As filed with the Securities and Exchange Commission on March 6, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) December 23, 1997
CAPITAL TRUST
(Exact Name of Registrant as Specified in its Charter)
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California 1-8063 94-6181186
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
605 Third Avenue, 26th Floor
New York, NY 10016
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(Address of principal executive offices) (Zip Code)
(212) 655-0220
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed since last report)
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ITEM 2. Acquisition or Disposition of Assets
Item 2 is hereby amended as follows:
On December 23, 1997, the Registrant purchased with existing cash a
$62.6 million mortgage loan obligation (the "Cortlandt Mortgage Loan") from
Credit Suisse First Boston Corporation ("CSFB") at a premium of approximately
102%. The Cortlandt Mortgage Loan is secured by a first mortgage on an
approximately 668,000 square foot office and retail property located at 22
Cortlandt Street in New York City (the "Cortlandt Property").
With the acquisition of the Cortlandt Mortgage Loan, the Registrant
acquired an outstanding loan of approximately $47.3 million, representing the
funded portion of the loan obligation, and assumed an obligation to make
additional advances of approximately $15.3 million, representing the unfunded
portion of the loan obligation, to fund reserves for interest, tenant
improvements, and leasing commissions.
The Cortlandt Mortgage Loan, which matures in January 2001, bears
interest at a fixed spread over LIBOR for its term. Prepayment of the Cortlandt
Mortgage Loan is permitted during the entire loan period. The Cortlandt Mortgage
Loan is subject to a prepayment penalty during the first eighteen months of the
loan and carries no prepayment premium or penalty for the final eighteen months
of the loan. A specified fee is due from the borrower to the Registrant upon the
satisfaction of the Cortlandt Mortgage Loan.
In assessing the Cortlandt Property underlying the Mezzanine Loan, the
Registrant considered several material factors, including, but not limited to
those described below.
With respect to sources of revenue, the Registrant considered the
Cortlandt Property's occupancy rate of 82.5% as compared to the overall
sub-market occupancy rate of approximately 91%; the Cortlandt Property's average
annual rental rate of approximately $17 per occupied square foot (including the
retail space) and an average annual rental rate of approximately $22 per
occupied square foot for office space as compared to competitive office rental
rates in the sub-market ranging from $22 to $26 per square foot, and the
principal businesses, occupations, and professions of the tenants operating at
the Cortlandt Property, including tenants such as Century 21, a retail tenant,
which occupies approximately 22% of the Cortlandt Property (with a lease
expiration beyond 50 years, a base rental rate which is below comparable base
rental rates in the marketplace, and no renewal options), the State of New York,
an office tenant, which occupies approximately 13% of the Cortlandt Property
(with leases expiring between 2000 and 2002, a base rental rate which compares
favorably to the marketplace, and no renewal options), and the Municipal Credit
Union, an office tenant, which occupies approximately 10% of the Cortlandt
Property (with a lease expiration date which is no earlier than 2014, a base
rental rate which compares favorably to the marketplace, and one five-year
extension option).
During the next four years, three leases representing approximately
48,000 square feet or approximately 7% of the Cortlandt Property will mature.
These leases represent approximately $1.4 million of gross revenue per annum or
approximately 17% of the 1998 estimated annual gross revenue of the Cortlandt
Property.
With respect to factors relating to expenses, the Registrant
considered: the utility rates at the Cortlandt Property for electricity, steam
and water and sewer which are comparable to utility rates for similar
properties; the taxes at the Cortlandt Property which were comparable to tax
rates for similar properties; maintenance and operating expenses which were in
line for similar properties which are operated and maintained in a professional
manner; and the recent expenditures for tenant improvement installations at the
Cortlandt Property.
After reasonable inquiry, the Registrant is not aware of any material
factors relating to the Cortlandt Property underlying the Loan that would cause
the reported financial information herein not to be indicative of future
operating results.
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ITEM 7. Financial Statements, Supplemental Financial
Information and Exhibits.
(a) Financial Statements of the Cortlandt Property
Audited financial statements of the owner of the Cortlandt
Property securing the Cortlandt Mortgage Loan reported in Item
2 herein and in the Registrant's Current Report on Form 8-K,
as filed with the Securities and Exchange Commission on
January 7, 1998, are included herein in accordance with the
instructions to Form 8-K as indicated in the following index
to the financial statements.
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Index to Financial Statements
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Independent Auditors' Report..................................................................... F1
Statement of Revenue and Certain Operating Expenses for the year ended
December 31, 1997........................................................................... F2
Notes to Financial Statements..................................................................... F3
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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.
CAPITAL TRUST
(Registrant)
Date: March 6, 1998 By: /s/ Edward L. Shugrue III
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Name: Edward L. Shugrue III
Title: Chief Financial Officer
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
To the Members of
ASC-CSFB II, LLC
I have audited the accompanying statement of revenue and certain operating
expenses (described in Note 2) of ASC- CSFB II, LLC (A Limited Liability
Company) for the year ended December 31, 1997. This financial statement is the
responsibility of the Limited Liability Company's management. My responsibility
is to express an opinion on the financial statement based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining on a test basis evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
The accompanying statement of revenue and certain operating expenses was
prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission and is not intended to be a complete
presentation of the Limited Liability Company's revenue and certain expenses.
In my opinion, the financial statement referred to above presents fairly, in all
material respects, the revenue and certain operating expenses of ASC-CSFB II,
LLC for the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
/s/ Herbert W. Brody
New York, NY
February 9, 1998
F-1
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ASC-CSFB II, LLC
Statement of Revenue and Certain Operating Expenses
For the Year Ended December 31, 1997
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REVENUES:
Base rents $ 6,350,700
Other revenue from tenants 986,100
Interest 59,500
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Total operating revenues 7,396,300
CERTAIN OPERATING EXPENSES:
Utilities 1,810,300
Operating 1,496,500
Wages and related expenses 555,600
Real estate taxes 1,333,100
Marketing 223,000
Management 211,900
Administrative 171,600
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Total certain operating expense 5,802,000
REVENUES IN EXCESS OF CERTAIN $ 1,594,300
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OPERATING EXPENSES
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The accompanying notes are in integral part of this statement.
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ASC-CSFB II, LLC
NOTES TO STATEMENT OF REVENUE AND CERTAIN OPERATING EXPENSES
For the Year Ended December 31, 1997
1. ORGANIZATION:
ASC-CSFB II, LLC, a Limited Liability Company, held title to an office
building located at 22 Cortlandt Street in New York City.
A breakdown of the occupied space as of December 31, 1997 is as
follows:
Retail 26%
Office 74%
2. BASIS OF PRESENTATION:
The accompanying statement of revenue and certain operating expenses
for the year ended December 31, 1997 excludes certain expenses such as
interest, ground rent, depreciation and amortization, and other costs
not directly related to the operations of the Limited Liability
Company, in accordance with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) The financial statement is presented on the accrual basis of
accounting.
(b) Rentals from tenants with scheduled rent increases and rent
abatements are recognized as revenue on a straight line basis
over the respective lease term.
4. REAL ESTATE TAXES:
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Real estate taxes consist of the following:
Second half of 1996-1997 real estate taxes $ 847,700
First half of 1997-1998 real estate taxes 816,600
Refund of prior year real estate tax ( 162,100)
Refund of current year real estate tax ( 97,700)
Charge to purchaser of building of a portion
of first half of 1997-1998 tax bill ( 71,400)
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$1,333,100
Real estate tax expense
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5. FUTURE MINIMUM RENTALS:
Future minimum rentals to be received under noncancellable leases are
as follows:
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Year ending December 31 -
1998 $ 6,284,000
1999 8,656,000
2000 8,725,000
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ASC-CSFB II, LLC
NOTES TO STATEMENT OF REVENUE AND CERTAIN OPERATING EXPENSES
For the Year Ended December 31, 1997
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2001 8,051,000
2002 5,921,000
Future years 100,421,000
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Total future minimum rentals $138,058,000
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One tenant in the building has future minimum lease payments in excess
of 42% of the total future minimum rentals. Management does not believe
this represents a credit risk.
6. SALE OF BUILDING:
On December 16, 1997 the Limited Liability Company sold the office
building to an unrelated third party. In connection with the sale
prorations of various income and expense items were calculated as of
December 14, 1997. These prorations are included in the accompanying
statement.
F-4
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