UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report: March 31, 1998
Entertainment Properties Trust
(Exact name of registrant as specified in its charter)
Maryland 1-13561 43-179877
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1200 Main, Suite 3250 Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (816) 472-1700
N/A
(Former name or former address, if changed since last report.)
Item 2 Acquisition or Disposition of Assets
The Company has acquired the megaplex theatre property known
as Cantera 30 in Chicago, Illinois ("Cantera 30") from an affiliate
of American Multi-Cinema, Inc. ("AMC"), a wholly-owned subsidiary
of AMC Entertainment, Inc. ("AMCE"). The Company has also acquired
two undeveloped pad sites in connection with the Cantera 30
acquisition. Cantera 30 and the associated pad sites were
purchased for cash with proceeds from the Company's $200 million
Bank Credit Facility.
Cantera 30 is one of the "Option Properties" described in the
Company's Prospectus contained in its Registration Statement on
Form S-11, Registration No. 33-35281 (the "Registration
Statement").
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Cantera 30 was acquired on March 31, 1998. The theatre has 30
screens and 6,210 seats and occupies 130,757 gross square feet.
The purchase price for Cantera 30 was $37 million, including
$2 million for the undeveloped pad sites. Title to the theatre and
pad sites is held in the name of a wholly-owned subsidiary of the
Company.
Cantera 30 has been leased to AMC at an initial annual rental
rate of $3,675,000. The Company intends to lease the pad sites to
developers of restaurants or other businesses complimentary to the
theatre.
The Lease for Cantera 30 is a triple-net lease with an initial
term of 15 years which may be extended upon the same terms and
conditions for four additional five-year terms at the option of
AMC. The Lease is referred to as a triple net lease in that it
requires AMC to pay substantially all expenses associated with the
operation of the property, such as taxes and other governmental
charges, insurance, utilities, service, maintenance and any ground
lease payments, if applicable. The Lease requires that, for a
specified period, AMC shall operate the property only as a movie
theatre and activities incidental thereto. AMC's performance of
its obligations under the Lease has been guaranteed by AMCE.
The following table illustrates the forecasted impact on the
Company's financial position of the acquisition of Cantera 30:
FORECAST FINANCIAL STATEMENT IMPACT OF
CANTERA 30 ACQUISITION
Gross Per Share
Theatre property acquisition price $35,000,000
Pad site acquisition price $2,000,000
Total acquisition price $37,000,000
Annual theatre rents/1/ $3,675,000 $ 0.27
Annual cost of funds/2/ ($2,751,875) ($ 0.20)
Funds from Operations $923,125 $ 0.07
Annual depreciation ($687,175) ($ 0.05)
Annual net income $235,950 $ 0.02
/1/ Does not include potential rental revenue from pad sites.
/2/ Assumes current interest rates and current margins over base
rate.
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Peter C. Brown, Chairman of the Board of the Company, is the
President, Chief Financial Officer and a director of AMCE. Mr.
Brown is also Executive Vice President, Chief Financial Officer and
a director of AMC. Robert C. Harris, President, Chief Development
Officer and a trustee of the Company, is the former Senior Vice
President of AMC in charge of its international affairs.
The purchase price for the theatre property was determined by
the management of both AMCE and the Company as the cost of
developing and constructing the property. The associated pad sites
were purchased at fair market value as agreed between AMCE and the
Company.
The Lease payment obligations with respect to the theatre
property were determined by the management of AMCE and the Company
and were not negotiated on an arms-length basis. The Lease
payments are based on an initial capitalization rate of 10.5%,
which the Company believes reflects the fair market value of the
theatre property to the Company based on rates for comparable
triple net lease transactions. The 10.5% capitalization rate is
consistent with the rate utilized in other theatre leases between
AMC and the Company.
The theatre property will be operated by AMC as a megaplex
movie theatre under the terms of the Lease.
The description of Cantera 30 and the underlying Lease terms
contained in the Prospectus which is a part of the Registration
Statement under the captions "Business of the Company and its
Properties" and "Leases" is incorporated by reference in this
Report.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
WITH THE EXCEPTION OF HISTORICAL INFORMATION, THIS REPORT ON
FORM 8-K CONTAINS FORWARD-LOOKING STATEMENTS AS DEFINED IN THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND IDENTIFIED BY
SUCH WORDS AS "WILL BE," "INTENDED," "CONTINUE," "BELIEVE," "MAY,"
"EXPECT," "HOPE," "ANTICIPATE," "GOAL," "FORECAST" OR OTHER
COMPARABLE TERMS. THE COMPANY'S ACTUAL FINANCIAL CONDITION,
RESULTS OF OPERATIONS OR BUSINESS MAY VARY MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS AND INVOLVE VARIOUS
RISKS AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO THE
FOLLOWING:
. The Company's initial dependence on a single tenant
and lease guarantor for its lease revenues and
ability to make distributions to its shareholders
. The Company's ability to diversify its portfolio
. Potential conflicts of interest involving the
Company and its initial tenant and lease guarantor
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. Competition from other entities providing capital
to the entertainment industry
. Dependence on key personnel
. Operating risks in the entertainment industry that
may affect the operations of the Company's tenants
. Tax risks arising from the Company's qualification
as a REIT
. Interest rates and availability of debt financing
. General real estate investment risks
. Other risks and uncertainties
INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON SUCH
FORWARD-LOOKING STATEMENTS, AND ARE ENCOURAGED TO REVIEW THE RISK
FACTORS IDENTIFIED IN THE COMPANY'S PROSPECTUS CONTAINED IN THE
REGISTRATION STATEMENT ON FORM S-11.
Item 7 Financial Statements and Exhibits
(a) Financial statements of business acquired. The Company
will not operate Cantera 30, but is instead leasing the
theatre property (through its wholly-owned subsidiary) to
AMC in accordance with a triple net Lease guaranteed by
AMCE. The theatre property is being used entirely by AMC
in its business pursuant to a triple net Lease from the
Company's subsidiary and is not being used in any
significant way for rental to third parties.
Accordingly, consolidated financial statements of AMCE,
as guarantor of the Lease, have been provided in lieu of
an operating statement for the theatre property.
For information with respect to the financial condition
and results of operations of AMCE and subsidiaries
(including AMC), reference is made to the unaudited
Condensed Pro Forma Financial Statements and notes
thereto of AMC Entertainment, Inc. and subsidiaries for
the twenty-six week period ended October 2, 1997 and the
year (53 weeks) ended April 3, 1997; the unaudited
Financial Statements and notes thereto of AMC
Entertainment, Inc. and subsidiaries as of October 2,
1997 and April 3, 1997 and for the twenty-six weeks ended
October 2, 1997 and September 26, 1996; and the
Consolidated Financial Statements of AMC Entertainment,
Inc. and subsidiaries and report thereon of independent
accountants for the year (53 weeks) ended April 3, 1997
and years (52 weeks) ended March 28, 1996 and March 30,
1995 contained in the Registration Statement and
incorporated by reference into this Report.
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(b) Pro forma financial information - The Company will not
operate Cantera 30 but is instead leasing Cantera 30 to
AMC under a triple net Lease guaranteed by AMCE.
Accordingly, the forecast financial information in the
table included in Item 2 of this Form 8-K is being
provided in lieu of pro forma financial information.
(c) Exhibits
EXHIBIT NO. DESCRIPTION
10.1 Form of Agreement of Sale and Purchase
between the Company and American Multi-
Cinema, Inc. (incorporated by reference
to Exhibit 10.1 to the Registration
Statement)
10.5 Form of Lease entered into between the
Company and American Multi-Cinema, Inc.
(incorporated by reference to Exhibit
10.5 to the Registration Statement)
10.6 Form of Guaranty of Lease between the
Company and AMC Entertainment, Inc.
(incorporated by reference to Exhibit
10.6 to the Registration Statement)
99 Sections of the Prospectus contained in
the Registration Statement and entitled
"Business of the Company and its
Properties" and Leases" and the financial
statements of AMCE and subsidiaries
identified in Item 7(a) (incorporated by
reference to Exhibit 99 to the Company's
Current Report on Form 8-K dated January
30, 1998).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
ENTERTAINMENT PROPERTIES TRUST
Date: April 3, 1998 By /s/ R. Scott Christian
R. Scott Christian, Treasurer
