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: September 1, 1999
(Date of earliest event reported)
Inland Retail Real Estate Trust, Inc.
(Exact name of registrant as specified in the charter)
Maryland 333-64391 36-4246655
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
2901 Butterfield Road
Oak Brook, Illinois 60523
(Address of Principal Executive Offices)
(630) 218-8000
(Registrant's telephone number including area code)
Not Applicable
(Former name or former address, if changed since last report)
-1-
Item 2. Acquisition or Disposition of Assets
Lake Olympia Square, Ocoee, Florida
On September 1, 1999, we purchased a shopping center known as Lake Olympia
Square, containing 85,776 gross leasable square feet and an adjacent outparcel,
by acquiring the interests of Inland Southeast Investment Corporation and
Inland Southeast Acquisitions Corp. (collectively the "Lake Olympia Affiliated
Partners"), both of which are affiliates of our Advisor, in Inland Southeast
Lake Olympia Limited Partnership and Inland Southeast Lake Olympia Outparcel
Limited Partnership (collectively the "Lake Olympia Property Partnerships").
The Lake Olympia Property Partnerships own the entire fee simple interest in
Lake Olympia Square.
Lake Olympia Square is located at the southwest intersection of Silver Star
Road and Clarke Road in Ocoee, Florida. Ocoee is located three miles west of
the Orlando, Florida city limits.
The Lake Olympia Property Partnerships purchased Lake Olympia Square on June
24, 1998 from an unaffiliated third party. The $9,873,627 we paid for this
property represents the total costs incurred by the Lake Olympia Affiliated
Partners in connection with their acquisition and financing of the property as
of the date of our purchase of their interests. Such costs consists of the
following:
* Purchase Price.......................... $ 9,732,045
* Acquisition costs to third parties...... 80,106
* Financing costs to an Inland affiliate.. 46,281
* Financing costs to third parties........ 15,195
Total.......... $ 9,873,627
===========
Our acquisition cost is approximately $115 per square foot of leasable space.
We paid a total of $3,967,847 to the Lake Olympia Affiliated Partners, since
the outstanding balance of the mortgage loan and certain prorations were
credited against the purchase price. That amount, together with $205,310
provided by the Lake Olympia Affiliated Partners (for a total of $4,173,157),
was paid to Inland Mortgage Investment Corporation, an Inland Affiliated
Company, as payment in full of two promissory notes evidencing loans made to
the Lake Olympia Affiliated Partners in connection with their purchase in June
1998 of this property. The promissory notes provided for payments of interest
only at the rate of 10.9% per annum. There may be additional expenses incurred
relative to the acquisition of this property, which we will pay. We expect
these additional costs to be immaterial.
In evaluating this property as a potential acquisition, we considered a variety
of factors including location, demographics, tenant mix, price per square foot,
occupancy and the fact that overall rental rates at the shopping center are
comparable to market rates. We believe that the shopping center is located
within a vibrant economic area. We did not consider any other factors
materially relevant to the decision to acquire this property.
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We do not anticipate making any significant repairs and improvements to this
property over the next few years. However, if we were to make any repairs or
improvements, the tenants would be obligated to pay a substantial portion of
any monies spent pursuant to the provisions of their respective leases.
We believe that this property is well located, has acceptable roadway access,
attracts high-quality tenants, is well maintained and has been professionally
managed. This property will be subject to competition from similar shopping
centers within its market area, and its economic performance could be affected
by changes in local economic conditions.
We purchased this property subject to a mortgage and a collateral assignment of
rents and leases in favor of LaSalle National Bank, as trustee for Morgan
Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series
1997-WF1, (the "Bank") , securing an indebtedness evidenced by a promissory
note (the "Note") held by the Bank in the original principal amount of
$6,200,000. Interest on the unpaid principal of the Note accrues at the rate
of 8.25% per annum. Principal and interest are payable on the first day of
each month, in installments of $50,978. The principal balance of the Note was
$5,932,943 as of the date of closing, and, provided all payments are made as
scheduled, the balance due on the maturity date, which is April 1, 2007, will
be $4,669,258. At any time after the third anniversary of the date of the Note
(i.e., March 26, 2000), and upon giving the holder of the Note 30 days prior
written notice, the principal amount and accrued interest may be prepaid with a
prepayment penalty which varies but in no event is less then 1% of the amount
of principal prepaid.
Lake Olympia Square, which was built in 1995, consists of a one-story, multi-
tenant retail building. As of September 1, 1999, this property was 96% leased.
Tenants leasing more than 10% of the total square footage currently include
Winn-Dixie. a supermarket, and Tutor Time Child Care Systems, a childcare
facility. The leases with these tenants require the tenants to pay base annual
rent on a monthly basis as follows:
Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Winn-Dixie 44,000 51.30 6.75 Currently 06/30/15
Options (1) 6.75 07/01/15 06/30/40
Tutor Time Child
Care Systems 10,000 11.66 12.00 Currently 01/31/07
Options (2) 12.00+ 02/01/07 01/31/17
(1) There are five successive five-year renewal options at the same base rent
per square foot per annum.
(2) There are two successive five-year renewal options with the base rent per
square foot per annum increasing according to increases in the CPI.
-3-
For federal income tax purposes, our depreciable basis in this property will be
approximately $7,306,484. When we calculate depreciation expense for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years,
respectively. Real estate taxes for the year ended 1998 (the most recent tax
year for which information is generally available) were $131,617.
On September 1, 1999, a total of 82,450 square feet was leased to 18 tenants at
Lake Olympia Square. The following tables set forth certain information with
respect to our leases with those tenants:
Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Winn-Dixie 44,000 06/15 5/5 yr. 297,000 6.75
Tutor Time Child
Care Systems 10,000 01/07 2/5 yr. 120,000 12.00
Froggers Restaurant 6,000 10/06 2/5 yr. 115,175 19.20
Movie Gallery 5,000 08/01 2/3 yr. 61,250 12.25
Countryside Home
Loans 2,290 10/01 2/3 yr. 28,000 12.23
Lake Olympia Dental 1,800 09/00 1/5 yr. 33,738 18.74
Beneficial Finance 1,600 12/05 1/5 yr. 22,400 14.00
First Choice
Restaurant 1,500 09/05 2/5 yr. 23,500 15.67
Sylvan Learning
Center 1,260 10/06 1/5 yr. 19,734 15.66
Harrison
Chiropractic 1,200 01/02 2/5 yr. 18,540 15.45
Mailboxes, Etc. 1,200 09/00 1/5 yr. 17,547 14.62
Subway 1,200 12/03 3/5 yr. 18,000 15.00
First Class
Cleaners 900 09/00 2/5 yr. 14,175 15.75
Hair Cuttery 900 09/01 1/5 yr. 14,700 16.33
H & R Block 900 04/02 2/3 yr. 14,625 16.25
Orlando Sentinel 900 11/99 5/1 yr. 14,127 15.70
The Preppy Puppy 900 10/01 1/3 yr. 13,500 15.00
Tan Bodies & Nails 900 09/00 1/5 yr. 13,160 14.62
Vacant 3,326
(1) Each tenant also pays its proportionate share of real estate taxes,
insurance and common area maintenance costs. In addition, Winn-Dixie pays,
as additional rent, a percentage of gross sales in excess of a prescribed
amount.
-4-
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1 900 14,127 853,280 15.70 1.05 1.57
2000 4 4,800 80,213 843,163 20.57 4.55 9.02
2001 4 9,090 120,650 767,495 13.27 10.60 14.82
2002 2 2,100 34,050 649,060 16.21 2.45 4.89
2003 1 1,200 19,139 616,705 15.95 1.40 2.89
2004 - - - 598,674 - - -
2005 2 3,100 46,371 598,674 14.96 3.61 7.75
2006 2 7,260 135,304 552,304 18.64 8.46 24.50
2007 1 10,000 120,000 417,000 12.00 11.66 28.78
2008 - - - 297,000 - - -
(1) Total annual base rent reflects the annual rental increases as per the lease. We made no
assumptions regarding the re-leasing of expired leases. It is the opinion of our management
that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received an appraisal prepared in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Institute and the Appraisal
Foundation by an independent appraiser who is a member of the Appraisal
Institute. The appraisal reported a fair market value for Lake Olympia Square,
as of August 27, 1999, of $10,225,000. Appraisals are estimates of value and
should not be relied on as a measure of true worth or realizable value.
Bridgewater Marketplace, Orlando, Florida
On September 7, 1999, we purchased an existing shopping center known as
Bridgewater Marketplace located on approximately 7.7 acres and containing
58,050 gross leasable square feet. Bridgewater Marketplace is located at the
southwest corner of the intersection of State Road 50 and Bridgeway Boulevard
in Orlando, Florida.
-5-
We purchased Bridgewater Marketplace from an unaffiliated third party. Our
total acquisition cost, including expenses, was $6,093,855. This amount may
increase by additional costs which have not yet been finally determined. We
expect any additional costs to be immaterial. Our acquisition cost is
approximately $105 per square foot of leasable space, which consists of the
following:
* Purchase Price.......................... $ 5,975,000
* Acquisition costs to third parties...... 54,288
* Financing costs to an Inland affiliate.. 23,900
* Financing costs to third parties........ 40,667
Total.......... $ 6,093,855
===========
In evaluating this property as a potential acquisition, we considered a variety
of factors including location, demographics, tenant mix, price per square foot,
occupancy and the fact that overall rental rates at the shopping center are
comparable to market rates. We believe that the shopping center is located
within a vibrant economic area. We did not consider any other factors
materially relevant to the decision to acquire this property.
We do not anticipate making any significant repairs and improvements to this
property over the next few years. However, if we were to make any repairs or
improvements, the tenants would be obligated to pay a substantial portion of
any monies spent pursuant to the provisions of their respective leases.
We believe that this property is well located, has acceptable roadway access,
attracts high-quality tenants, is well maintained and has been professionally
managed. This property will be subject to competition from similar shopping
centers within its market area, and its economic performance could be affected
by changes in local economic conditions.
We purchased this property subject to a mortgage, security agreement and a
collateral assignment of rents and leases in favor of SouthTrust Bank, National
Association, which secures two promissory notes in the aggregate principal
amount of $4,780,000. One promissory note is in the principal amount of
$2,987,500, requires monthly payments of interest only at a floating rate per
annum of 1.75% over a LIBOR related index, is due on September 7, 2006 and may
be prepaid at any time prior to maturity without penalty. The other note is in
the principal amount of $1,792,500, requires monthly payments of interest only
at a floating rate per annum of 1.75% over a LIBOR related index, is due on
September 7, 2000, and may be prepaid at any time prior to maturity without
penalty.
-6-
Bridgewater Marketplace, which was built in 1998, consists of a single-story,
multi-tenant retail center. As of September 7, 1999, this property was 97%
leased. Approximately 5,300 square feet of the center still needs to be
finished into three smaller tenant spaces (a portion of which has been leased),
and the funds required for this tenant finish work have been escrowed by the
seller. The seller has also escrowed funds to cover base rent and recoverable
expenses for 1,850 square feet of vacant space for one year, and for leased but
unoccupied spaces for the periods until the tenants for those spaces are
required to begin paying rent. The only tenant leasing more than 10% of the
total square footage currently is Winn-Dixie, a supermarket. The lease with
this tenant requires the tenant to pay base annual rent on a monthly basis as
follows:
Base Rent
Approximate Per Square
GLA Foot Per
Leased % of Total Annum Lease Term
Lessee (Sq. Ft.) GLA ($) Beginning To
----------- ----------- ----------- ------------ ------------ ---------
Winn-Dixie 44,000 75.80 8.30 12/1998 12/2018
Options (1) 8.30 01/2019 12/2118
(1) There are five successive twenty-year renewal options at the same base
rent per square foot per annum.
For federal income tax purposes, our depreciable basis in this property will be
approximately $5,274,000. When we calculate depreciation expense for tax
purposes, we will use the straight-line method. We depreciate buildings and
improvements based upon estimated useful lives of 40 and 15 years,
respectively. Real estate taxes for the year ended 1998 (the most recent tax
year for which information is generally available) were $13,435. As
Bridgewater Marketplace was under development during 1998, the property is
subject to reassessment for real estate taxes for 1999 and subsequent years.
Real estate taxes for the year ended December 1999 are expected to be
approximately $60,000.
On September 7, 1999, a total of 56,250 square feet was leased to 11 tenants at
this property. The following tables set forth certain information with respect
to our leases with those tenants:
Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Winn-Dixie 44,000 12/18 5/20 yr. 365,200 8.30
A Slice of New York 2,000 06/04 1/5 yr. 30,000 15.00
Shanghai Restaurant 1,600 06/08 - 24,000 15.00
Subway 1,500 06/04 3/5 yr. 24,000 16.00
Luxury Hair Salon 1,200 03/03 - 18,000 15.00
Allstate Insurance 900 04/02 2/1 yr. 13,500 15.00
Jackson Hewitt 900 07/02 1/3 yr. 13,500 15.00
-7-
Approximate
GLA Current Rent per
Leased Lease Renewal Annual Rent Square Foot
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Community Cleaners 900 01/04 2/5 yr. 12,600 14.00
Polo Nails 900 03/04 - 13,500 15.00
A Touch of Bronze 900 03/04 1/5 yr. 13,500 15.00
Lori's Little Pets 1,450 09/04 - 21,750 15.00
Vacant 1,800
(1) Each tenant also pays its proportionate share of real estate taxes,
insurance and common area maintenance costs. In addition, Winn-Dixie pays,
as additional rent, a percentage of gross sales in excess of a prescribed
amount.
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring by Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 - - - 498,925 - - -
2000 - - - 552,677 - - -
2001 - - - 556,263 - - -
2002 2 1,800 30,150 548,592 16.75 3.10 5.64
2003 1 1,200 20,400 522,125 17.00 2.07 3.87
2004 6 7,650 127,825 450,871 17.11 10.68 21.20
2005 - - - 390,800 - - -
2006 - - - 391,600 - - -
2007 - - - 392,400 - - -
2008 1 1,600 27,200 378,800 17.00 2.76 6.93
(1) We made no assumptions regarding the re-leasing of expired leases. It is the opinion of
our management that the space will be re-leased at market rates at the time of re-leasing.
</TABLE>
We received an appraisal prepared in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Institute and the Appraisal
Foundation by an independent appraiser who is a member of the Appraisal
Institute. The appraisal reported a fair market value for Bridgewater
Marketplace, as of July 27, 1999, of $6,100,000. Appraisals are estimates of
value and should not be relied on as a measure of true worth or realizable
value.
-8-
Item 5. Other Events
Potential Property Acquisitions
We are currently considering the acquisition of Bartow Marketplace Shopping
Center in Cartersville, Georgia. An affiliate of our Sponsor has entered into
a contract for the purchase of this property, with the intention to assign its
rights thereunder to us if we decide to acquire the property. Our decision to
acquire this property will generally depend upon:
* our receipt of an acceptable appraisal and environmental report;
* no material adverse change occurring in the property, the tenants or in
the local economic conditions; and
* our receipt of sufficient net proceeds from this Offering to make such an
acquisition.
Other properties may be identified in the future that we acquire before or
instead of this property. We cannot guarantee that we will complete this
acquisition.
Bartow Marketplace Shopping Center was constructed in 1995. It is a single-
story retail center containing 375,067 leasable square feet. The center has 17
tenant spaces. Tenants occupying more than 10% of the total square footage
currently are Wal-Mart and Lowe's Home Centers. As of the date of this
Supplement, the acquisition cost of this property is approximately $24,545,000.
This amount may increase by additional costs incurred which have not yet been
finally determined. We expect any additional costs to be immaterial.
Item 7. Financial Statements and Exhibits
(a) Financial Statements
To be subsequently filed.
-9-
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.
Inland Retail Real Estate Trust, Inc.
(Registrant)
By:/s/ BARRY L. LAZARUS
Barry L. Lazarus
President, Chief Operating Officer,
Treasurer and Chief Financial Officer
Date: September 16, 1999
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