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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _________________
Commission file number
333-77229
T REIT, Inc.
(Exact name of registrant as specified in its charter)
Virginia 52-2140299
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1557 N. Tustin Avenue, Suite 650
Santa Clara, California 92705 (877) 888-7348
(Address of principal executive offices) (Registrant's telephone number,
including area code)
N/A
(Former name)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [ X ]
As of August 21, 2000, there were 230,803.9337 shares of common stock of
T REIT, Inc. outstanding.
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T REIT, Inc.
Form 10-Q
For the quarterly period ended June 30, 2000
INDEX
Page
----
Part I Financial Information
Item 1. Financial Statements. 2
Balance Sheets 2
Statement of Shareholders' Equity 4
Statement of Income 3
Statement of Cash Flow 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 9
Item 3. Qualitative and Quantitative Disclosure about Market Risks. 11
Part II Other Information
Item 1. Legal Proceedings. 12
Item 2. Changes in Securities. 12
Item 3. Defaults upon Senior Securities. 12
Item 4. Submission of Matters to a Vote of Security Holders. 12
Item 5. Other Information. 12
Item 6. Exhibits and Reports on Form 8-K. 12
Signatures 13
1
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Part I - Financial Information
Item 1. Financial Statements.
T REIT, INC.
Balance Sheets
<TABLE>
<S> <C> <C>
June 30, December 31,
2000 1999
--------------- ----------------
(unaudited)
Assets
Cash $1,203,242 $ 100
--------------- ----------------
$1,203,242 $ 100
=============== ================
Liabilities and
Shareholders' Equity
Amounts due Advisor $ 74,391 $ -
Amounts due affiliate of Advisor 96,489
--------------- ----------------
170,880 -
--------------- ----------------
Shareholders' equity:
Common stock, $.01 par value; 1,232 1
10,000,000 shares authorized,
123,199 shares issued and
outstanding
Additional paid-in capital 1,060,757 99
Accumulated deficit (28,395) -
--------------- ----------------
1,032,362 100
--------------- ----------------
$1,203,242 $ 100
=============== ================
</TABLE>
See accompanying notes.
2
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T REIT, INC.
Statements of Income
(unaudited)
Three
Months
Six Months Ended
Ended June June 30,
30, 2000 2000
------------ ------------
Revenues
Interest income $ 5,663 $ 4,943
------------ ------------
5,663 4,943
------------ ------------
Expenses
Organizational $ 29,888 $ 29,888
General and administrative 1,000 1,000
Interest 3,170 1,070
------------ ------------
34,058 31,958
------------ ------------
Net loss $(28,395) $(27,015)
============ ============
Basic and diluted loss per share $ (.74) $ (.56)
============ ============
See accompanying notes.
3
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T REIT, INC.
Statement of Shareholders' Equity
Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
Number Par Additional
of shares Value Paid-in Capital Accumulated Total
Deficit
--------------- ------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 10 $ 1 $ 99 $ - $ 100
1999
Issuance of common
stock 123,199 1,232 1,059,525 - 1,060,757
Redemption of
common stock (10) (1) (99) - (100)
Net loss - - - (28,395) (28,395)
--------------- ------------- ----------------- --------------- -----------------
Balance, June 30, 2000 123,199 $1,232 $1,059,525 $(28,395) $1,032,362
=============== ============= ================= =============== =================
</TABLE>
See accompanying notes.
4
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T REIT, INC.
Statement of Cash Flow
(unaudited)
Six Months
Ended June 30,
2000
----------------
Cash flows from operating activities:
Net loss $ (28,395)
Changes in assets and liabilities:
Increase in amounts due Advisor 74,391
Increase in amounts due affiliate of Advisor 96,489
----------------
Net cash provided by operating activities 142,485
----------------
Cash flow from financing activities:
Issuance of common stock 1,060,757
Redemption of common stock (100)
Net cash provided by financing activities 1,060,657
----------------
Net increase in cash and cash equivalents 1,203,142
Cash and cash equivalents, beginning of period 100
----------------
Cash and equivalents, end of period $1,203,242
================
See accompanying notes.
5
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T REIT, INC.
Notes to Financial Statements
Period Ended June 30, 2000
1. Description of Business
T REIT, Inc. (the "Company") was formed in December 1998 in the Commonwealth of
Virginia and intends to qualify as a real estate investment trust for federal
income tax purposes. The Company's plans are to acquire existing office,
industrial, retail and service properties located in several states. As of June
30, 2000, the Company has not acquired any properties and has not entered into
any agreements to purchase property. The Company intends to acquire properties
through its operating partnership, T REIT, L.P. Currently, the Company owns 100%
of the ownership interests of T REIT, L.P. and there are no related minority
interests.
The Company is externally advised by Triple Net Properties, LLC (the "Advisor"),
which is primarily responsible for managing the day-to-day operations and assets
of the Company. The Advisory Agreement dated February 22, 2000, between the
Company and the Advisor is for a one year term, subject to successive renewals.
2. Interim Financial Data
The financial statements include the accounts of the Company and T REIT, L.P.
The information furnished has been prepared in accordance with generally
accepted accounting principles for interim financial reporting and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. In the opinion of management, all adjustments considered
necessary for the fair presentation of the Company's financial position, results
of operations and cash flows have been included. No financial statements for the
corresponding quarterly periods in 1999 have been presented since the Company
did not commence operations until 2000.
These financial statements should be read in conjunction with the Company's
registration statement on Form S-11.
3. Cash and Cash Equivalents
Cash and cash equivalents consist of all highly liquid investments with a
maturity of three months or less when purchased.
4. Stock Offering Costs
Pursuant to a registration statement on Form S-11 filed with the Securities and
Exchange Commission under the Securities Act of 1933, the Company is offering
6
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T REIT, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
for sale up to 10,000,000 shares of its Common Stock (the "Shares") at an
offering price $10 per share. The registration statement was declared effective
February 22, 2000. The offering of Shares will terminate on the earlier of
February 22, 2002 or the date on which the maximum offering of Shares has been
sold.
The Company is offering the Shares to the residents of Arizona, California,
Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa,
Kansas, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri,
Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma,
Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah,
Virginia, Washington, West Virginia, Wisconsin and Wyoming.
Pursuant to the registration statement, the Shares can be offered to affiliates
(officers, directors and brokers) at a discounted price of $9.05 per share. The
registration statement also provides that broker-dealers are entitled to one
warrant for every forty shares sold in states that permit such compensation.
At June 30, 2000, no warrants were outstanding. However, the Company
is obligated to issue 1,932 warrants to broker-dealers which will be
issued in the third quarter of 2000.
As of June 30, 2000, the Company has sold and issued 123,199 shares, including
22,090 shares issued to the Advisor at $9.05 per share. Aggregate gross proceeds
before offering costs and selling commissions total $1,209,190.
5. Organizational Costs
The Company complies with the Statement of Opinion 98-5, Reporting the Costs of
Start-Up Activities ("SOP 98-5"). SOP 98-5 requires the Company to expense all
costs incurred during the formation and start-up of the Company. The Company
incurred and expensed $29,888 of organizational costs during the six and
three months ended June 30, 2000.
7
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T REIT, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
6. Advisory Fees
The Advisor is compensated by the Company for its services through a series of
fees as detailed in the Advisory Agreement with the Company. For the six months
ended June 30, 2000, the Advisor has not earned any advisory related fees.
In addition to fee compensation, the Advisor is reimbursed costs and expenses it
incurs on behalf of the Company. For the six months ended June 30, 2000, the
Advisor incurred $71,121 of organizational expenses and offering costs on behalf
of the Company which are included in the amount due Advisor on the Company's
balance sheet.
7. Earnings Per Share
Basic and diluted earnings per share are based on 38,080 and 48,091 weighted
average number of shares outstanding for the six and three months ended June 30,
2000, respectively.
8. Related Party Transactions
The Advisor has made advances to the Company to pay for formation and offering
costs. The advances bear interest at 12%. As of June 30, 2000, the advances
total $74,391. Interest accrued on the advances totals $3,179 for the six
months ended June 30, 2000 and $1,070 for the three months ended June 30, 2000.
At June 30, 2000, $96,489 is owed to NNN Capital Corp., a dealer manager
affiliated with the Advisor, for selling commissions and due diligence fees
relating to the sale of the Company's stock.
8
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This information contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Although T REIT, Inc. (the "Company") believes that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, the Company's actual results could differ materially
from those set forth in the forward-looking statements. Certain factors that
might cause such a difference include the following: changes in general economic
conditions, changes in local real estate conditions, availability of proceeds
from the Company's offering, the ability of the Company to obtain financing on
satisfactory terms, the ability of the Company to acquire properties meeting its
investment criteria; the ability of the Company to locate suitable tenants for
its properties, and the ability of tenants and borrowers to make payments under
their respective leases.
The Company was formed as a Virginia corporation in December 1998 and
intends to qualify as a real estate investment trust for federal income tax
purposes. To date, the Company has not acquired any properties and has not
entered into any contracts to purchase property. The Company intends to invest
in properties primarily in designated states. The Company intends to lease the
properties to tenants and will lease some of its properties under net leases and
in sale and leaseback transactions.
The Company intends to focus on acquisitions of properties primarily in
fifteen focus states--Alaska, Florida, Iowa, Michigan, Minnesota, Nevada, North
Carolina, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington,
Wisconsin and Wyoming. However, the Company may acquire properties in other
states.
The Company intends to conduct business and own properties through its
operating partnership, T REIT, L.P. (the "Operating Partnership"), which was
formed as a Virginia limited partnership in May 1999. The Company is the sole
general partner of the Operating Partnership and has control over the affairs of
the Operating Partnership.
The Company's day to day operations are managed by its advisor, Triple Net
Properties, LLC (the "Advisor"), under an advisory agreement. The Advisor was
formed in April 1998 to serve as an asset and property manager for real estate
investment trusts, syndicated real estate limited partnerships and limited
liability companies and similar real estate entities.
References herein to the "Company" mean T REIT, Inc. and the Operating
Partnership collectively, unless the context otherwise requires.
Pursuant to a registration statement on Form S-11 (the "Registration
Statement") under the Securities Act of 1933, as amended, the Company is
offering for sale up to 10,000,000 shares of its common stock (the "Shares") at
an offering price of $10 per Share. The Registration Statement was declared
effective on February 22, 2000. The offering of Shares will terminate on the
earlier of February 22, 2002, or the date on which the maximum offering has been
sold.
9
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The Company is offering the Shares to the residents of Arizona, California,
Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Iowa,
Kansas, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri,
Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma,
Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah,
Virginia, Washington, West Virginia, Wisconsin and Wyoming.
As of June 30, 2000 the Company had sold 123,199 shares resulting in net
proceeds of $1,060,757 (excluding funds from Pennsylvania investors), which
exceeded the minimum offering amount of $1,000,000. As of June 30, 2000, the
Company has approximately $1,032,000 available to invest in properties after
deduction of selling commissions, marketing support and due diligence
reimbursement fees, organizational and offering expenses and miscellaneous
acquisition expenses.
The Company expects to use net offering proceeds from the sale of Shares to
purchase properties. In addition, the Company intends to borrow money to
acquire properties and to pay certain related fees.
Results of Operations
Three Months and Six Months Ended June 30, 2000
At June 30, 2000 and December 31, 1999, the Company's total assets were
$1,203,242 and $100, respectively. The increase in total assets reflects the
stock offering during the period ended June 30, 2000.
As of June 30, 2000, the Company owed the Advisor $74,391 for costs and
expenses it has incurred on behalf of the Company.
Gross revenues of the Company of $5,663 for the six months ended June 30,
2000, represented interest income earned on offering proceeds held by the
Company prior to the investment in properties. Expenses of the Company were
$34,058 for the six months ended June 30, 2000, and consisted primarily of
organizational expenses. Because the Company did not commence operations until
it received and accepted subscriptions from the escrow account, there is no
comparative financial data available from the prior fiscal year.
Net increase in cash and cash equivalents for the six months ended June 30,
2000 is the result of the sale of the Shares during the period.
No cash distributions were made to shareholders during the second quarter
of 2000.
As of June 30, 2000, the Company had not entered into any arrangements
creating a reasonable probability that a property would be acquired by the
Company. The number of properties to be acquired will depend upon the amount of
net offering proceeds and loan proceeds available to the Company.
Management expects that the cash to be generated from operations will be
adequate to pay operating expenses and to make distributions to the Company's
shareholders.
10
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Item 3. Qualitative and Quantitative Disclosure about Market Risks.
None.
11
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Part II
Other Information
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27: Financial Data Schedule.
(b) Current Report on Form 8-K, dated July 11, 2000, filed August 2, 2000,
reporting, under Item 4, the resignation of the Company's independent
accountant.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
DATE: August 21, 2000. T REIT, INC.
(Registrant)
By: /s/ Anthony W. Thompson
___________________________
Anthony W. Thompson
President and
Chief Executive Officer
By: /s/ Jack Maurer
___________________________
Jack Maurer
Secretary and Treasurer
Chief Accounting Officer
13
