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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
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Date of Report JUNE 12,1996
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FIRST UNION REAL ESTATE EQUITY AND MORTGAGE INVESTMENTS
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(Exact name of registrant as specified in its charter)
OHIO 1-6249 34-6513657
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of organization) Identification No.)
Suite 1900, 55 Public Square
Cleveland, Ohio 44113-1937
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 781-4030
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Former name or former address, if changed since last report.
Total number of pages in report 4.
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ITEM 5. OTHER EVENTS
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(a) On June 12, 1996 First Union signed a Purchase and Sale Agreement
("Agreement") with Marathon U.S. Realties, Inc. (the "Seller") for the purchase
by First Union of a portfolio of nine (9) retail shopping malls, comprising
approximately 5,800,000 square feet of gross leasable area, located in
secondary markets in the states of Louisiana, Arkansas, Texas, Oklahoma and New
Mexico. The purchase price for the nine malls is three hundred sixteen million
dollars ($316,000,000) which includes assumption of fifty million dollars
($50,000,000) in existing mortgage debt. Seven (7) of the mall properties will
be acquired in fee, and two (2) will be acquired through the purchase of the
Seller's partnership interest in partnerships owning the malls. In one of the
partnerships, the acquired interest will be ninety percent (90%) and in the
other fifty percent (50%). In connection with the purchase of the 90%
partnership interest, the Agreement provides that if Seller is able to acquire
the remaining 10% interest from its partner prior to closing, the entire 100%
interest will be conveyed to First Union and the purchase price will be
increased by three million one hundred seventy-six thousand dollars
($3,176,000). Although the Seller has not yet closed on the
acquisition of the 10% interest from its partner, it is expected to do so prior
to closing with First Union. First Union will also acquire all personal
property relating to the operation of the malls.
First Union Management, Inc., First Union's property management
affiliate, will hire the employees of the Seller or its property management
affiliate for the operation of the mall portfolio, upon similar terms of
compensation as they now enjoy. First Union Management, Inc. will also assume
the lease obligation for the Seller's home office in Dallas, Texas and intends
to operate it as a regional office.
Upon execution of the Agreement, First Union deposited earnest money of
three million one hundred sixty thousand dollars ($3,160,000) with an escrow
agent. The purchase is subject to a sixty (60) day due diligence inspection
period, during which time the earnest money deposit is fully refundable. The due
diligence inspection period entitles First Union to fully inspect all aspects of
the proposed investment including the physical characteristics of the
properties, to perform such engineering and environmental studies as it deems
necessary, to review and evaluate all financial documentation relating to
operation of the malls and to be satisfied with all legal matters pertaining to
the transaction and ownership of the malls. First Union may terminate the
contract during the inspection period for any reason whatsoever resulting from
its due diligence inspection.
The transaction is also subject to the Seller obtaining approval of
certain lenders who hold mortgage interests in two of the properties and
approval of the partners holding partnership interests in two of the malls.
During the inspection period the Seller is required to conduct its
business as usual and First Union has approval rights with respect to certain
leasing and other contractual undertakings made by the Seller which would
survive the closing. The Agreement contains standard representations and
warranties from the Seller relating to the condition and title to the properties
and relating to operation of the properties. The representations and warranties
survive the closing for a period of eighteen (18) months and the obligations
with respect to the representations and warranties are guaranteed by an
affiliate company of the Seller.
During the inspection period First Union may also terminate the
Agreement in the event of certain kinds of damage or destruction to the
properties, or condemnation of the properties. The Agreement contains typical
default provisions relating to non-performance of obligations of either party.
In the event of default by First Union, the sole remedy for the Seller would be
retention of the earnest money deposit. In the event of default by the Seller
prior to closing, First Union would be entitled to specific performance of the
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contract or damages up to seven hundred fifty thousand dollars ($750,000).
During the inspection period the Seller is not permitted to offer the properties
for sale or to discuss the proposed sale of the properties with any other party.
The transaction is scheduled to close within fifteen days after the end
of the inspection period. The inspection period may be extended under certain
circumstances in connection with delay of the Seller in providing certain
documentation to First Union, or for an additional thirty days (30) at First
Union's election at the end of the initial sixty days, upon the condition that
one million dollars ($1,000,000) of the earnest money deposit become
non-refundable.
Although there can be no assurance that a joint venture agreement will
be consummated or that a suitable joint venture partner will be found, First
Union intends to acquire the properties through a joint venture with a joint
venture partner. It is anticipated that First Union's equity investment in the
joint venture would be approximately thirty million dollars ($30,000,000) and
that the joint venture partner's equity investment would be approximately
seventy five to eighty million dollars ($75,000,000-$80,000,000). The remaining
funds necessary for acquisition of the properties is anticipated to be obtained
through mortgage financing provided by the joint venture partner or some third
party. First Union expects that the joint venture agreement will provide that
the properties be managed by First Union Management, Inc. Also, First Union
expects that it will be a minority partner in the joint venture but will have
approval rights with respect to all material operating issues relating to the
properties including capital expenditures, major leases, development, and
disposition of the properties. Finally, it is anticipated that the joint venture
agreement will provide a mechanism through which First Union may be able to
acquire the interests of its joint venture partner at some time in the future.
(b) Exhibit
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(99) Other Documents
(a) Press Release
SIGNATURES
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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.
First Union Real Estate Equity
and Mortgage Investments
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(Registrant)
Date: June 27, 1996 By: /s/ Paul F. Levin
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Paul F. Levin
Vice President, Secretary
and General Counsel
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EXHIBIT
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FIRST UNION REAL ESTATE INVESTMENTS
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AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD, INC.
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Thomas T. Kmiecik John Parsons or Bill Murphy
(216) 781-4030 (312) 266-7800
IN CLEVELAND, OHIO
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Peter H. Bryan
Edward Howard & Co.
(216) 781-2400
FOR IMMEDIATE RELEASE
JUNE 13, 1996
FIRST UNION REAL ESTATE INVESTMENTS
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ANNOUNCES PROPOSED ACQUISITION OF MARATHON U.S. REALTIES
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RETAIL PORTFOLIO FOR $316 MILLION
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CLEVELAND, OHIO, JUNE 13, 1996 -- FIRST UNION REAL ESTATE INVESTMENTS
(NYSE:FUR), announced today the signing of a contract with Marathon U.S.
Realties, Inc. to acquire a portfolio of nine regional malls, totalling 6
million square feet for a gross purchase price of $316 million. Under the terms
of the agreement, First Union's proposed acquisition is contingent upon
completion and acceptance of due diligence during the next 60 days. First Union
anticipates its equity investment will not exceed $50 million and intends to
acquire the properties with a joint venture partner.
The properties are located in the southwestern United States, and currently are
generating average in-line store sales of approximately $250 per square foot and
are 94% occupied. Anchor tenants include Dillards, JC Penney, Sears, Wal-Mart,
Mervyn's, McRaes, and Foley's. First Union Management, Inc., the property
management affiliate of First Union Real Estate Investments, will manage the
properties. If completed, the acquisition will bring First Union's retail
portfolio of managed properties to 13 million square feet.
James C. Mastandrea, Chairman and Chief Executive Officer, commented on the
pending transaction, "This proposed acquisition is consistent with our Strategic
Business Plan to reposition and grow our portfolio to maximize total return to
shareholders." Mr. Mastandrea commented further, "This acquisition typifies
positive spread investing and will be accretive to funds from operations. It is
further enhanced by the restructuring and repositioning changes made at First
Union during the past two years."
First Union Real Estate Investments (NYSE:FUR) is an equity real estate
investment trust (REIT) specializing in repositioning real estate to extract
intrinsic value, primarily in retail and apartment properties in specific market
concentrations.
