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: February 9, 2000
(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)
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Item 2. Acquisition or Disposition of Assets
Conway Plaza, Orlando, Florida
On February 9, 2000, we purchased an existing shopping center known as Conway
Plaza located on approximately 17 acres and containing 119,423 gross leasable
square feet. Conway Plaza Shopping Center is a grocery-anchored community
shopping center located at the southeast corner of Curry Ford and Conway Roads
in Orange County, Orlando, Florida.
We purchased Conway Plaza from an unaffiliated third party by paying the entire
purchase price we paid for the property in cash. The property will most likely
be financed in the future. Our wholly owned Florida limited liability company,
Inland Southeast Conway, L.L.C., owns the entire fee simple interest in Conway
Plaza. Our total acquisition cost, including expenses, was approximately
$8,540,363. This amount may increase by additional costs which have not yet
been finally determined. We expect any additional acquisition related costs to
be insignificant. Our acquisition cost is approximately $72 per square foot of
leasable space, which consists of the following:
* Purchase Price......................................... $ 8,500,000
* Acquisition costs to third parties..................... 40,363
-------------
TOTAL......................... $ 8,540,363
=============
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 anticipate expending not more than approximately $250,000 for roof repairs
and parking lot and landscaping improvements over the next one to two years.
It is unlikely that the majority of such expenditures will be passed through to
the tenants.
An environmental assessment conducted in 1994 identified the presence of
tetrachloroethylene (PCE) and trichloroethylene (TCE) in the groundwater at the
property. The PCE and TCE were reportedly present as the result of releases
primarily from a dry cleaner located adjacent to our property, and secondarily,
from a dry cleaner that for approximately 30 years, and until August 1998, was
a tenant at our property.
Based upon a sampling of groundwater in January 2000, there is an environmental
risk at the site but we have been advised that it appears to be relatively low
because the on-site contamination measured in water samples taken in 1994 has
diminished significantly. Additionally, based upon the results of the sampling
in January 2000 of surface water, we have been advised that there is no
apparent environmental risk off our site as nothing of environmental concern
was detected in the water samples taken from the lake adjacent to and
downgradient of our property. Therefore, we do not at this time anticipate any
third-party having a legal basis for making a claim or filing a lawsuit against
us for existing conditions.
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The federal Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") imposes strict liability for all cleanup costs on the current
owner of property where there has been a release or threatened release of
hazardous substances. PCE and TCE are such hazardous substances. While the
federal government under CERCLA may always perform a response action at the
facility or require the owner to do so, in light of the fact that the State of
Florida is dealing with the property as explained below and given the facts
known to date, absent changed circumstances, we have been advised that such
possibility is small. In addition, there has been no indication that the
federal government is interested in the site.
The State of Florida has established a state-funded dry cleaning solvent
cleanup program to clean up properties that are contaminated as a result of the
operations of a dry cleaning facility. This program is administered by the
Florida Department of Environmental Protection. The program limits the
liability of the owner, operator and real property owner of facilities for
cleanup of solvent contamination if certain stated conditions are met.
The former tenant submitted an application for eligibility in the Florida
program in December 1996. The site was accepted in the program in April 1997
with a deductible of $1,000. Assessment and cleanup under the program is
implemented according to a priority ranking system established by the Florida
Department of Environmental Protection. In view of the site's priority ranking
as of January 2000, the site will most likely not be addressed for cleanup
under the program until at least the year 2001. The adjacent off-site dry
cleaner has also been accepted in the program and its cleanup will be scheduled
concurrently with our property. Even though our property may have been
contaminated by the upgradient and adjacent dry cleaner, there presently is
probably no possibility of our recovering anything from that entity.
Regardless of a site's eligibility for this program, real property owners are
authorized to conduct rehabilitation activities at any time. The law provides
limited liability protection under certain conditions. However, the owner may
not seek cost recovery from the Florida fund.
We do not plan on conducting our own rehabilitation activities. Instead, we
intend to have the property assessed and, if necessary, cleaned up through the
Florida program whenever the program is ready to start cleanup on the property.
In addition, we have purchased an environmental impairment insurance policy for
known and unknown environmental contamination at the site providing coverage of
up to $5 million for each loss and for the total of all losses, for a term of
10 years. The insurance covers on-site cleanup where the cleanup costs result
from a governmental mandate of corrective action from pollution conditions at,
on or within the site to which the insurance applies. Further, the third party
pollution liability coverage will cover sums that we become legally obligated
to pay as damages arising out of claims for bodily injury or property damage
that result from pollution conditions at, on or emanating from our site.
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.
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Conway Plaza, which was constructed between 1966 and 1981 and substantially
renovated in 1999 (with Publix being newly rebuilt in 1999), is a single-story,
multi-tenant, retail center. As of February 9, 2000, this property was
approximately 97% leased. In addition to the main building, there are three
outbuildings. The smallest outbuilding consists of three tenant spaces, each
of 1,200 square feet. Weighco of Florida and the Nail Salon are tenants in
this outbuilding, and one of the tenant spaces is vacant. Separated from the
smallest outbuilding by a few feet is the largest outbuilding, consisting of
two tenant spaces of 5,100 square feet each and another of 6,015 square feet.
The 6,015 square foot space was completely renovated in 1999 and is occupied by
Coldwell Banker. Centered Health Care, P.A. and Greenberg Dental are tenants
in each of the 5,100 square foot spaces in this larger building. The third
outbuilding is a stand alone metal structure of 3,050 square feet leased by
Fabriclean.
Two tenants, Publix (a supermarket) and Beall's Outlet Store (a discount
department clothing store), each lease more than 10% of the total gross
leasable area of the property. 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
----------- ----------- ----------- ------------ ------------ ---------
Publix 37,888 31.73 7.75 10/99 10/19
Options (1) (3) 7.75 11/19 10/49
Beall's Outlet
Store 12,000 10.05 5.00 05/97 04/01
Options (2) (3) 5.25 to 05/01 04/25
7.00
(1) There are six successive five-year renewal options at the same base rent
per square foot per annum.
(2) There are eight successive three-year renewal options. The base rent per
square foot increases by $.25 per square foot for each option.
(3) Publix and Beall's Outlet Store are obligated to pay, as additional rent, a
percentage of gross sales in excess of a prescribed amount, subject, in the case
of Beall's Outlet Store, to a specified maximum amount. However, neither Publix
or Beall's Outlet Store are currently paying percentage rent since their gross
sales have not reached the prescribed amounts.
For federal income tax purposes, our depreciable basis in this property will be
approximately $6,394,000. 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 1999 (the most recent tax year for which information is
generally available) were $74,661.
-4-
On February 9, 2000, a total of 115,823 square feet was leased to 20 tenants at
this property. The following tables set forth certain information with respect
to our leases with those tenants as of February 9, 2000:
Approximate Base Rent Per
GLA Current Square Foot
Leased Lease Renewal Annual Rent Per Annum
Lessee (Sq. Ft.) Ends Options ($) ($)
------ ---------- ----- ------- ----------- -----------
Publix 37,888 10/19 6/5 293,632 7.75
Paramount Health
Club 8,410 03/00 - 63,075 7.50
Henry's Vacuum 1,200 07/00 - 12,000 10.00
Weighco of Florida 1,200 07/00 - 12,660 10.55
Sunshine Laundry 1,800 12/01 1/5 22,284 12.38
Nail Salon 1,200 12/00 - 12,600 10.50
Fabriclean 3,050 01/01 - 24,980 8.19
Beall's Outlet
Store 12,000 04/01 8/3 60,000 5.00
A+ Liquors 1,300 04/01 - 13,156 10.12
Coldwell Banker 6,015 07/01 - 48,782 8.11
Players Sport Pub 5,700 08/01 - 49,590 8.70
Players Sport Pub (2)1,400 08/01 - 1,204 0.86
Great Clips 1,600 09/02 - 16,000 10.00
Greeting Card
Depot 1,800 03/03 - 15,600 8.67
Nature's Market 2,200 10/03 - 22,000 10.00
Advance America 1,600 12/04 - 17,600 11.00
Dollar Tree Store 5,400 01/05 2/5 43,200 8.00
Eckerd Drugs 10,260 01/05 4/5 42,270 4.12
Centered Health
Care, P.A. 5,100 12/06 - 51,000 10.00
Hua Xiu Chinese
Food Take Out
Restaurant 1,600 04/07 - 16,480 10.30
Greenberg Dental 5,100 12/09 - 34,986 6.86
Vacant 3,600
(1) In general, each tenant pays its proportionate share of real estate taxes,
insurance and common area maintenance costs, although the leases with some
tenants provide that the tenant's liability for such expenses is limited in
some way, usually so that their liability for such expenses does not exceed
a specified amount. Eckerd Drugs pays, as additional rent, a percentage of
gross sales in excess of a prescribed amount, but is not obligated to pay
any share of insurance costs. Beall's Outlet Store does not pay its
proportionate share of any expenses.
(2) This lease is for storage space.
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(3) Approximately $107,525 is being held in escrow and is available for a
period of 23 months following the closing of our purchase of this property
(i.e., until January 2002) for disbursement to us for rent, common area
maintenance charges, real estate taxes and insurance relating to 3,600
square feet of vacant space. Of these escrowed funds, $77,050 are
available to be paid to us at the annual rate of $14.50 per square foot for
base rent and $2.25 per square foot for common area maintenance, real
estate taxes and insurance for 2,400 square feet of such vacant space, and
$30,475 of these escrowed funds are available to be paid to us at the
annual rate of $11.00 per square foot for base rent and $2.25 per square
foot for common area maintenance, real estate taxes and insurance for 1,200
square feet of such vacant space. Payments are to be made to us monthly
from that escrow if the spaces remain vacant during the 23-month period.
When all or part of such vacant space is rented, and the new tenant begins
paying full current rent and reimbursable expenses, the amount we will be
entitled to receive from the escrow will be reduced or eliminated. The
seller is also responsible for all leasing commissions, tenant improvements
and all other costs associated with placing tenants in the vacant space.
In addition, a $15,000 escrow has been established for the seller's
obligation to perform certain parking lot paving and building cleaning,
patching, caulking and painting.
<TABLE>
<CAPTION>
Average Percent of Percent of
Base Rent Total Annual Base
Annual Base Total Per Square Building GLA Rent
Approx. GLA Rent of Annual Foot Under Represented Represented
Year Number of of Expiring Expiring Base Expiring By Expiring By Expiring
Ending Leases Leases Leases Rent (1) Leases Leases Leases (2)
December 31, Expiring (Sq. Ft.) ($) ($) ($) (%) (%)
- ----------- --------- ----------- ----------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 4 12,010 100,335 811,915 8.35 10.06 12.36
2001 6 31,265 220,667 673,596 7.06 26.18 27.18
2002 1 1,600 16,480 563,147 10.30 1.34 2.45
2003 2 4,000 43,950 538,703 10.99 3.35 7.80
2004 1 1,600 19,808 515,783 12.38 1.34 3.68
2005 2 15,660 85,471 421,502 5.46 13.11 16.57
2006 1 5,100 60,894 418,509 11.94 4.27 14.45
2007 1 1,600 19,664 346,240 12.29 1.34 4.70
2008 - - - 341,521 - - -
2009 1 5,100 49,776 343,408 9.76 4.27 14.57
(1) For purposes of this column, we made no assumptions regarding the re-leasing of
expiring leases. Therefore, no amount is included in this column for any lease which
will expire during the specified 10-year period, commencing with its actual expiration
date and continuing throughout the remaining years shown in this table.
(2) In view of the assumption made with regard to Total Annual Base Rent as explained in
footnote (1), the percentages shown may not be reflective of the expected actual
percentages.
(3) The foregoing assumptions should not be deemed indicative of or a prediction of future
actual results. It is the opinion of our management that the space for expiring
leases will be re-leased at market rates existing at the time of the expiration of
those leases.
</TABLE>
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We received an appraisal which states that it was prepared in conformity with
the Code of Professional Ethics and Standards of Professional Appraisal Practice
of the Appraisal Institute and the Uniform Standards of Professional Appraisal
Practice of the Appraisal Foundation by an independent appraiser who is a member
of the Appraisal Institute. The appraisal reported a fair market value for
Conway Plaza, as of December 26, 1999, of $8,800,000. Appraisals are estimates
of value and should not be relied on as a measure of true worth or realizable
value.
Item 7. Financial Statements and Exhibits
(a) Financial Statements
To be subsequently filed.
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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: February 24, 2000
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