SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): December 10, 1998
Aegis Realty, Inc.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Maryland
----------------------------------------------
(State or other Jurisdiction of Incorporation)
1-13239 13-3967879
- ------------------------ ------------------------------------
(Commission File Number) (IRS Employer Identification Number)
625 Madison Avenue, New York, NY 10022
----------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (212) 421-5333
Not Applicable
------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report
<PAGE>
Item 2. Acquisition or Disposition of Assets
Southgate Shopping Center
On December 9, 1998, Aegis Realty Operating Partnership, L.P. ("AROP")
whose sole general partner is Aegis Realty, Inc. ("Aegis"), acquired, directly
and through a wholly owned subsidiary, 100% of the partnership interests of
Southgate Partners Limited Partnership ("SPLP"), an entity which directly owns
Southgate Shopping Center ("Southgate"), for $15,100,000. Southgate is a
213,923-square-foot neighborhood shopping center located in Heath, Ohio, is
anchored by Big Bear Supermarket and Odd Lots and is currently 99% leased.
SPLP, the selling entity, is a limited partnership of which 32.7% of the
partnership interests were owned by affiliates of Related Aegis, LP, Aegis'
Advisor (the "Advisor"). As an "Affiliated Transaction", approval of the
Southgate acquisition was subject to compliance with Article X, Section 2 of
Aegis' Amended By-Laws which set forth the following conditions designed to
avoid conflicts of interest with respect to the property ("Affiliated Property")
to be acquired in the Affiliated Transactions: 1) The acquisition must be
consistent with Aegis' business plan; 2) The purchase price must be no greater
than the value of the Affiliated Property, as established by a nationally
recognized appraisal firm selected by a majority of the Independent Directors;
3) The decision to acquire the Affiliated Property must be specifically approved
by a majority of the Independent Directors; 4) Affiliates of the Advisor who
have ownership interests in the Affiliated Property must receive Units of
Limited Partnership Interest of AROP ("OP Units") rather than cash in exchange
for their interest in the Affiliated Property, and the terms of the Affiliated
Transaction must be consistent with such pricing and terms as have been
negotiated by Aegis with other unaffiliated recipients of OP Units in connection
with other reasonably contemporaneous acquisitions by Aegis; and 5) The Advisor
must waive the portion of the acquisition fee payable to the Advisor from Aegis
attributable to the "Affiliated" portion of the transaction. The Southgate
acquisition met with the above listed criteria. The partnership interests
acquired from unaffiliated partners in SPLP were not subject to the condition in
Item #4 listed above, and therefore the unaffiliated partners could elect to
receive either cash or OP Units for their partnership interest.
The financing of the Southgate acquisition consisted of the following:
I) $1,295,734 in cash, which was provided from borrowings under Aegis'
BankBoston $40 million line of credit (the "Facility");
II) $2,715,882 by issuance of 208,914 OP Units of AROP. The OP Units are
convertible to shares of common stock of Aegis on a one-to-one basis, subject to
adjustment, on the one year anniversary of the closing date. The OP Units were
issued at an agreed upon value of $13 per OP Unit. If as of the last trading day
prior to the first anniversary of the closing date (the "Post-Closing Adjustment
Date"), the Average Price Per Share (the "Average Price Per Share", as defined
below) is less than $13, Aegis is obligated to issue additional OP Units to
those contributors who received OP Units in the amount of the difference between
(i) the quotient obtained by dividing $2,715,882 by the Average Price Per Share
as of the Post-Closing Adjustment Date and (ii) 208,914. The "Average Price Per
Share" is defined as the average final closing price per share of the common
stock of Aegis, during the twenty trading day period ending on the valuation
date;
<PAGE>
III) $10,888,384 by the assumption of the current outstanding balance of
an existing first mortgage loan encumbering the property. The mortgage was
originated in September 1997 with Merrill Lynch Credit Corp., having an original
balance of $11,000,000, an interest rate of 7.73%, a 30 year amortization period
and monthly payments of 79,508.79. The loan matures on October 1, 2007; and
IV) $200,000 by delivery of an unsecured purchase money note to the
seller, which is non-interest bearing, has a one year term and is fully
pre-payable without penalty.
In addition, AROP made a $1,429,435 loan to Standard Investment Company
("SIC"), a limited liability company that had a 34.99% partnership interest in
SPLP. The loan is secured by the 107,974 OP Units that were issued to SIC in
exchange for their partnership interest in SPLP. The loan bears an initial
interest rate of 7.613% and matures on December 9, 2015 or earlier if Southgate
is sold. The principals of SIC executed guarantees for 25% of the total loan
amount.
In connection with the transaction, AROP agreed not to sell Southgate
for a minimum of 10 years except in a transaction that does not result in
recognition of gain to the contributors who received OP Units, or if sold to pay
the tax on the gain to the contributors there from. AROP has also agreed to
maintain for the same 10 year period a minimum of $2,300,000 of indebtedness
which will be available for such contributors to guarantee.
Southgate will be managed by RCC Property Advisors ("RCCPA"), an
affiliate of the Advisor.
Crossroads Shopping Center
On December 9, 1998, AROP acquired 100% of the members' equity of
Crossroads East Shopping Center, Ltd. ("CESC"), an entity which directly owned
Crossroads Shopping Center ("Crossroads"), for $4,800,000. Crossroads is a
71,925-square-foot neighborhood shopping center located in Columbus, Ohio, is
anchored by Lenscrafters and is currently 78% leased.
CESC, the selling entity, is a limited liability company of which 52.5%
of the member interests were owned by affiliates of the Advisor. The Crossroads
transaction met all the conditions for an Affiliated Transaction as disclosed
above. The members' equity acquired from unaffiliated members were not subject
to the condition in Item 4 listed above, and therefore the unaffiliated members
could elect to receive cash rather than OP Units for their member equity.
The financing of the acquisition of the member interest in CESC
consisted of the following:
I) $2,129,785 in cash, which was provided from borrowings under the
Facility;
II) $2,165,215 by issuance of 166,555 OP Units of AROP. The OP Units are
convertible and subject to adjustment in the same manner as described above for
Southgate;
III) $230,000 by delivery of an unsecured purchase money note to the
seller, which will be non-interest bearing, have a one year term and fully
pre-payable without penalty; and
<PAGE>
IV) $275,000 by delivery of an unsecured purchase money note to the
seller, which will be non-interest bearing, have a one year term and fully
pre-payable without penalty.
In addition, AROP made a $915,401 loan to SIC, who had 40% of the
members' equity in CESC. The loan is secured by the 57,055 OP Units that were
issued to SIC in exchange for their members' equity in CESC. The loan bears an
interest rate of 7.613% and matures on December 9, 2015 or earlier if Crossroads
is sold. The principals of SIC executed guarantees for 25% of the total loan
amount.
In connection with the transaction, AROP agreed not to sell Crossroads
for a minimum of 10 years except in a transaction that does not result in
recognition of gain to the contributors who received OP Units, or if sold to pay
the tax on the gain to the Contributors there from. AROP has also agreed to
maintain for the same 10 year period a minimum of $50,000 of indebtedness which
will be available for such contributors to guarantee.
Crossroads will be managed by managed by RCCPA as well.
As a result of the forgoing transactions, as of December , 1998, the
officers and directors of Aegis, as well as the employees of the affiliates of
the Advisor, have increased their ownership interest in Aegis, assuming
conversion of all OP Units to common stock, from 2.8% to 4.9%.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
A. Financial Statements
The following financial statements are included in compliance with Staff
Accounting Bulletin Number 71/71a.
SOUTHGATE SHOPPING CENTER
HISTORICAL SUMMARIES OF GROSS INCOME
AND DIRECT OPERATING EXPENSES
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
AND
INDEPENDENT AUDITORS' REPORT
<PAGE>
SOUTHGATE SHOPPING CENTER
HISTORICAL SUMMARIES OF GROSS INCOME AND DIRECT OPERATING EXPENSES
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
TABLE OF CONTENTS
Independent Auditors' Report 1
Historical Summaries of Gross Income and
Direct Operating Expenses 2
Notes to Historical Summaries of Gross Income and
Direct Operating Expenses 3
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE PARTNERS OF SOUTHGATE PARTNERS, L.P.
We have audited the accompanying Historical Summaries of Gross Income
and Direct Operating Expenses of SOUTHGATE SHOPPING CENTER for each of the three
years in the period ended December 31, 1998. These Historical Summaries are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on the Historical Summaries based on our audits.
We conducted our audits 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 Summaries are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summaries. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Historical
Summaries. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying Historical Summaries were prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission as described in Note 2 and are not intended to be a complete
presentation of the Shopping Center's revenues and expenses.
In our opinion, the Historical Summaries referred to above present
fairly, in all material respects, the gross income and direct operating expenses
described in Note 2 for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
Friedman Alpren & Green LLP
New York, New York
February 22, 1999
<PAGE>
SOUTHGATE SHOPPING CENTER
HISTORICAL SUMMARIES OF GROSS INCOME AND DIRECT OPERATING EXPENSES
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C>> <C>
Revenues
Rental income $ 1,831,885 $ 1,589,889 $ 1,031,378
----------- ----------- -----------
Expenses
Leasing 90,406 75,584 42,077
Administrative 204,495 184,311 166,025
Operating 88,414 86,639 102,675
Maintenance and repairs 52,322 28,068 45,120
Real estate taxes 75,151 67,237 93,129
----------- ----------- -----------
510,788 441,839 449,026
----------- ----------- -----------
Excess of gross income over
direct operating expenses $ 1,321,097 $ 1,148,050 $ 582,352
=========== =========== ===========
</TABLE>
See accompanying notes to Historical Summaries of Gross Income and Direct
Operating Expenses.
<PAGE>
SOUTHGATE SHOPPING CENTER
NOTES TO HISTORICAL SUMMARIES OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
1 - ORGANIZATION
Southgate Partners, L.P. was formed on July 13, 1995 to acquire, own and
operate the Southgate Shopping Center, a shopping mall located in Heath,
Ohio.
2 - BASIS OF PRESENTATION
The accompanying Historical Summaries were prepared for the purpose of
complying with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission and are not intended to be a complete presentation of the Shopping
Center's revenues and expenses. Accordingly, the Historical Summaries include
the income and direct operating expenses of the Southgate Shopping Center,
and exclude interest and dividend income, depreciation, amortization of loan
costs, interest expense and other financing charges.
<PAGE>
B. Pro Forma Financial Information
Unaudited Pro Forma Consolidated Financial Data
The following tables of unaudited pro forma consolidated data of the Company
have been prepared from the historical consolidated financial statements of
the Company, as adjusted to give effect to a significant acquisition (the
purchase of Southgate Shopping Center). The accompanying pro forma balance
sheet of the Company has been prepared as if this investment had been
consummated on September 30, 1998. The accompanying pro forma statements of
income and other financial date for the year ended December 31, 1997 and the
nine months ended September 30, 1998 have been prepared as if this investment
had been consummated as of January 1, 1997 and January 1, 1998, respectively.
The unaudited pro forma financial data does not purport to be indicative of
what the results of the Company would have been had the transactions been
completed on the dates assumed, nor is such financial data necessarily
indicative of the results of operations of the Company that may exist in the
future. The unaudited pro forma financial data must be read in conjunction
with the Notes therein and with the historical Consolidated Financial
Statements and the related Notes of the Registrant.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Total
----------- ----------- -----------
<S> <C> <C>> <C>
Revenues:
Rental income $ 7,761,826 $ 1,589,889(a) $ 9,351,715
Recovery of common area
maintenance charges 855,843 855,843
Real estate tax reimbursements 1,047,025 1,047,025
Income from equity investments 193,511 193,511
Interest income 751,142 751,142
Other 146,450 146,450
----------- ----------- -----------
Total revenues 10,755,797 1,589,889 12,345,686
----------- ----------- -----------
Expenses
Repairs and maintenance 931,588 28,068(a) 959,656
Real estate 1,190,345 67,237(a) 1,257,582
Interest 558,994 94,068(b) 1,503,062
850,000(f)
General and
administrative 1,593,612 259,895(a) 1,910,249
56,742(d)
Depreciation
and amortization 2,655,049 331,111(c) 2,989,489
3,329(e)
Minority interest in income
of the Operating Partnership 8,263 11,472(g) 19,735
Other 379,450 86,639(a) 466,089
----------- ----------- -----------
Total expenses 7,317,301 1,788,561 9,105,862
----------- ----------- -----------
Net income (loss) $ 3,438,496 $ (198,672) $ 3,239,824
=========== =========== ===========
Net income (loss)
applicable to common shareholders $ 1,420,370 $ (198,672) $ 1,221,698
=========== =========== ===========
Net income (loss) per weighted
average shareholders $ .18 $ (.02) $ .15
=========== =========== ===========
</TABLE>
(a) Represents income and direct operating expenses of Southgate for the period
1/1/97-12/31/97. During this period, Southgate was being renovated and
repositioned to increase occupancy and rental rates. There was additional
net income resulting from such improvements in 1998 which is when the
Company purchased Southgate.
(b) Represents interest on funds from the Facility used for the purchase of
Southgate.
(c) Represents depreciation of Southgate for the period 1/1/97-12/31/97.
(d) Represents asset management fee relating to Southgate for the period
1/1/97-12/31/97.
(e) Represents amortization of loan costs relating to debt assumed upon purchase
of Southgate for the period 1/1/97-12/31/97.
(f) Represents interest expense on debt assumed upon purchase of Southgate for
the period 1/1/97-12/31/97.
(g) Represents minority interest relating to the loss from Southgate.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Total
----------- ----------- -----------
<S> <C> <C>> <C>
Revenues:
Rental income $ 9,177,921 $ 1,373,914(a) $10,551,835
Recovery of common area
maintenance charges 1,078,726 1,078,726
Real estate tax reimbursements 1,415,427 1,415,427
Income from equity investment 307,837 307,837
Interest income 1,557,012 1,557,012
Other 143,589 143,589
----------- ----------- -----------
Total revenues 13,680,512 1,373,914 15,054,426
----------- ----------- -----------
Expenses
Repairs and maintenance 1,010,755 39,242(a) 1,049,997
Real estate 1,235,942 56,363(a) 1,292,305
Interest 1,202,772 94,068(b) 1,932,593
635,753(f)
General and 2,231,801 221,176(a) 2,495,417
administrative 42,440(d)
Depreciation 2,649,942 247,653(c) 2,900,085
and amortization 2,490(e)
Minority interest in income
of the Operating Partnership 54,056 1,263(g) 55,319
Other 795,297 66,311(a) 861,608
----------- ----------- -----------
Total expenses 9,180,565 1,406,759 10,587,324
----------- ----------- -----------
Income (loss) before 4,499,947 (32,845) 4,467,102
gain on sale of investment
Gain on sale of investment
in Partnership 779,893 0 779,893
----------- ----------- -----------
Net income (loss) $ 5,279,840 $ (32,845) $ 5,246,995
=========== =========== ===========
Net income (loss) per
weighted average shareholders $ .66 $ .00 $ .65
=========== =========== ===========
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Historical Adjustments Total
------------ ----------- ------------
<S> <C> <C>> <C>
ASSETS
Real estate, net $142,858,431 $15,131,119(h) $158,372,535
382,985(i)
Investment in Partnerships 6,209,166 6,209,166
Mortgage loans receivable 3,278,307 3,278,307
Loan receivable from affiliate 0 0
Cash and cash equivalents 4,294,209 4,294,209
Accounts receivable-tenants,
net of allowance for doubtful
accounts of $303,000 1,278,563 1,278,563
Deferred costs, net 1,975,224 28,965(h) 2,004,189
Other Assets 925,994 95,116(h) 1,021,110
------------ ----------- ------------
Total Assets $160,819,894 $15,638,185 $176,458,079
============ =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $29,397,157 $12,397,155(h) $42,177,297
382,985(i)
Accounts payable and other liabilities 2,660,168 142,163(h) 2,802,331
Due to Advisor and affiliates 355,667 355,667
Distributions payable 1,966,253 1,966,253
------------ ----------- ------------
Total Liabilities 34,379,245 12,922,303 47,301,548
------------ ----------- ------------
Minority interest of unitholders in the
Operating Partnership 1,948,982 2,715,882(h) 4,664,864
------------ ----------- ------------
Shareholders' equity:
Common stock; $.01 per value;
50,000,000 shares authorized;
8,051,159 shares issued and
outstanding 80,511 80,511
Additional paid in capital 125,439,851 125,439,851
Distributions in excess (1,028,695) (1,028,695)
------------ ----------- ------------
Total Shareholders' Equity 124,491,667 124,491,667
------------ ----------- ------------
Total Liabilities and
Shareholders' Equity $160,819,894 $15,638,185 $176,458,079
============ =========== ===========
</TABLE>
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS
FOR THE NINE MONTHS ENDED AND AS OF SEPTEMBER 30, 1998
(a) Represents income and direct operating expenses of Southgate for the period
1/1/98-9/30/98.
(b) Represents interest on funds from the Facility used for the purchase of
Southgate.
(c) Represents depreciation of Southgate for the period 1/1/98-9/30/98.
(d) Represents asset management fee relating to Southgate for the period
1/1/98-9/30/98.
(e) Represents amortization of loan costs relating to debt assumed upon purchase
of Southgate for the period 1/1/98-9/30/98.
(f) Represents interest expense on debt assumed upon purchase of Southgate for
the period 1/1/98-9/30/98.
(g) Represents minority interest relating to the loss from Southgate.
(h) Represents purchase of Southgate.
(i) Represents acquisition fee relating to Southgate which was funded by the
Facility.
C. Exhibits
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Aegis Realty, Inc.
(Registrant)
BY: /s/ Stuart J. Boesky
-----------------------------
Stuart J. Boesky
President
February 25, 1999
