SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
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) January 6, 1995
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.)
530 Fifth Avenue, New York, New York 10036
(Address of principal executive office)
Registrant's telephone number, including area code 212/642-4800
Not Applicable
(Former name or former address, if changed since last report)
ITEM 2 Acquisition or Disposition of Assets
On January 6, 1995, the Registrant purchased the Danbury
Square Mall Shopping Center ("Property") from The Aetna Life
Insurance Company ("Seller"). The purchase price was $19,250,000
exclusive of the closing costs, fees and other expenses of
approximately $220,000.
The Property was acquired pursuant to a Purchase and Sale
Agreement dated January 6, 1995 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 $8,000,000 and
through a first mortgage loan of $11,250,000 from the Seller. The
mortgage note bears interest at 9.5% per annum, payable in monthly
installments of interest only. The scheduled maturity date is
February 1, 2000, at which time the entire outstanding principal 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 that market.
The Property acquired is located in Fairfield County,
Connecticut, contains 192,599 square feet of rentable space and is
situated on 19.3 acres of land. The shopping center contains
approximately 23 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 Kenosia Avenue in the town of Danbury, Fairfield
County, Connecticut. Danbury is a white-collar, bedroom community
with a population of 65,000 and median household income of $71,866.
The competitive market totals in excess of 5.3 million square feet,
and has a 98% occupancy rate. The primary competitive market,
which includes the cities of Danbury and Brookfield, totals nearly
2.5 million square feet and has a 2% vacancy rate.
A significant factor of the Property is its close proximity to
the Danbury Fair Mall("Mall"). The Mall contains 1.3 million
square feet and is anchored by several national tenants. The Mall
attracts high volume customer traffic flow which benefits the
Property and its tenants. Danbury Square is connected to the Mall
through the sharing of a ring road for access.
Tenants:
Tenants comprising more than 10% of the rentable square footage
of the Property are: Toys'R Us, a national chain of children's
toy stores, occupying 65,700 square feet of rentable space and
Bed, Bath and Beyond, a national chain of home furnishings
stores, occupying 19,719 square feet of rentable space. The
Property is currently 94% 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 is
$11.35.
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
1995 0 -- -- --
1996 2 3,800 $ 91,850 4.5%
1997 1 1,508 27,144 1.3
1998 1 1,931 34,758 1.7
1999 4 12,145 306,882 14.9
2000 2 16,961 247,376 12.0
2001 5 27,544 465,483 22.6
2002 4 16,794 251,402 12.2
2004 2 21,663 368,271 17.8
Thereafter 2 79,440 269,579 13.0
181,786 $2,062,745 100.0
Vacant 10,813
192,599
</TABLE>
Building and Capital Improvements:
The federal tax basis of the Property (including land) is
$19,250,000. The Property will be depreciated over its estimated
useful life (40.0 years) on a straight line basis. The
Registrant anticipates spending an additional $700,000 in the
next twelve months for tenant improvements, leasing costs and
property improvements.
Property Taxes:
The estimated annual realty taxes of the Property are $173,000.
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
Second Purchase and Sale Agreement between Registrant and
The Aetna Life Insurance Company is hereby incorporated
by reference from the Registrant's Form 8-K dated January
6, 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 May 18, 1995
By /s/ Charles J. Urstadt
Charles J. Urstadt
President and Chief
Executive Officer
DANBURY SQUARE SHOPPING CENTER
HRE PROPERTIES
TABLE OF CONTENTS
Item 7 Financial Statements, Pro Forma Financial Information
(a) Financial Statements Page
Independent Public Accountants Report ............................6
Statement of Revenue and Certain Expenses of Danbury Square
Shopping Center For the Year Ended December 31, 1994.............7
Note to Statement of Revenues and Certain Expenses of
Danbury Square Shopping Center
For the Year Ended December 31, 1994...........................8
Pro Forma Estimate of Taxable Income and Funds
Generated From Danbury Square Shopping Center
For the Year Ended December 31, 1994 (Unaudited).............9
Notes and Management's Assumptions to Pro Forma
Estimate of Taxable Income and Funds Generated
From Danbury Square Shopping Center
For the Year Ended December 31, 1994 (Unaudited)...........10
Statement of Revenues and Certain
Expenses of Danbury Square Shopping Center
For the Three Months Ended January 31, 1995 (Unaudited).....11
Note to Statement of Revenues and Certain
Expenses of Danbury Square Shopping Center
For the Three Months Ended January 31, 1995 (Unaudited)......12
(b) Pro Forma Financial Information
Pro Forma Consolidated Balance Sheet
as of October 31, 1994 (Unaudited)............................14
Pro Forma Consolidated Statement of Income
For the Year Ended October 31, 1994 (Unaudited)...............15
Notes and Management's Assumptions to Pro Forma
Consolidated Financial Statements
For the Year Ended October 31, 1994 (Unaudited)..............16
Pro Forma Consolidated Statement of Income
For the Three Months Ended January 31, 1995 (Unaudited).......18
Notes and Management's Assumptions to Pro Forma
Consolidated Statement of Income
For the Three Months Ended January 31, 1995 (Unaudited)......19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of HRE Properties:
We have audited the accompanying statement of revenues and certain
expenses of Danbury Square Shopping Center ("Danbury Square") for
the year ended December 31, 1994. This financial statement is the
responsibility of Danbury 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 Danbury 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 Danbury Square for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
March 15 , 1995
DANBURY SQUARE SHOPPING CENTER
STATEMENT OF REVENUES AND CERTAIN EXPENSES (Note 1)
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<S> <C>
REVENUES:
Rental income $ 2,303,879
CERTAIN EXPENSES:
Real estate taxes 265,072
Repairs and maintenance 152,089
Property management and administration 97,454
Insurance 18,316
Utilities 38,756
Total Certain Expenses 571,687
REVENUES IN EXCESS OF CERTAIN EXPENSES $ 1,732,192
The accompanying note is an integral part of this statement.
</TABLE>
DANBURY SQUARE SHOPPING CENTER
NOTE TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1994
1. BASIS OF PRESENTATION:
The accompanying statement of revenues and certain expenses (the
"financial statement") reflects the operations of Danbury Square
Shopping Center (the "Property"), a 192,599 square foot retail
property located in Danbury, Connecticut. The Property was
acquired by HRE Properties (the "Trust") from an unaffiliated party
on January 6, 1995.
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 DANBURY SQUARE SHOPPING CENTER
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
The following presents unaudited estimates of taxable income for the year
ended December 31, 1994. 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.
<TABLE>
<S> <C>
REVENUES:
Rental income $ 2,303,879
CERTAIN EXPENSES:
Real estate taxes 265,072
Repairs and maintenance 152,089
Property management and administration 97,454
Insurance 18,316
Utilities 38,756
Total Certain Expenses 571,687
REVENUES IN EXCESS OF CERTAIN EXPENSES 1,732,192
Pro Forma Adjustments:
Less:
Depreciation 387,500
Mortgage interest 1,068,750
1,456,250
Pro Forma Estimate of Taxable Income 275,942
Add:
Depreciation 387,500
Pro Forma Estimate of Funds Generated $ 663,442
The accompanying note is an integral part of this statement.
</TABLE>
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PROFORMA ESTIMATE OF TAXABLE INCOME AND
FUNDS GENERATED FROM THE
DANBURY SQUARE SHOPPING CENTER
FOR THE YEAR ENDED DECEMBER 31, 1994 (UNAUDITED)
1. The historical operating income of Danbury Square Shopping
Center "the Property" is derived from the Statement of Revenues and
Certain Expenses of Danbury Square Shopping Center for the year
ended December 31, 1994 contained elsewhere in this filing. The
Property was purchased by the Registrant on January 6, 1995.
2. The computation of depreciation is based upon the cost of the
Property's building and improvements ($15,500,000) over a 40-year
useful life.
3. Mortgage interest is applicable to the mortgage note payable
of $11,250,000 computed at 9.5% per annum as if the mortgage loan
had been outstanding for the entire period. The mortgage loan is
payable with interest only for five years. The outstanding
principal is due at maturity.
4. 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.
DANBURY SQUARE SHOPPING CENTER
STATEMENT OF REVENUES AND CERTAIN EXPENSES (Note 1)
FOR THE THREE MONTHS ENDED JANUARY 31, 1995
(UNAUDITED)
<TABLE>
<S> <C>
REVENUES:
Rental income $ 591,834
CERTAIN EXPENSES:
Real estate taxes 60,456
Repairs and maintenance 15,064
Property management and administration 15,550
Insurance 4,579
Utilities 6,482
Total Certain Expenses 102,131
REVENUES IN EXCESS OF CERTAIN EXPENSES $ 489,703
The accompanying note is an integral part of this statement.
</TABLE>
DANBURY SQUARE SHOPPING CENTER
NOTE TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE THREE MONTHS ENDED
JANUARY 31, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited statement of revenues and certain
expenses (the "financial statement") reflects the operations of
Danbury Square Shopping Center (the "Property"), a 192,599 square
foot retail property located in Danbury Connecticut. The Property
was acquired by HRE Properties (the "Trust") from an unaffiliated
party on January 6, 1995.
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. The
financial statement is not necessarily indicative of the results of
operations for future periods.
The unaudited consolidated balance sheet at January 31, 1995 is not
presented herein as such balance sheet has been filed as part of
the Trust's Form 10-Q report for the three month period ended
January 31, 1995 and is hereby incorporated by reference.
Item 7(b) PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet as of October
31, 1994, and the Pro Forma Consolidated Statement of Income for
the year ended October 31, 1994, and three months ended January 31,
1995 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, 1994. The pro forma
consolidated statements of income for the year ended October 31,
1994 and for the three months ended January 31, 1995 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, 1994
HRE Pro forma HRE
Historical Adjustments Pro forma
Real Estate Investments:
Properties owned at cost, net of accumulated
depreciation and recoveries $ 120,631 $ 19,470 (a) $140,101
Mortgage notes receivable 7,763 7,763
128,394 147,864
Cash and cash equivalents 8,738 (8,220) (b) 518
Interest and rent receivable 2,343 2,343
Deferred charges, net of accumulated amortization 2,108 2,108
Other assets 976 976
$ 142,559 $153,809
LIABILITIES AND SHAREHOLDERS EQUITY
Liabilities:
Mortgage notes payable and bank loan $ 51,386 $ 11,250 (a) $ 62,636
Accounts payable and accrued expenses 1,024 1,024
Deferred trustees fees 521 521
Other liabilities 1,147 1,147
54,078 65,328
Shareholders Equity:
Preferred shares
Common shares 123,507 123,507
Less common shares held in treasury, at cost (2,861) (2,861)
Distributions in excess of accumulated net income (32,165) (32,165)
88,481 88,481
$142,559 $ 153,809
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>
Year Ended October 31, 1994
HRE Pro forma HRE
Historical Adjustments Pro forma
Revenues:
Operating leases $16,498 $ 2,347 (a) $ 18,845
Financing leases 1,392 1,392
Interest 1,079 (285) (d) 794
18,969 21,031
Operating Expenses:
Property expenses 7,185 578 (a) 7,763
Interest 3,775 1,069 (b) 4,844
Depreciation and amortization 4,075 388 (c) 4,463
General and administrative expenses 1,423 1,423
Trustees fees and expenses 163 163
Write-down in carrying value of investments 1,086 1,086
17,707 19,742
Operating Income 1,262 1,289
Gain on Sale of Properties 82 82
Net Income $ 1,344 $1,371
Net Income Per Common Share:
Operating Income $ .24 $.24
Gain on sale of properties .02 .02
Net Income $ .26 $.26
Weighted Average Number of Common Shares Outstanding 5,330 5,330
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
HRE PROPERTIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 1994 (UNAUDITED)
1. BASIS OF PRESENTATION:
HRE Properties ("the Trust") acquired Danbury Square Shopping Center
("the Property"), a 192,599 square foot retail property located in
Danbury, Connecticut, for a total cost of $19,470,000, which included
closing and other costs of approximately $220,000. The Trust
acquired the Property subject to an $11,250,000 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,
1994.
The accompanying unaudited pro forma consolidated statement of income
is presented as if the acquisition transaction had been made as of
November 1, 1993.
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, 1994. 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, 1994, 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, 1993, 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 $19,470,000 and the related $11,250,000 mortgage note
payable as if the Property was purchased on October 31, 1994.
(b) To reflect pro forma cash and cash equivalents as if the cash
investment in the Property had been made as of October 31, 1994.
HRE PROPERTIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED OCTOBER 31, 1994 (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, 1993 to October 31, 1994.
(b) To reflect interest expense related to the $11,250,000 mortgage
note payable at 9.5% for the acquisition of the Property as if the
mortgage loan has been outstanding for the entire period.
(c) To reflect depreciation expense for the Property over a 40-year
useful life for the Property's building and improvements using a cost
basis of $15,500,000 as if the Property was purchased on November 1,
1993.
(d) To reflect a reduction in interest income as if the cash
investment ($8,220,000) had been made at the beginning of the period,
using an interest rate of 3.5%, which was HRE's actual yield for the
fiscal year ended October 31, 1994.
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, 1995
Pro forma
Historical Adjustments Pro forma
Revenues:
Operating leases $4,579 $ 389 (a) $ 4,968
Financing leases 326 326
Interest 264 (62) (d) 202
5,169 5,496
Operating Expenses:
Property expenses 1,855 87 (a) 1,942
Interest 1,148 190 (b) 1,338
Depreciation and amortization 1,127 48 (c) 1,175
General and administrative expenses 405 405
Trustees fees and expenses 59 59
4,594 4,919
Net Income $ 575 $ 577
Net Income Per Common Share:
Net Income $ .11 $.11
Weighted Average Number of Common Shares Outstanding 5,342 5,342
The accompanying note is an integral part of this statement.
</TABLE>
HRE PROPERTIES
. NOTES AND MANAGEMENT'S ASSUMPTIONS TO
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED
JANUARY 31, 1995
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited pro forma consolidated statement of income
is presented as if the Trust's acquisition of Danbury Square Shopping
Center had been made as of November 1, 1993.
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, 1995. 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, 1993, nor are they necessarily indicative
of the results of operations for future periods.
The unaudited pro forma consolidated balance sheet as of January 31,
1995 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, 1995 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, 1994 to January 31, 1995.
(b) To reflect an increase in interest expense related to the
$11,250,000 mortgage note payable at 9.5% for the acquisition of the
Property as if the mortgage note has been outstanding for the entire
period.
(c) To reflect an increase in depreciation expense for the Property
over a 40-year useful life for the Property's building and
improvements using a cost basis of $15,500,000 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 ($8,220,000) had been made prior to this period,
using an interest rate of 4.15%, which was the Registrant's actual
yield for the three month period ended January 31, 1995.
