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 (Date of earliest event reported) December 22, 1993
HRE Properties
(Exact name of registrant as specified in its charter)
Massachusetts
(State or other jurisdiction of incorporation)
1-6309 04-2458402
(Commission File Number) (IRS Employer Identification No.)
321 Railroad Avenue, Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 203/863-8200
530 Fifth Avenue, New York, New York
(Former name or former address, if changed since last report)
ITEM 2 Acquisition or Disposition of Assets
On December 22, 1993, the Registrant purchased the Townline
Square Shopping Center ("Property") from The Aetna Life Insurance
Company ("Seller"). The purchase price was $25,000,000 exclusive
of the closing costs, fees and other expenses of approximately
$ 150,000.
The Property was acquired pursuant to a Purchase and Sale
Agreement dated December 22, 1993 by and between The Aetna Life
Insurance Company and the Registrant. There is no relationship
between any Trustee or Officer of the Registrant and Seller.
Registrant funded the purchase with cash of $10,000,000
including $5,000,000 borrowed under one of the Registrant's bank
lines of credit, and through a first mortgage loan of $15,000,000
from the Seller. The mortgage note bears interest at 7.5% per
annum, payable in monthly installments of interest only until
November 1, 1995 and thereafter in monthly installments of
principal and interest of $120,840. The scheduled maturity date is
December 22, 1998, at which time the entire outstanding unpaid
principal balance is due.
Material Factors Considered By the Registrant:
Market and Competition:
Prior to acquiring the Property the Registrant considered
general regional and local economic conditions and the Property's
competitive posture within these markets.
The Property acquired is located in New Haven County,
Connecticut, contains 295,915 square feet of rentable space and is
situated on 29.2 acres of land. The Property contains
approximately 20 tenants whose principal businesses are the sale of
various retail products and merchandise.
The Property was developed in 1989 and is located in a densely
populated area on Route 5 in the town of Meriden, County of New
Haven, Connecticut. Meriden is a white-collar, bedroom community
with a population of approximately 101,000. The primary
competitive market, includes the towns of Meriden and Wallingford,
Connecticut. There are two competing shopping centers within a
two-mile radius of the Property and eight shopping centers within
a three-mile radius. There is a vacancy rate in the direct
competing area of approximately 15% of leasable area.
Tenants:
Tenants comprising more than 10% of the rentable square footage
of the Property are: Bradlee's, a national chain of discount
department stores, occupying 85,900 square feet of rentable
space; The Wiz, a regional chain of electronic and audio
equipment stores, occupying 50,000 square feet of rentable space
and; ShopRite, a regional supermarket chain, occupying 45,000
square feet of rentable space. The Property is currently 95%
occupied.
All of the leases with tenants are for terms longer than one year
and generally provide for additional rental amounts based on each
tenant's share of the cost of maintaining common areas and
certain operating expenses, including insurance, of the property.
The average effective annual rental rate per square foot at the
date of acquisition was $9.21.
The following is a schedule of lease expirations of the Property
by year:
<TABLE>
<S> <C> <C> <C> <C>
Number of
Tenants Minimum
whose leases Total Square Annual Per-
Year Expire Footage Rentals Centage
1994 2 2,580 $ 53,760 2.0%
1995 3 9,885 176,955 6.5
1996 1 2,700 43,200 1.6
1997 1 2,842 30,012 1.1
1998 1 3,889 35,000 1.3
1999 3 22,560 303,765 11.1
2000 1 9,000 135,000 5.0
2001 - -- -- --
2002 1 2,543 18,894 0.7
2003 2 3,115 31,464 1.1
Thereafter 5 222,020 1,896,486 69.6
281,134 $2,724,536 100.0
Vacant 14,781
295,915
</TABLE>
Building and Capital Improvements:
The federal tax basis of the Property (including land) is
$25,000,000. The building component will be depreciated over its
estimated useful life (40.0 years) on a straight line basis. The
Registrant anticipates spending an additional $200,000 in the
next twelve months for tenant improvements, leasing costs and
property improvements.
Property Taxes:
The estimated annual realty taxes of the Property are $350,000.
Property Management:
The Registrant expects to manage the Property directly.
After reasonable inquiry, the Registrant is not aware of any
material factors relating to the Property, other than those set
forth above, that would cause the reported financial information
not to be necessarily indicative of future operating results.
Item 7 Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements
(b) Pro Forma Financial Information
(c) Exhibits
Purchase and Sale Agreement between Registrant and The
Aetna Life Insurance Company, dated December 22, 1993,
is hereby incorporated by reference from the Registrant's
Form 10-K dated January 26, 1995.
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.
HRE PROPERTIES
(Registrant)
Date August 11, 1995
By \s\ Charles J. Urstadt
Charles J. Urstadt
President and Chief
Executive Officer
TOWNLINE SQUARE SHOPPING CENTER
HRE PROPERTIES
TABLE OF CONTENTS
Item 7 Financial Statements, Pro Forma Financial Information
(a) Financial Statements Page
Independent Auditors' Report .....................................6
Statement of Revenue and Certain Expenses of Townline Square
Shopping Center For the Year Ended December 31, 1993.............7
Note to Statement of Revenues and Certain Expenses of
Townline Square Shopping Center
For the Year Ended December 31, 1993...........................8
Pro Forma Estimate of Taxable Income and Funds
Generated From Townline Square Shopping Center
For the Year Ended December 31, 1993 (Unaudited).............9
Notes and Management's Assumptions to Pro Forma
Estimate of Taxable Income and Funds Generated
From Townline Square Shopping Center
For the Year Ended December 31, 1993 (Unaudited)...........10
(b) Pro Forma Financial Information
Pro Forma Consolidated Balance Sheet
as of October 31, 1993 (Unaudited)............................12
Pro Forma Consolidated Statement of Income
For the Year Ended October 31, 1993 (Unaudited)...............13
Notes and Management's Assumptions to Pro Forma
Consolidated Financial Statements
For the Year Ended October 31, 1993 (Unaudited)..............14
Pro Forma Consolidated Statement of Income
For the Three Months Ended January 31, 1994 (Unaudited).......16
Notes and Management's Assumptions to Pro Forma
Consolidated Statement of Income
For the Three Months Ended January 31, 1994 (Unaudited)......17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of HRE Properties:
We have audited the accompanying statement of revenues and certain
expenses of Townline Square Shopping Center ("Townline Square") for
the year ended December 31, 1993. This financial statement is the
responsibility of Townline Square's management. Our responsibility
is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we 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. We believe that our audit
provides a reasonable basis for our opinion.
As described in Note 1, the accompanying statement of revenues and
certain expenses was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission and
is not intended to be a complete presentation of Townline Square's
revenues and expenses.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses
of Townline Square for the year ended December 31, 1993, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
July 19, 1995
TOWNLINE SQUARE SHOPPING CENTER
STATEMENT OF REVENUES AND CERTAIN EXPENSES (Note 1)
FOR THE YEAR ENDED DECEMBER 31, 1993
REVENUES:
Rental income $ 3,453,809
CERTAIN EXPENSES:
Real estate taxes 301,840
Repairs and maintenance 178,152
Property management and administration 185,591
Insurance 31,467
Utilities 87,638
Total Certain Expenses 784,688
REVENUES IN EXCESS OF CERTAIN EXPENSES $ 2,669,121
The accompanying note is an integral part of this statement.
TOWNLINE SQUARE SHOPPING CENTER
NOTE TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1993
1. BASIS OF PRESENTATION:
The accompanying statement of revenues and certain expenses (the
"financial statement") reflects the operations of Townline Square
Shopping Center (the "Property"), a 295,915 square foot retail
property located in Meriden, Connecticut. The Property was
acquired by HRE Properties (the "Trust") from an unaffiliated party
on December 22, 1993.
The accompanying financial statement was prepared in accordance
with certain rules and regulations of the Securities and Exchange
Commission and excludes certain expenses such as interest,
depreciation and amortization, and other costs not directly related
to the future operations of the Property. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted pursuant to those rules and
regulations, although the Trust believes that the disclosures made
are adequate to make the information presented not misleading.
PRO FORMA ESTIMATE OF TAXABLE
INCOME AND FUNDS GENERATED
FROM THE TOWNLINE SQUARE SHOPPING CENTER
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
The following presents unaudited proforma estimates of taxable income and
funds generated from the Townline Square Shopping Center for the year ended
December 31, 1993. These estimates do not purport to represent actual or
expected results of operations of the shopping center for any period in the
future. The estimates were prepared on the basis described in the
accompanying notes, which should be read in conjunction herewith.
REVENUES:
Rental income $ 3,453,809
CERTAIN EXPENSES:
Real estate taxes 301,840
Repairs and maintenance 178,152
Property management and administration 185,591
Insurance 31,467
Utilities 87,638
Total Certain Expenses 784,688
REVENUES IN EXCESS OF CERTAIN EXPENSES 2,669,121
Pro Forma Adjustments:
Less:
Depreciation 500,000
Mortgage interest 1,125,000
Line of Credit Interest 350,000
1,975,000
Pro Forma Estimate of Taxable Income 694,121
Add:
Depreciation 500,000
Pro Forma Estimate of Funds Generated $1,194,121
The accompanying notes and management's assumptions are an integral part of
this statement.
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA ESTIMATE OF TAXABLE INCOME AND
FUNDS GENERATED FROM THE
TOWNLINE SQUARE SHOPPING CENTER
FOR THE YEAR ENDED DECEMBER 31, 1993 (UNAUDITED)
1. The historical operating income of Townline Square Shopping
Center ("the Property") is derived from the Statement of Revenues
and Certain Expenses of Townline Square Shopping Center for the
year ended December 31, 1993 contained elsewhere in this filing.
The Property was purchased by the Registrant on December 22, 1993.
2. The computation of depreciation is based upon the cost of the
Property's building and improvements ($20,000,000) depreciated on
a straight-line basis over a 40-year useful life.
3. Mortgage interest is applicable to the mortgage note payable
of $15,000,000 computed at 7.5% per annum as if the mortgage loan
had been outstanding for the entire period. The mortgage loan is
payable with interest only for two years and thereafter in monthly
installments of principal and interest of $120,840. The
outstanding unpaid principal balance is due on December 31, 1998.
4. Line of credit interest is applicable to short-term borrowings
of $5,000,000. Interest is computed at prime +1% (weighted average
interest of 7% during the period). The short-term borrowings were
used to supplement the financing of the acquisition of the
Property.
5. The Registrant qualifies as a real estate investment trust
(REIT) under the Internal Revenue Code. Accordingly, the
Registrant will not be subject to federal income tax so long as it
continues to qualify as a real estate investment trust and
distributes substantially all of its federal taxable income.
Item 7(b) PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet as of October
31, 1993, and the Pro Forma Consolidated Statement of Income for
the year ended October 31, 1993, and three months ended January 31,
1994 have been prepared to reflect the acquisition transaction and
the adjustments described in the accompanying notes. The pro forma
financial information is based on the historical financial
statements of HRE Properties and should be read in conjunction with
the notes and management's assumptions thereto. The Pro Forma
Consolidated Balance Sheet was prepared as if the acquisition
transaction occurred on October 31, 1993. The pro forma
consolidated statements of income for the year ended October 31,
1993 and for the three months ended January 31, 1994 were prepared
assuming the transaction occurred on the first day of the period
presented. The pro forma financial information is unaudited and
not necessarily indicative of the consolidated results which
actually would have occurred if the acquisition transaction had
been consummated at the beginning of the period presented, nor does
it purport to represent the future financial position and results
of operations for future periods.
HRE PROPERTIES
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In thousands, except share data)
<TABLE>
<S> <C> <C> <C>
October 31, 1993
ASSETS HRE Pro forma HRE
Historical Adjustments Pro forma
Real Estate Investments:
Properties owned at cost, net of accumulated
depreciation and recoveries $ 99,279 $ 25,150 (a) $124,429
Investment in unconsolidated joint venture 250 250
Mortgage notes receivable 8,917 8,917
108,446 133,596
Cash and cash equivalents 7,061 (5,150) (b) 1,911
Interest and rent receivable 1,304 1,304
Deferred charges, net of accumulated amortization 1,796 1,796
Other assets 723 723
$ 119,330 $139,330
LIABILITIES AND SHAREHOLDERS EQUITY
Liabilities:
Bank loan $ $ 5,000 (a) $ 5,000
Mortgage notes payable 24,227 15,000 (a) 39,227
Accounts payable and accrued expenses 847 847
Deferred trustees fees 602 602
Other liabilities 958 958
26,634 46,634
Shareholders Equity:
Preferred shares
Common shares 123,205 123,205
Less common shares held in treasury, at cost (2,861) (2,861)
Distributions in excess of accumulated net income (27,648) (27,648)
92,696 92,696
$ 119,330 $ 139,330
The accompanying notes and management's assumptions are an integral part of this statement.
</TABLE>
HRE PROPERTIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<S> <C> <C> <C>
Year Ended October 31, 1993
HRE Pro forma HRE
Historical Adjustments Pro forma
Revenues:
Operating leases $13,763 $ 3,454 (a) $17,217
Financing leases 1,520 1,520
Interest 1,122 (138) (d) 984
Interest from and equity in losses
of unconsolidated joint venture ( 243) ( 243
16,162 19,478
Operating Expenses:
Property expenses 6,311 785 (a) 7,096
Interest 2,494 1,475 (b) 3,969
Depreciation and amortization 4,363 500 (c) 4,863
General and administrative expenses 1,723 1,723
Trustees fees and expenses 294 294
Write-down in carrying value of investments 8,285 8,285
23,470 26,230
Operating Loss Before Minority Interests (7,308) (6,752)
Minority Interests in Results of Consolidated
Joint Venture 15 15
Operating Loss (7,293) (6,737)
Gain on Sale of Properties 2,330 2,330
Net Loss $(4,963) $(4,407)
Net Loss Per Common Share:
Operating Loss $(1.38) $(1.27
Gain on sale of properties .44 .44
Net Loss $(.94) $(.83
Weighted Average Number of Common Shares Outstanding 5,296 5,296
The accompanying notes and management's assumptions are an integral part of this statement.
</TABLE>
HRE PROPERTIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 1993 (UNAUDITED)
1. BASIS OF PRESENTATION:
HRE Properties ("the Trust") acquired Townline Square Shopping Center
("the Property"), a 295,915 square foot retail property located in
Meriden, Connecticut, for a total cost of $25,150,000, which included
closing and other costs of approximately $150,000. The Trust
acquired the Property subject to a $15,000,000 first mortgage loan
obtained from the seller of the property.
The accompanying unaudited pro forma consolidated balance sheet is
presented as if the acquisition transaction occurred on October 31,
1993.
The accompanying unaudited pro forma consolidated statement of income
is presented as if the acquisition transaction had been made as of
November 1, 1992.
These pro forma financial statements should be read in conjunction
with the historical financial statements and notes thereto of the
Trust as of October 31, 1993. In management's opinion, all material
adjustments necessary to reflect the effects of the acquisition of
the Property by the Trust have been made.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of the actual financial position of the Trust
as of October 31, 1993, or what the actual results of operations of
the Trust would have been assuming the acquisition of the Property
had been completed as of November 1, 1992, nor are they necessarily
indicative of the results of operations for future periods.
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED BALANCE SHEET:
(a) To reflect the pro forma acquisition of the Property for
approximately $25,150,000, the related $15,000,000 mortgage note
payable and $5,000,000 of short-term borrowings as if the Property
was purchased on October 31, 1993.
(b) To reflect pro forma cash and cash equivalents as if the cash
investment in the Property had been made as of October 31, 1993.
HRE PROPERTIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 1993 (UNAUDITED)
(CONTINUED)
3. ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) To reflect rental income and operating expenses as reported by
the Property for the period November 1, 1992 to October 31, 1993.
(b) To reflect interest expense of: i) $1,125,000 related to the
$15,000,000 mortgage note payable at 7.5% per annum for the
acquisition of the Property as if the mortgage note has been
outstanding for the entire period, and ii) $350,000 related to
short-term borrowings of $5,000,000 with interest at prime +1%,
(weighted average interest rate during the period was 7%). The
short-term borrowings were drawn from one of the Trust's bank lines
of credit for the acquisition of the Property and such borrowings are
assumed to be outstanding for the entire period.
(c) To reflect depreciation expense for the Property's building and
improvements computed on a straight-line basis over a 40-year useful
life using a cost basis of $20,000,000 as if the Property was
purchased on November 1, 1992.
(d) To reflect a reduction in interest income as if the cash
investment ($5,150,000) had been made at the beginning of the period,
using an interest rate of 2.676% which was HRE's actual yield for the
fiscal year ended October 31, 1993.
HRE PROPERTIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<S> <C> <C> <C>
Three Months Ended January 31, 1994
Pro forma
Historical Adjustments Pro forma
Revenues:
Operating leases $3,740 $ 529 (a) $ 4,269
Financing leases 360 360
Interest 262 (20) (d) 242
4,362 4,871
Operating Expenses:
Property expenses 1,702 118 (a) 1,820
Interest 754 203 (b) 957
Depreciation and amortization 927 71 (c) 998
General and administrative expenses 397 397
Trustees fees and expenses 36 36
3,816 4,208
Net Income $ 546 $ 663
Net Income Per Common Share:
Net Income $ .10 $.12
Weighted Average Number of Common Shares Outstanding 5,320 5,320
The accompanying note is an integral part of this statement.
HRE PROPERTIES
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED
JANUARY 31, 1994
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited pro forma consolidated statement of income
is presented as if the Trust's acquisition of Townline Square
Shopping Center had been made as of November 1, 1992.
The pro forma financial statement should be read in conjunction with
the historical financial statements and notes thereto of the
Registrant as of January 31, 1994. In management's opinion, all
material adjustments necessary to reflect the effects of the
acquisition of the Property by the Registrant have been made.
The unaudited pro forma financial statement is not necessarily
indicative of what the actual results of operations of the Registrant
would have been assuming the acquisition of the Property had been
completed as of November 1, 1992, nor are they necessarily indicative
of the results of operations for future periods.
The unaudited pro forma consolidated balance sheet as of January 31,
1994 is not presented herein as such balance sheet has been filed as
part of the Registrant's Form 10-Q report for the three month period
ended January 31, 1994 and is hereby incorporated by reference.
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(a) To reflect rental income and operating expenses as reported by
the Property as if the Trust owned the Property for the entire period
November 1, 1993 to January 31, 1994.
(b) To reflect an increase in interest expense of: i) $153,000
related to the $15,000,000 mortgage note payable at 7.5% and ii)
$50,000 related to short-term borrowings of $5,000,000 at prime +1%
as if such mortgage note and short-term borrowings have been
outstanding for the entire period.
(c) To reflect an increase in depreciation expense for the
Property's building and improvements computed on a straight-line
basis over a 40-year life using a cost basis of $20,000,000 as if the
Property had been owned for the entire period.
(d) To reflect pro forma adjustments to interest income as if the
cash investment ($5,150,000) had been made prior to this period,
using an interest rate of 2.8%, which was the Registrant's actual
yield for the three month period ended January 31, 1994.
</TABLE>
