount of cash and cash equivalents and accounts
payable are reasonable estimates of fair value due to their short-term
nature. The fair value of the mortgage and developer notes payable has
been estimated using borrowing rates currently available to the Company
for similar terms. The carrying value of the mortgage and developer notes
payable approximates fair value.
- 7 -
<PAGE>
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 in the
consolidated financial statements and the related notes. Actual results
could differ from those estimates.
2. INVESTMENTS IN REAL ESTATE, Net
Investments in real estate, net consisted of the following:
Land $ 27,386,983
Buildings and improvements 200,696,604
Furnishings and equipment 10,872,633
Construction in progress 71,331,362
------------
Total 310,287,582
Less accumulated depreciation (35,758,543)
------------
Total investments in real estate, net $274,529,039
============
3. MORTGAGE NOTES PAYABLE
Mortgage notes payable consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
Mortgage notes on operating properties with fixed interest rates from
7.5% to 11%, due through February 1, 2031. $ 127,211,390
Mortgage notes on operating properties with floating interest rates (8.5%
to 9.5% at December 31, 1997), due upon completion of construction. 31,484,425
Mortgage notes on operating properties due Pacific Harbor Capital, Inc.
with fixed interest rates from 7.5% to 11% due through February 1, 2031. 10,903,270
Mortgage notes on operating properties due Pacific Harbor Capital, Inc.
with variable interest rates (8.5% to 9.5% at December 31, 1997),
due upon completion of construction. 3,049,799
-------------
$ 172,648,884
=============
</TABLE>
- 8 -
<PAGE>
Minimum principal payments on mortgage notes payable as of December 31,
1997 are as follows:
YEAR ENDING
DECEMBER 31,
1998 $ 12,715,000
1999 8,864,000
2000 2,020,000
2001 2,169,000
2002 2,301,000
Thereafter 144,579,884
------------
Total $172,648,884
============
The Company's investments in real estate are pledged as collateral to the
mortgage notes payable.
The Company has entered into interest rate swaps to manage its interest
rate risk. Under various agreements, the Company agrees with other parties
to exchange, at specified intervals, the difference between fixed-rate and
variable-rate interest amounts calculated by reference to an agreed
notional principal amount. At December 31, 1997, the Company had
agreements with a notional amount totaling $21,000,000 to pay a
weighted-average fixed rate of 8.4% and receive LIBOR.
In addition, the Company has entered into an agreement in the form of a
swap agreement with certain partners to cap its monthly debt service
requirement on a partnership that had an outstanding loan of $13,000,000
at December 31, 1997.
4. DEVELOPER NOTES PAYABLE
Certain of the Company's consolidated partnerships have entered into notes
payable with the developers of Projects. These notes payable are generally
for fees and other amounts due the developer. The notes bear interest at
fixed rates ranging from 3.0% to 13.5% and repayment of principal and
interest is based on the properties' available cash flow, as defined.
5. INCOME TAXES
The Company is included in the consolidated federal income tax return of
the Group. The income tax provision included in these consolidated
financial statements reflects the historical income tax provision and
temporary differences attributable to the operations of the Company on a
separate return basis.
The components of the provision (benefit) for income taxes consisted of
the following at December 31, 1997:
Current $ (13,997,397)
Deferred (803,380)
-------------
Total $ (14,800,777)
=============
- 9 -
<PAGE>
Deferred income taxes, which are recorded in parent company investment,
reflect the net tax effects of temporary differences between the carrying
amounts of the assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. The tax effected temporary
differences at December 31, 1997 are as follows:
Deferred revenues $ 877,786
Depreciable assets - investments in real estate 758,188
Amortizable assets 80,913
-----------
Net deferred tax asset $ 1,716,887
===========
Based on management's assessment, it is more likely than not that the
deferred tax assets will be realized through future taxable income or
payments under the tax-sharing agreement.
A reconciliation of the statutory rate to the effective tax rate is as
follows:
Income tax at statutory rate $ (1,258,428)
State income taxes, net of federal benefit (143,820)
Low-income housing credits (13,398,529)
------------
$(14,800,777)
============
6. MINORITY INTERESTS
Minority interests relate to the third-party ownership in partnerships in
which the Company has a controlling interest. For financial reporting
purposes, the partnership's assets, liabilities, and operations are
consolidated with those of the Company, and the other partners' interest
in the partnerships are included in the Company's consolidated financial
statements as minority interests.
7. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1997, the parent company provided
various general and administrative services to the Company including: data
processing, treasury, legal, human resources, payroll, accounting, risk
management, rent, and others. Costs for these services are designed to
approximate the actual costs incurred by the Company to render these
services. Management believes the methods used to determine these costs
are reasonable; however, such costs may not be representative of those
which would be incurred if the Company had operated as an independent
entity during the period presented. Charges for these costs are included
in general and administrative expenses and amounted to approximately
$1,200,000 for the year ended December 31, 1997.
8. COMMITMENTS AND CONTINGENCIES
Under the terms of the various partnership agreements, the Company is
required to make additional capital contributions of up to $41,865,783 as
of December 31, 1997. The general partners of the partnerships have a
right to call for the capital contributions for investment in the
partnerships or for payment of partnership operating expenses or fees.
- 10 -
<PAGE>
Pursuant to certain partnership agreements, the Company has guaranteed
minimum returns to certain limited partners and has agreed to fund
deficits, if any, resulting from the properties' insufficient cash flow to
meet its obligations. The Company is committed under a letter of credit to
provide certain guarantees as discussed above. The outstanding letter of
credit under this arrangement was $11,614,000 at December 31, 1997.
The Company is subject to various claims, legal actions, and complaints in
the normal course of business. In the opinion of management, the
disposition of these matters will not have a material adverse effect on
the Company's financial position, results of operations, or cash flows.
* * * * * *
- 11 -
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma consolidated condensed balance sheet
of LNR Property Corporation and subsidiaries as of February 28, 1998 and the
unaudited pro forma consolidated condensed statements of earnings for the three
months ended February 28, 1998 and the year ended November 30, 1997, have been
prepared to reflect (1) the Company's acquisition of Affordable Housing Group
(the "AHG Acquisition") and (2) the spin-off (the "Spin-off") of the Company
from Lennar Corporation which was effective October 31, 1997. The pro forma
consolidated condensed financial statements have been prepared assuming that all
of AHG (all interests relative to the 42 properties) have been acquired. Pro
forma financial information related to the Spin-off has previously been supplied
in the Company's filings and is presented here to provide a more meaningful
comparison of the results of operations between the periods.
The unaudited pro forma consolidated condensed balance sheet has been
prepared as if the AHG Acquisition had occurred on February 28, 1998 and the
unaudited pro forma consolidated condensed statements of earnings for the three
month period ended February 28, 1998 and for the year November 30, 1997 have
been prepared as if the AHG Acquisition and the Spin-off had occurred on
December 1, 1996. The unaudited pro forma financial statements have been
prepared utilizing the accounting policies outlined in the historical financial
statements included in the Company's Annual Report on Form 10-K for the year
ended November 30, 1997. The AHG Acquisition is accounted for using the purchase
method of accounting.
The pro forma financial statements have been prepared under the
Securities and Exchange Commission ("SEC") rules. As a result, the pro forma
acquisition adjustments assume interest expense was incurred for the year ended
November 30, 1997 and the three month period ended February 28, 1998 on the full
amount of consideration paid for the AHG Acquisition. Although the SEC requires
that interest expense be included on the full amount of consideration paid, the
amount of consideration and therefore the interest expense would have been lower
had AHG been acquired by the Company at the beginning of the periods presented
due to the amount of tax credits that were available to purchase at those times.
Therefore, management believes that the accompanying pro forma statements of
earnings are not indicative of the results that AHG is expected to achieve as a
result of the acquisition.
The following information should be read in conjunction with the
Company's consolidated financial statements and the notes thereto, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other financial information included in its Annual Report on Form 10-K for the
year ended November 30, 1997 and its Quarterly Report on Form 10-Q for the
quarter ended February 28, 1998. The unaudited pro forma consolidated condensed
financial statements do not necessarily reflect what the results of operations
and financial position would have been had the AHG Acquisition and the Spin-off
occurred as assumed in preparing the unaudited pro forma consolidated condensed
financial statements, nor do they necessarily reflect the future results or
financial position of the Company.
<PAGE>
<TABLE>
<CAPTION>
LNR PROPERTY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
FEBRUARY 28, 1998
(IN THOUSANDS)
THE COMPANY AHG PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 14,486 2,276 (1,329)(a) 15,433
Restricted cash 48,303 26,139 74,442
Investment securities 320,659 - 320,659
Mortgage loans, net 89,418 - 89,418
Operating properties and equipment, net 283,544 283,113 (93,460)(a) 470,271
(2,926)(e)
Land held for investment 80,040 - 80,040
Investments in and advances to partnerships 182,006 - 13,899 (e) 195,905
Deferred income taxes 23,376 - 2,719 (e) 26,095
Other assets 49,911 8,268 (6,024)(a) 52,201
46 (e)
-------------- -------------- -------------- --------------
Total assets $ 1,091,743 319,796 (87,075) 1,324,464
============== ============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 5,363 4,178 (1,864)(a) 7,677
Accrued expenses and other liabilities 47,682 18,229 (1,349)(a) 55,309
(9,253)(e)
Mortgage notes and other debts payable 429,716 198,982 (59,186)(a) 649,419
79,907 (b)
-------------- -------------- -------------- --------------
Total liabilities 482,761 221,389 8,255 712,405
-------------- -------------- -------------- --------------
Minority interests 22,778 27,021 (23,944)(a) 25,855
-------------- -------------- -------------- --------------
Parent Company investment - 71,386 (14,470)(a) -
(79,907)(b)
22,991 (e)
Stockholders' equity
Common stock 3,613 - 3,613
Additional paid-in capital 544,548 - 544,548
Retained earnings 16,552 - 16,552
Unrealized gain on available-for-sale securities, net 21,491 - 21,491
-------------- -------------- -------------- --------------
Total stockholders' equity 586,204 - - 586,204
-------------- -------------- -------------- --------------
Total liabilities and stockholders' equity $ 1,091,743 319,796 (87,075) 1,324,464
============== ============== ============== ==============
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
<PAGE>
<TABLE>
<CAPTION>
LNR PROPERTY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THE COMPANY AHG PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenues
Rental income $ 14,594 6,503 (2,514) (a) 18,583
Equity in earnings of partnerships 16,940 - (533) (a) 16,407
Interest income 9,740 174 9,914
Gains on sales of:
Real estate 6,526 - 6,526
Investment securities 1,386 - 1,386
Management fees 2,094 - 2,094
Other, net 558 1,112 (63) (a) 761
(846) (e)
------------- ------------- ------------- ---------------
Total revenues 51,838 7,789 (3,956) 55,671
------------- ------------- ------------- ---------------
Costs and expenses
Cost of rental operations 9,111 3,641 (1,276) (a) 11,476
General and administrative 6,053 1,054 150 (d) 7,257
Minority interests 1,837 (401) 96 (a) 1,532
Depreciation 533 2,379 (895) (a) 2,197
180 (e)
------------- ------------- ------------- ---------------
Total costs and expenses 17,534 6,673 (1,745) 22,462
------------- ------------- ------------- ---------------
Operating earnings/(loss) 34,304 1,116 (2,211) 33,209
Interest expense 7,058 3,504 (1,121) (a) 10,173
1,406 (b)
(637) (c)
(37) (e)
------------- ------------- ------------- ---------------
Earnings/(loss) before income taxes 27,246 (2,388) (1,822) 23,036
Income tax benefit/(expense) (10,626) 5,091 (347) (a) (5,171)
711 (f)
------------- ------------- ------------- ---------------
Net earnings/(loss) $ 16,620 2,703 (1,458) 17,865
============= ============= ============= ===============
Net earnings per share:
Basic $0.46 $0.49
============= ===============
Diluted $0.46 $0.49
============= ===============
Weighted average pro forma share outstanding:
Basic 36,129 36,129
============= ===============
Diluted 36,269 36,269
============= ===============
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
<PAGE>
<TABLE>
<CAPTION>
LNR PROPERTY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED NOVEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO FORMA
THE COMPANY AHG ACQUISITION SPIN-OFF
HISTORICAL HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------- ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues
Rental income $ 56,334 23,707 (10,098) (a) 69,943
Equity in earnings of partnerships 30,149 - (1,356) (a) 13,292 (g) 42,085
Interest income 41,446 452 41,898
Gains on sales of:
Real estate 18,076 - 18,076
Investment securities 5,359 - 5,359
Management fees 13,385 - 13,385
Other, net 2,734 6,090 (1,088) (a) 4,352
(3,384) (e)
------------- ------------- ------------- ------------- ----------------
Total revenues 167,483 30,249 (15,926) 13,292 195,098
------------- ------------- ------------- ------------- ----------------
Costs and expenses
Cost of rental operations 35,767 12,796 (5,099) (a) 43,464
General and administrative 26,346 3,942 600 (d) (4,408) (h) 26,480
Minority interests 238 (1,608) 385 (a) (985)
Depreciation 6,060 8,445 (3,808) (a) 11,417
720 (e)
------------- ------------- ------------- ------------- ----------------
Total costs and expenses 68,411 23,575 (7,202) (4,408) 80,376
------------- ------------- ------------- ------------- ----------------
Operating earnings/(loss) 99,072 6,674 (8,724) 17,700 114,722
Interest expense 26,584 10,270 (4,434) (a) (2,100) (i) 34,721
5,572 (b)
(1,021) (c)
(150) (e)
------------- ------------- ------------- ------------- ----------------
Earnings/(loss) before income taxes 72,488 (3,596) (8,691) 19,800 80,001
Income tax benefit/(expense) (28,270) 14,801 (1,387) (a) (7,721) (f) (19,188)
3,389 (f)
------------- ------------- ------------- ------------- ----------------
Net earnings/(loss) $ 44,218 11,205 (6,689) 12,079 60,813
============= ============= ============= ============= ================
Net earnings per share:
Basic $1.22 $1.68
============= ================
Diluted $1.22 $1.68
============= ================
Weighted average pro forma share outstanding:
Basic 36,129 36,129
============= ================
Diluted 36,269 36,269
============= ================
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed financial
statements.
<PAGE>
LNR PROPERTY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
(a) Represents adjustments to reflect the interests in ten properties which
will be accounted for on the equity method that were consolidated in
the AHG financial statements. This also includes the removal of one
property which was part of AHG's historical financial statements which
will not be acquired by the Company.
(b) Represents debt incurred in connection with the acquisition of AHG and
the related interest expense.
(c) Represents the elimination of interest expense from AHG's former parent
company on intercompany balances.
(d) Represents incremental costs associated with establishing certain
administrative and support activities that were previously provided by
AHG's former parent company.
(e) Represents the adjustment of the carrying value of AHG's assets and
liabilities to fair market value on the acquisition date and the
related income statement effect.
(f) Represents the estimated income tax effect of the pro forma adjustments
at the Company's effective tax rate of 39.0%, before consideration of
the tax credits.
(g) Represents the Company's 50% interest in the earnings of Lennar Land
Partners.
(h) Represents the elimination of costs related to the Spin-off and
addition of incremental administrative costs associated with operating
as a stand-alone public company.
(i) Represents the reduction in interest expense due to the use of proceeds
from funds advanced by Lennar in connection with the Spin-off to repay
debt.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
/S/ SHELLY RUBIN
----------------------------------------
Name: Shelly Rubin
Title: Chief Financial Officer
(Principal Financial Officer)
Date: July 14, 1998
