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: April 20, 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 Mesquite 30 in Mesquite, Texas ("Mesquite 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
Mesquite 30 acquisition. Mesquite 30 and the associated pad
sites were purchased for cash with proceeds from the Company's
$200 million Bank Credit Facility.
Mesquite 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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Mesquite 30 was acquired on April 20, 1998. The theatre has
30 screens and 6,008 seats and occupies 130,891 gross square
feet. The purchase price for Mesquite 30 was $24.6 million,
including $1.5 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.
Mesquite 30 has been leased to AMC at an initial annual
rental rate of $2.4 million. The Company intends to lease the
pad sites to developers of restaurants or other businesses
complimentary to the theatre.
The Lease for Mesquite 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 Mesquite 30:
FORECAST FINANCIAL STATEMENT IMPACT OF
MESQUITE 30 ACQUISITION
Gross
(thousands) Per Share
Theatre property acquisition price $23,200 $1.67
Pad site acquisition price 1,484 .10
Total acquisition price $24,684 $1.77
Annual theatre rents /1/ $2,436 $.17
Annual cost of funds /2/ ($1,696) ($.12)
Funds from Operations $740 $.03
Annual depreciation ($507) ($.04)
Annual net income $233 $.01
/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 Mesquite 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 Mesquite 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 Mesquite 30 but is instead leasing Mesquite 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 27, 1998 By /s/ David M. Brain
David M. Brain, Chief
Financial Officer
