SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
******************************************
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
******************************************
For the period ended MARCH 31, 2000
Commission file number 0-13693
------------------------------
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
-------------------------------------------
(Exact name of registrant as specified in charter)
Massachusetts 13-6850434
------------- --------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2839 Paces Ferry Road, Suite 1170, Atlanta, GA 30339
- ---------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
(770) 984-9500
-------------------
Registrant's telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 X No___
The number of shares outstanding as of May 15, 2000 was 1,100,491.
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
INDEX OF FINANCIAL INFORMATION
PART I FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Consolidated Balance Sheets (unaudited) as of March 31, 2000
and December 31, 1999 3
Consolidated Statements of Operations (unaudited)
for the three months ended March 31, 2000 and 1999 4
Consolidated Statement of Shareholders' Equity (unaudited)
for the three months ended March 31, 2000 5
Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
PART II OTHER INFORMATION/SIGNATURE
Item 6 Exhibits and Reports on Form 8-K 23
Signature 24
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
<CAPTION>
March 31, December 31,
2000 1999
---------------- ----------------
<S> <C> <C>
Real estate assets:
Land $ 8,247,900 $ 8,247,900
Buildings and improvements 55,551,787 55,545,257
Furniture, fixtures & equipment 4,000,097 3,968,848
Less: accumulated depreciation (3,908,703) (3,351,811)
---------------- ----------------
Net real estate assets 63,891,081 64,410,194
Investment in unconsolidated Joint Venture 1,488,268 1,551,974
Cash and cash equivalents 571,982 916,215
Restricted cash 1,448,285 1,816,102
Receivable from Joint Venture 19,706 27,356
Receivables and other assets 252,451 236,900
Deferred financing costs, less accumulated amortization of $145,192 And
$127,656 at March 31, 2000 and December 31, 1999, respectively 105,372 117,908
Deferred leasing costs, less accumulated amortization of $65,757 And
$59,240 at March 31, 2000 and December 31, 1999, respectively 31,148 37,665
---------------- ----------------
Total assets $ 67,808,293 $ 69,114,314
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 54,994,339 $ 55,074,923
Line of credit 1,865,000 1,715,000
Accounts payable and accrued liabilities 1,334,918 1,899,937
Distributions payable to Preferred Unitholders 232,375 464,750
---------------- ----------------
Total liabilities 58,426,632 59,154,610
---------------- ----------------
Minority interests of unitholders in Operating Partnership:
Preferred partnership interests 8,834,386 8,730,003
Common partnership interests 98,844 222,084
---------------- ----------------
Total minority interests 8,933,230 8,952,087
---------------- ----------------
Shareholders' equity:
Common shares of beneficial interest, without par or stated value,
25,000,000 authorized, 1,100,491 and 1,100,493 shares issued and
outstanding at March 31, 2000 and December 31, 1999, respectively
Additional paid in capital 3,295,983 3,295,998
Accumulated deficit (2,847,552) (2,288,381)
---------------- ----------------
Total shareholders' equity 448,431 1,007,617
---------------- ----------------
Total liabilities and shareholders' equity $ 67,808,293 $ 69,114,314
================ ================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
For the three months ended
March 31,
-----------------------------
2000 1999
------------ -----------
REVENUES
<S> <C> <C>
Rental revenues $ 2,718,309 $ 998,389
Other property revenues 148,457 40,374
Other income 12,620 12,000
------------ -----------
2,879,386 1,050,763
------------ -----------
EXPENSES
Property operating and maintenance 1,103,341 397,549
Depreciation and amortization 563,408 166,557
Amortization of deferred financing costs 17,536 7,726
Interest expense 1,289,235 332,079
General and administrative 187,812 143,537
------------ -----------
3,161,332 1,047,448
Income (loss) before equity in loss of unconsolidated
Joint Venture and minority interests (281,946) 3,315
Equity in loss of unconsolidated Joint Venture (63,707) -
------------ -----------
Income (loss) before minority interests (345,653) 3,315
Less Minority interests in Operating Partnership:
Preferred partnership interests 336,758 -
Common partnership interests (123,240) 599
------------ -----------
Net income (loss) $ (559,171) $ 2,716
============ ===========
NET INCOME (LOSS) PER SHARE - BASIC $ (0.51) $ 0.00
============ ===========
NET INCOME (LOSS) PER SHARE - DILUTED $ (0.51) $ 0.00
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 1,100,491 1,100,505
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 1,343,037 1,343,051
============ ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the three months ended March 31, 2000
(unaudited)
<CAPTION>
Additional Total
paid in Accumulated shareholders'
capital deficit equity
--------------- ----------------- -----------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1999 $ 3,295,998 $(2,288,381) $ 1,007,617
Net loss - (559,171) (559,171)
Retirement of shares (15) - (15)
Distributions Common - - -
--------------- ----------------- -----------------
BALANCE AT MARCH 31, 2000 $ 3,295,983 $(2,847,552) $ 448,431
=============== ================= =================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
For the three months
ended March 31,
2000 1999
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (559,171) $ 2,716
------------ ---------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 563,408 166,557
Amortization of deferred financing costs 17,536 7,726
Equity in loss of unconsolidated Joint Venture 63,707 -
Minority interests in Operating Partnership:
Preferred partnership interests 336,758 -
Common partnership interests (123,240) 599
Distributions to preferred unitholders (464,750) -
Changes in assets and liabilities, net of the effect
of real estate assets acquired
Restricted cash 367,817 (13,983)
Receivable from Joint Venture 7,650 -
Receivables and other assets (15,551) 19,289
Capitalized leasing costs - (11,842)
Accounts payable and accrued liabilities (565,019) 94,789
------------ ---------
Total adjustments 188,316 263,135
------------ ---------
Net cash provided (used) by operating activities (370,855) 265,851
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (37,779) (128,907)
Refundable deposits and acquisition costs - (13,278)
------------ ---------
Net cash used in investing activities (37,779) (142,185)
------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Deferred financing costs (5,000) -
Net proceeds from line of credit 150,000 -
Principal repayments on mortgage notes payable (80,584) (37,987)
Purchase of retired shares (15) (3)
------------ ---------
Net cash provided (used) by financing activities 64,401 (37,990)
------------ ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS (344,233) 85,676
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 916,215 158,302
------------ ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 571,982 $243,978
============ ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 2000
NOTE 1 - BUSINESS AND ORGANIZATION
Vinings Investment Properties Trust ("Vinings" or the "Trust") was
organized on December 7, 1984 as a mortgage real estate investment
trust ("REIT") whose original plan was to liquidate within
approximately ten years. On February 28, 1996, Vinings Investment
Properties, Inc. completed a tender offer to acquire control of the
Trust in order to rebuild Vinings assets by expanding into the
multifamily real estate markets through the acquisition of garden style
apartment communities which are leased to middle-income residents.
Current management believes that these investments will provide
attractive sources of income to Vinings which will not only increase
net income and provide cash available for future distributions, but
will increase the value of Vinings' real estate portfolio as well.
Currently Vinings conducts all of its operations through Vinings
Investment Properties, L.P. (the "Operating Partnership"), a Delaware
limited partnership. As of March 31, 2000, the Trust was the sole 1%
general partner and an 80.94% limited partner in the Operating
Partnership. (This structure is commonly referred to as an umbrella
partnership REIT or an "UPREIT").
On April 29, 1999, the Operating Partnership offered, in a private
transaction pursuant to a Securities Purchase Agreement, Series A
Convertible Preferred Partnership interests (the "Preferred Units"),
the proceeds from which were used to acquire thirteen multifamily
communities (collectively, the "Portfolio Properties") from seventeen
limited partnerships and limited liability companies. Eight of the
Portfolio Properties were purchased through subsidiary partnerships of
the Operating Partnership. The remaining Portfolio Properties were
purchased through a joint venture structure. (See Notes 3 and 4.) As of
December 31, 1999, a total of 1,988,235 Preferred Units had been issued
for an aggregate purchase price of $8,450,000. On March 15, 2000 the
Board of Trustees voted to convert the Preferred Units into a newly
created class of preferred shares of beneficial interest in Vinings and
consequently authorized the issuance of 1,988,235 preferred shares with
the same rights, preferences and privileges as the Preferred Units (the
"Preferred Shares") (See Notes 5).
Vinings currently owns, through wholly owned subsidiaries, ten
apartment communities totaling 1,520 units and a 75,000 square foot,
single story business park. In addition, Vinings holds a 20% interest
in and is the general partner of an unconsolidated joint venture, which
owns through subsidiary partnerships five additional apartment
communities totaling 968 units (See Note 4). At March 31, 2000, the
average occupancy of Vinings' portfolio, including the communities held
by the unconsolidated joint venture, was 93%.
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles and with the instructions
to Form 10-Q and Article 10 of Regulation S-X.
The accompanying consolidated financial statements of Vinings include
the consolidated accounts of the Trust and its subsidiaries. All
significant intercompany balances and transactions have been eliminated
in consolidation. Vinings accounts for its investment in the
unconsolidated joint venture using the equity method of accounting. The
term "Vinings" or "Trust" hereinafter refers to Vinings Investment
Properties Trust and its subsidiaries, including the Operating
Partnership.
The minority interests of the common unitholders in the Operating
Partnership (the "Common Units") reflected on the accompanying balance
sheets are calculated based on the common unitholders' minority
interest ownership percentage (18.06% as of March 31, 2000) multiplied
by the Operating Partnership's net assets. The minority interests of
the preferred unitholders on the accompanying balance sheet represent
cash contributed in exchange for those units and the accrued
liquidation preference of $0.21 per Preferred Unit ($280,003 at
December 31, 1999 and $384,386 at March 31, 2000). The minority
interests of the common unitholders in the income or loss of the
Operating Partnership on the accompanying statements of operations is
calculated based on the weighted average minority interest ownership
percentage (approximately 18% for all periods presented) multiplied by
income (loss) before minority interests after subtracting income
allocated to the preferred partnership interests. The minority
interests of the preferred unitholders on the statements of operations
represents the accrued preferred 11% return on the Preferred Units
($232,375 for the period ended March 31, 2000) and the accrued pro rata
liquidation preference of $0.21 per Preferred Unit ($104,383 for the
period ended March 31, 2000) (See Note 5).
Income Taxes
------------
Vinings has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, Vinings will
generally not be subject to federal income taxation on that portion of
its income that qualifies as REIT taxable income to the extent that
Vinings distributes at least 95% of its taxable income to its
shareholders and satisfies certain other requirements. Accordingly, no
provision for federal income taxes has been included in the
accompanying consolidated financial statements.
As a result of the Stock Transaction, as hereinafter defined, fewer
than five shareholders own in excess of 50% of the equity in Vinings
(See Note 7). On March 15, 2000, the Board of Trustees voted to waive
the ownership limitations in Vinings' Declaration of Trust with respect
to shareholders acquiring shares in the Stock Transaction, as well as
with respect to certain holders of Preferred Units who will be
acquiring Preferred Shares. The Board is currently considering whether
it is in the best interests of shareholders for Vinings to continue to
qualify as a REIT for federal income tax purposes in light of the
restrictions imposed on Vinings in order for it to qualify as a REIT.
To maintain its REIT status, Vinings would be required to effect a
change in its ownership structure prior to June 30, 2000. However,
there can be no assurances that the Trust will be successful in
effecting such a change prior to June 30, 2000.
<PAGE>
Presently, the Board does not believe that there would be negative tax
consequences to the shareholders should Vinings lose its REIT status
due to the fact that the Trust is not currently generating taxable
income. However, management is continuing to investigate all
alternatives for maintaining REIT status as well as all consequences to
the shareholders should Vinings lose its REIT status.
Cash and Cash Equivalents
-------------------------
Vinings considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Restricted Cash
---------------
Restricted cash consists of real estate tax, insurance and replacement
reserve escrows held by mortgagees, which are funded monthly from
property operations and released solely for the purpose for which they
were established. Restricted cash also includes security deposits
collected and held on behalf of the residents and tenants.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Real Estate Assets
------------------
Real estate assets are stated at depreciated cost less reductions for
impairment, if any. In identifying potential impairment, management
considers such factors as declines in a property's operating
performance or market value, a change in use, or adverse changes in
general market conditions. In determining whether an asset is impaired,
management estimates the future cash flows expected to be generated
from the asset's use and its eventual disposition. If the sum of these
estimated future cash flows on an undiscounted basis is less than the
asset's carrying cost, the asset is written down to its fair value. In
management's opinion, there has been no impairment of Vinings' real
estate assets as of March 31, 2000.
Ordinary repairs and maintenance are expensed as incurred. Major
improvements and replacements are capitalized and depreciated over
their estimated useful lives when they extend the useful life, increase
capacity or improve efficiency of the related asset. Depreciation is
computed on a straight-line basis over the useful lives of the real
estate assets (buildings and improvements, 5-40 years; furniture,
fixtures and equipment, 3-7 years; and tenant improvements, generally
over the life of the related lease).
<PAGE>
Revenue Recognition
-------------------
All leases are classified as operating leases and rental income is
recognized when earned which materially approximates revenue
recognition on a straight-line basis.
Deferred Financing Costs and Amortization
-----------------------------------------
Deferred financing costs include fees and costs incurred to obtain
financing and are capitalized and amortized over the term of the
related debt.
Net Income (Loss) Per Share
---------------------------
The following is a reconciliation of net income (loss) available to the
common shareholders and the weighted average shares used in Vinings'
basic and diluted net income (loss) per share computations:
<TABLE>
<CAPTION>
For the three months
ended March 31,
----------------------------
2000 1999
----------------------------
<S> <C> <C>
Net income (loss) - basic $(559,171) $2,716
Minority interests in Operating Partnership:
Preferred partnership interests - -
Common partnership interests (123,240) 599
----------------------------
Total minority interest (123,240) 599
----------------------------
Net income (loss) - diluted $(682,411) $3,315
============================
Weighted average shares - basic 1,100,491 1,100,505
Dilutive Securities:
Weighted average Common Units 242,546 242,546
Weighted average Preferred Units - -
Share options - -
============================
Weighted average shares - diluted 1,343,037 1,343,051
============================
</TABLE>
Both common and preferred units in the Operating Partnership held by
the minority unitholders are redeemable for shares of beneficial
interest of the Trust ("Shares") on a one-for-one basis, or for cash,
at the option of the Trust. For the three months ended March 31, 1999,
and 2000, options to purchase 107,750 shares, 27,500 shares and 26,000
shares, respectively were excluded as the impact of such options was
antidilutive. For the three months ended March 31, 2000 the Preferred
Units totaling 1,988,235 were also excluded as the impact of such units
was antidilutive. On March 15, 2000, the Board of Trustees voted to
convert the Preferred Units into Preferred Shares (See Notes 5).
<PAGE>
Recent Accounting Pronouncement
-------------------------------
Vinings adopted Statements of Financial Accounting Standards ("SFAS")
No. 130, "Reporting of Comprehensive Income," during 1998, which
establishes a standard for reporting and display of comprehensive
income and its components. Comprehensive income is the total of net
income and all other nonowner changes in shareholders' equity. As of
March 31, 2000 and 1999, Vinings had no items of other comprehensive
income.
Vinings also adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information," during 1998, which establishes new
standards for disclosure of segment information on the so called
"management approach." The management approach is based on the way that
the chief operating decision maker organizes segments within a company
for making operating decisions and assessing performance. Since
Vinings' real estate portfolio has similar economic characteristics,
customers, and products and services, Vinings evaluates the operating
performance of its real estate portfolio as one reportable segment, on
the same basis of presentation for internal and external reporting.
Therefore, no additional segment information is presented herein.
Reclassifications
-----------------
Certain 1999 financial statement amounts have been reclassified to
conform with the current year presentation.
NOTE 3 - REAL ESTATE ASSETS
On May 1, 1999, Vinings, through its subsidiaries, completed the
acquisition of the Portfolio Properties from seventeen limited
partnerships and limited liability companies. Eight of the Portfolio
Properties (the "Mississippi Properties") were purchased through
subsidiary partnerships of the Operating Partnership. The remaining
Portfolio Properties (the "Joint Venture Properties") were purchased
through a joint venture structure. (See Note 4.)
The Mississippi Properties, totaling 1,064 units, were purchased by
eight individual partnerships in each of which Vinings Holdings, Inc.,
a wholly owned subsidiary of the Trust, owns a .1% general partnership
interest and the Operating Partnership owns a 99.9% limited partnership
interest. The aggregate purchase price for the Mississippi Properties
was $47,665,396 (excluding closing costs), which included the
assumption of debt of approximately $41,693,000 with the balance paid
in cash, which was funded by the issuance of the Preferred Units. A
total of approximately $749,200 in escrows held by the mortgagees was
also purchased.
In addition Vinings owns, also through subsidiary partnerships of the
Operating Partnership, two additional multifamily communities in the
metropolitan Atlanta area for a total of 1,520 units in ten
communities, as well as a 75,000 square foot business center. All of
the multifamily communities are encumbered by fixed rate mortgage
financing and the business center is security for the line of credit.
<PAGE>
NOTE 4 - INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
On May 1, 1999, Vinings purchased, through a joint venture structure,
five apartment communities, totaling 968 units (the "Joint Venture
Properties"). The Joint Venture Properties were purchased by nine
individual partnerships in each of which Vinings Holdings, Inc., a
wholly owned subsidiary of the Trust, owns a .1% general partnership
interest and Vinings/CMS Master Partnership, L.P. (collectively, the
"Joint Venture"), a Delaware limited partnership, owns a 99.9% limited
partnership interest. The Operating Partnership has a .1% general
partner interest and a 19.98% limited partner interest in the Joint
Venture, for which it paid $1,705,100. This investment was funded by
the issuance of the Preferred Units. The remaining limited partnership
interests in the Joint Venture are held by an unaffiliated third party.
The Joint Venture was formed on March 22, 1999, primarily to acquire
the limited partner interest in limited partnerships that acquire,
operate, manage, hold and sell certain real property, specifically the
Joint Venture Properties. The aggregate purchase price paid by the
property partnerships for the Joint Venture Properties was $46,634,603
(excluding closing costs), which included the assumption of
approximately $39,265,000 of debt with the balance paid in cash. A
total of approximately $716,400 in escrows held by the mortgagees was
also purchased.
Vinings accounts for its investment in the Joint Venture using the
equity method of accounting. The following is a summary of the results
of operations of the Joint Venture and Vinings' share of the equity in
the loss from the Joint Venture for the three month period from January
1, 2000 to March 31, 2000:
<TABLE>
<S> <C>
Revenues $ 1,653,858
--------------
Expenses:
Property operating and maintenance 717,839
General and administrative 13,690
Depreciation and amortization 376,769
Interest expense 864,092
--------------
Total Expenses 1,972,390
--------------
Net loss (318,532)
Vinings' equity percentage 20%
--------------
Vinings' equity in loss of unconsolidated Joint Venture $ (63,707)
==============
Distributions received by Vinings from Joint Venture $ -
==============
Cash flows used in operating activities $ (112,348)
==============
Cash flows used in investing activities $ (42,462)
==============
Cash flows used in financing activities $ (53,440)
==============
</TABLE>
<PAGE>
The following summarizes the balance sheet of the Joint Venture as of
March 31, 2000:
<TABLE>
<S> <C>
Real estates assets, net of accumulated depreciation $ 45,882,190
Cash and other assets 1,455,246
--------------
Total assets $ 47,337,436
==============
Mortgage notes payable $ 39,105,770
Other liabilities 790,728
--------------
Total liabilities 39,896,498
--------------
Capital - Vinings 1,488,268
Capital - Other 5,952,670
--------------
Total capital 7,440,938
-------------
Total liabilities and capital $ 47,337,436
==============
</TABLE>
Mortgage notes payable held by the Joint Venture are non-recourse fixed
rate notes secured by the individual properties. All of the notes
except one are insured by the U.S. Department of Housing and Urban
Development ("HUD") and, therefore, distributions from the properties
are subject to "surplus cash" as defined by HUD. The maturity dates of
the notes payable range from June 2007 to November 2037 and interest
rates range from 8.00% to 8.75%.
NOTE 5 - SHAREHOLDERS' EQUITY AND PREFERRED PARTNERSHIP INTERESTS
On April 29, 1999, the Operating Partnership offered in a private
transaction Preferred Units. The holders of Preferred Units are
entitled to receive cumulative preferential cash distributions at the
per annum rate of $0.4675 per Preferred Unit. Upon the occurrence of
certain triggering events, the holders of Preferred Units are entitled
to receive, in addition to an amount equal to any accumulated and
unpaid distributions on such holder's Preferred Units, a liquidation
preference of $4.46 per Preferred Unit, or, if any such triggering
event occurs prior to one year from the date of issuance $4.25 per
Preferred Unit.
Under certain circumstances, the holders of Preferred Units may convert
any part or all of such Preferred Units into common partnership units,
common shares, or Preferred Shares. In lieu of converting Preferred
Units into common shares, the Operating Partnership, in its sole
discretion, may satisfy its conversion obligations through certain cash
payments, as further set forth in the partnership agreement of the
Operating Partnership.
Generally, the holders of Preferred Units do not have the right to vote
on any matter on which any general or limited partner of the Operating
Partnership may vote. The holders of Preferred Units do, however, have
the right to vote as a separate class of Partnership Interests on
certain transactions including, without limitation, certain
authorizations and issuances of preferred units of partnership
interests designated as ranking senior to the Preferred Units, certain
amendments to the Partnership Agreement, and certain sales or other
dispositions of assets of the Operating Partnership, certain mergers or
consolidations of the Operating Partnership, and transactions which
result in the liquidation of the Partnership.
<PAGE>
As of March 31, 2000, a total of 1,988,235 Preferred Units had been
issued for an aggregate purchase price of $8,450,000. The Operating
Partnership used the proceeds of such sales of Preferred Units to pay
the cash consideration for the Operating Partnership's interests in the
property partnerships that acquired the Mississippi Properties, and its
interest in the Joint Venture. (See Notes 3 and 4.)
At the annual meeting of shareholders held on June 29, 1999, Vinings'
shareholders approved proposals to amend the Trust's Declaration of
Trust to decrease the total number of common shares of beneficial
interest authorized from an unlimited amount to 25,000,000 and to
authorize a new class of 7,050,000 preferred shares of beneficial
interest which, upon the affirmative vote of two-thirds of the Board of
Trustees, may be issued in such amounts, in one or more series, and
with such designations, preferences, limitations and relative rights
for each series as the Board of Trustees shall determine.
On March 15, 2000, the Board of Trustees voted to convert the Preferred
Units into a newly created class of preferred shares of beneficial
interest in Vinings, and consequently authorized the issuance of
1,988,235 Series A Preferred Shares with the same rights, preferences
and privileges as the existing Preferred Units.
NOTE 6 - NOTES PAYABLE
Mortgage Notes Payable
----------------------
Mortgage notes payable were secured by the following apartment
communities at March 31, 2000 and December 31, 1999, as follows:
<TABLE>
<CAPTION>
Fixed interest
rate as of Principal balance as of:
Maturity 3/31/00 3/31/00 12/31/99
--------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Cottonwood 10/01/2036 8.875% $ 4,679,695 $ 4,683,888
Delta Bluff 08/01/2036 9.25 % 6,198,489 6,203,591
Foxgate I 06/01/2037 8.50 % 6,592,397 6,598,549
Hampton House 08/01/2037 8.50 % 5,164,240 5,169,167
Heritage Place 10/01/2036 8.75 % 3,138,958 3,141,865
Northwood 06/01/2034 8.75 % 4,477,729 4,482,862
River Pointe 01/01/2037 8.625% 5,975,880 5,981,475
Trace Ridge 07/01/2036 8.50 % 5,324,736 5,330,125
The Thicket 07/01/2003 9.04 % 7,184,023 7,200,487
Windrush 07/01/2024 7.50 % 6,258,192 6,282,914
------------ --------------
Total $54,994,339 $55,074,923
============ ==============
</TABLE>
<PAGE>
All of the notes except The Thicket are insured by HUD and, therefore,
distributions from the properties are subject to "surplus cash" as
defined by HUD.
Scheduled maturities of the mortgage notes payable as of March 31, 2000
are as follows:
2000 $ 252,130
2001 361,792
2002 393,425
2003 7,314,761
2004 367,596
Thereafter 46,304,635
-------------
Total $54,994,339
=============
Line of Credit
--------------
On April 27, 1999 Vinings obtained a line of credit in the amount of
$2,000,000 from a financial institution. The line of credit is secured
by Peachtree Business Center. The interest rate on the line of credit
is one percent over prime as posted in The Wall Street Journal, which
was 9.50% at March 31, 2000. The principal balance of the line of
credit as of March 31, 2000 and December 31, 1999 was $1,865,000 and
$1,715,000, respectively. The line of credit expired on April 27, 2000
and was renewed until April 30, 2001.
NOTE 7 - RELATED PARTY TRANSACTIONS
On January 1, 1999, Vinings entered into management agreements with VIP
Management, LLC ("VIP"), an affiliate of the officers, who are also
Trustees of Vinings, to provide property management services for a fee
equal to varying percentages ranging from three and one half to six
percent of gross revenues, plus a fee for data processing. Prior to
January 1, 1999, Vinings had entered into management agreements with
Vinings Properties, Inc., also an affiliate of the officers of Vinings,
to provide property management services on substantially the same terms
as the current agreements. In addition, as a commitment to the
rebuilding of Vinings, prior to 1998 The Vinings Group, Inc., the
parent corporation of Vinings Properties, Inc. (collectively with VIP,
"The Vinings Group"), provided numerous services at no cost to Vinings
relating to administration, acquisition, and capital and asset advisory
services. Certain direct costs paid on Vinings' behalf were reimbursed
to The Vinings Group. Beginning January 1, 1998 the Vinings Group has
charged Vinings for certain overhead charges. Beginning August 1, 1999,
the Trust has also paid for its pro-rata share of rent, administrative
and other overhead charges, which includes reimbursing The Vinings
Group for a pro-rata portion of salaries and benefits for the officers
and other employees providing services to Vinings.
<PAGE>
The following table reflects payments made to The Vinings Group:
Three months
ended March 31,
2000 1999
----------- ----------
Vinings
Management fees $103,286 $ 56,184
Data processing fees 16,416 6,840
Overhead reimbursements 94,921 53,250
----------- ----------
Total $214,623 $177,899
=========== ==========
Joint Venture
Management fees $ 47,105 -
Data processing fees 14,520 -
----------- ----------
Total $ 61,625 -
=========== ==========
On February 4, 1999 one of the independent Trustees purchased the
Trust's line of credit, which expired on December 28, 1998 and Vinings
paid interest to the Trustee monthly at the annual rate of 8.50%
through April 27, 1999, at which time the Trustee was repaid in full.
In connection with the acquisition of the Portfolio Properties, MFI
Realty, Inc., an affiliate of the officers of Vinings, received fees
totaling $400,276 of which $167,103 was paid by the Operating
Partnership and $233,173 was paid by the Joint Venture.
Effective March 1, 2000, 628,927 shares of Vinings were purchased in a
privately negotiated transaction by the Officers, one of their
affiliates and an affiliate of one of the Trustees from a limited
number of shareholders, which included three of the Trustees and
certain of their affiliates (the "Stock Transaction"). In connection
with the Stock Transaction, the three selling Trustees -- James D.
Ross, Martin H. Petersen and Gilbert H. Watts, Jr. -- resigned from the
Board of Trustees.
As a result of the Stock Transaction, fewer than five shareholders own
in excess of 50% of the equity in Vinings. On March 15, 2000, the Board
of Trustees voted to waive the ownership limitations in Vinings'
Declaration of Trust with respect to shareholders acquiring shares in
the Stock Transaction, as well as with respect to certain holders of
Preferred Units who will be acquiring Preferred Shares. The Board is
currently considering whether it is in the best interests of
shareholders for Vinings to continue to qualify as a REIT for federal
income tax purposes in light of the restrictions imposed on Vinings in
order for it to qualify as a REIT. To maintain its REIT status, Vinings
would be required to effect a change in its ownership structure prior
to June 30, 2000. However, there can be no assurances that the Trust
will be successful in effecting such a change prior to June 30, 2000.
<PAGE>
Presently, the Board does not believe that there would be negative tax
consequences to the shareholders should Vinings lose its REIT status
due to the fact that the Trust is not currently generating taxable
income. However, management is continuing to investigate all
alternatives for maintaining REIT status as well as all consequences to
the shareholders should Vinings lose its REIT status.
NOTE 8 - DISTRIBUTIONS
Vinings has not declared or paid any dividends during the three months
ended March 31, 2000. Vinings declared two dividends of five cents per
share each, which were paid September 1, 1999 and December 8, 1999,
respectively to shareholders of record on August 16, 1999 and November
26, 1999, respectively. For federal income tax purposes these
distributions represented a return of capital. Vinings intends to
continue to pay distributions to shareholders in amounts at least
sufficient to enable the Trust to qualify as a REIT (See Note 2).
NOTE 9 - LEASING ACTIVITY
The following is a schedule of future minimum rents due under operating
leases that have initial or remaining noncancellable lease terms in
excess of one year as of March 31, 2000, at Peachtree:
2000 $289,102
2001 386,175
2002 148,236
-----------
Total $823,513
===========
One tenant generated 48% of Peachtree's revenues for the period
ended March 31, 2000. The same tenant accounts for 76% of the future
minimum lease payments.
NOTE 10 - CONTINGENCIES
Vinings is, from time to time, subject to various claims that arise in
the ordinary course of business. These matters are generally covered by
insurance. While the resolution of these matters cannot be predicted
with certainty, management believes that the final outcome of such
matters will not have a material adverse effect on the financial
position or results of operations of Vinings.
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION
Vinings paid interest of $1,230,593 and $312,319 for the three months
ended March 31, 2000 and 1999, respectively.
<PAGE>
NOTE 12 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on interest rates and other pertinent information available to
Vinings as of March 31, 2000 and December 31, 1999 the Trust estimates
that the carrying value of cash and cash equivalents, the mortgage
notes payable, the line of credit, and other liabilities approximate
their fair values when compared to instruments of similar type, terms
and maturity.
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of March 31, 2000 and
December 31, 1999. Although management is not aware of any factors that
would significantly affect its estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes of these
financial statements since March 31, 2000.
NOTE 13 - 1997 STOCK OPTION AND INCENTIVE PLAN
Vinings' 1997 Stock Option and Incentive Plan (the "Plan") provides
incentives to officers, employees, Trustees, and other key persons
including the grant of share options, share appreciation rights,
restricted and unrestricted share awards, performance share awards, and
dividend equivalent rights.
Under the Plan, the maximum number of shares that may be reserved and
available for issuance is 10% of the total number of outstanding shares
at any time plus 10% of the number of Units outstanding at any time
that are subject to redemption rights. At December 31, 1999 the total
number of shares available for issuance under the Plan was 134,305.
Options granted under the Plan expire ten years from the date of grant.
During 1998 and 1997, Vinings granted non-qualified share options to
the officers, Trustees and certain key persons. The options were vested
in full after one year from the date of the grant. Of the options
granted in 1998, 81,250 have an exercise price of $4.00 per share as
compared to a fair value of $3.63 on the date of the grant and 1,500
have an exercise price of $4.75 per share, which was equal to the fair
value on the date of grant. A total of 26,000 options were granted in
1997, which have an exercise price of $5.00 per share as compared to a
fair value of $4.56 per share on the date of the grant. There were no
options granted during 1999 or 2000.
On July 1, 1998 Vinings awarded 20,000 shares of restricted stock to
the officers and certain trustees (the "Restricted Stock"),
representing a total value of $80,000 (based on the fair market value
of a share of the Trust on the award date) which was reflected in
compensation expense and shareholders' equity in 1998. The Restricted
Stock was awarded as compensation for services to the Trust provided by
such officers and trustees as well as by The Vinings Group.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
- --------
Vinings Investment Properties Trust ("Vinings" or the "Trust") was organized on
December 7, 1984 as a mortgage real estate investment trust ("REIT") whose
original plan was to liquidate within approximately ten years. On February 28,
1996, Vinings Investment Properties, Inc. completed a tender offer to acquire
control of the Trust and to rebuild Vinings' assets by expanding into the
multifamily real estate markets through the acquisition of garden style
apartment communities which are leased to middle-income residents. Current
management believes that these investments will provide attractive sources of
income to Vinings which will not only increase net income and provide cash
available for future distributions, but will increase the value of Vinings' real
estate portfolio as well.
Currently Vinings conducts all of its operations through Vinings Investment
Properties, L.P. (the "Operating Partnership"). As of March 31, 2000, the Trust
was the sole 1% general partner and an 80.94% limited partner in the Operating
Partnership. (This structure is commonly referred to as an umbrella partnership
REIT or "UPREIT").
On April 29, 1999, the Operating Partnership offered, in a private transaction
pursuant to a Securities Purchase Agreement (the "Purchase Agreement"), Series A
Preferred Partnership interests (the "Preferred Units"). See Note 5 to Vinings'
March 31, 2000 Consolidated Financial Statements. As of March 31, 2000, a total
of 1,988,235 Preferred Units had been issued for an aggregate purchase price of
$8,450,000, the proceeds from which were used to acquire thirteen multifamily
communities (collectively, the "Portfolio Properties") from seventeen limited
partnerships and limited liability companies. Eight of the Portfolio Properties
(the "Mississippi Properties") were purchased through subsidiary partnerships of
the Operating Partnership. The remaining Portfolio Properties (the "Joint
Venture Properties") were purchased through a joint venture in which the
Operating Partnership has a 20% limited partner interest and is the general
partner (the "Joint Venture"). See Notes 3 and 4 to Vinings' March 31, 2000
Consolidated Financial Statements.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the accompanying consolidated
financial statements of Vinings and the notes thereto.
Results of Operations
- ---------------------
Rental and other property revenues increased $1,828,003, or 176%, from
$1,038,763 for the three months ended March 31, 1999 to $2,866,766 for the same
period in 2000. This increase is due primarily to the revenues generated in
connection with the Trust's ownership of the Mississippi Properties for the
three months ended March 31, 2000, which were not in Vinings' portfolio during
the same three month period of 1999.
Other income increased $620, or 5%, from $12,000 for the three months ended
March 31, 1999 to $12,620 for the same period of 2000.
<PAGE>
Property operating and maintenance expense increased by $705,792, or 178%, from
$397,549 for the three months ended March 31, 1999, to $1,103,341 for the same
period in 2000. Of this increase, $715,490 was due to expenses generated in
connection with the Trusts' ownership of the Mississippi Properties for the
three months ended March 31, 2000, which were not in Vinings' portfolio during
the same three month period in 1999. This increase was offset by a decrease in
operating expenses of $9,698 for the three months ended March 31, 2000 due
primarily to savings in Windrush and Thicket's management expense.
Depreciation and amortization increased by $396,851, or 238%, from $166,557 for
the three months ended March 31, 1999 to $563,408 for the same period in 2000.
This increase is due primarily to depreciation generated in connection with the
Trusts' ownership of the Mississippi Properties for the three months ended March
31, 2000, which were not in Vinings' portfolio during the same period of 1999.
There was a slight increase in Windrush and Thicket's depreciation due to
additional capital expenditures.
Amortization of deferred financing costs increased by $9,810, or 127%, from
$7,726 for the three months ended March 31, 1999 to $17,536 for the same period
in 2000 due to costs incurred in connection with the refinancing of the line of
credit.
Interest expense increased $957,156, or 288%, from $332,079 for the three months
ended March 31, 1999 to $1,289,235 for the same period in 2000, due primarily to
the mortgage interest generated in connection with the Trusts' ownership of the
Mississippi Properties for the three months ended March 31, 2000, which were not
in the Vinings' portfolio during the same period in 1999. In addition, interest
on Vinings' line of credit increased slightly due to rising interest rates.
Windrush and Thicket had slight decreases in interest expense due to mortgage
amortization.
General and administrative expense increased $44,275, or 31%, from $143,537 for
the three months ended March 31, 1999 to $187,812 for the same period in 2000.
This increase consists of: (1) overhead allocations paid to The Vinings Group
totaling $41,672; (2) professional fees totaling $10,762; and (3) rent expense
totaling $9,539. This increase is offset by the following decreases: (1)
corporate communications expense totaling $12,939; and (2) trustee expense
totaling $5,124.
Liquidity and Capital Resources
- -------------------------------
Net cash was used by operating activities of $370,855 for the three months ended
March 31, 2000 as compared to net cash provided by operating activities of
$265,851 for the three months ended March 31, 1999. This change is due primarily
to the distribution paid to the holders of Preferred Units made by the Operating
Partnership. This distribution was for the six month period from July 1, 1999 to
December 31, 1999 totaling $464,750 and was paid during the first quarter of
2000.
Cash flows used in investing activities decreased $104,406 from $142,185 for the
three months ended March 31,1999 to $37,779 for the same period in 2000, due
primarily to a reduction in capital expenditures.
<PAGE>
Cash of $64,401 was provided by financing activities for the three months ended
March 31, 1999 as compared to cash used by financing activities of $37,990 for
the same of period in 2000. This is due primarily to a draw of $150,000 on the
line of credit, which was offset by principal payments made on mortgage notes
payable.
The cash held by Vinings at March 31, 2000, plus the cash flow from Vinings'
assets, including the investment in the Joint Venture, is expected to provide
sources of liquidity to allow Vinings to meet current operating obligations
excluding the distributions to the preferred unitholders. Currently, the Trust's
cash flow is not sufficient to make the total distribution on the Preferred
Units. This is due to the assimilation of the Portfolio Properties into Vinings'
operations, which has taken longer than expected. As a result, it may be
necessary to draw funds from the line of credit in order to make the next
scheduled distribution to preferred unitholders in August, 2000. However, if the
current trend of increasing revenues and net operating income continues,
management believes that sufficient cash flow may be generated in the future to
make the scheduled distribution on the Preferred Units without drawing on the
line of credit. However, there can be no assurance that sufficient cash flow
will be generated from the Trust's operations. In addition, management plans to
continue ongoing discussions with capital sources, both public and private, as
well as explore financing alternatives, so as to allow the Trust to continue to
grow its income producing investments.
Other Matters
- -------------
This Form 10-Q 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. Vinings' 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: the inability of Vinings to identify
properties for acquisition; the inability of Vinings to continue to acquire
properties in the future; the less than satisfactory performance of any property
which might be acquired by Vinings; the inability to access the capital markets
in order to fund Vinings' present growth and expansion strategy; the cyclical
nature of the real estate market generally and locally in Georgia, Mississippi
and the surrounding southeastern states; the national economic climate; the
local economic climate in Georgia, Mississippi and the surrounding southeastern
states; the local real estate conditions and competition in Georgia, Mississippi
and the surrounding southeastern states; the ability of Vinings to identify and
correct all potential Year 2000 sensitive problems; the ability of Vinings to
continue to qualify as a REIT; and the ability of Vinings to generate sufficient
cash flow to pay the entire preferred distribution. There can be no assurance
that, as a result of the foregoing factors, Vinings' growth and expansion
strategy will be successful or that the business and operations of Vinings will
not be adversely affected thereby.
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Vinings is exposed to market risk from changes in interest rates, which may
adversely affect its financial position, results of operations and cash flows.
In seeking to minimize the risks from interest rate fluctuations, Vinings
manages exposures through its regular operating and financing activities.
Vinings does not use financial instruments for trading or other speculative
purposes. Vinings is exposed to interest rate risk primarily through its
borrowing activities, which are described in Note 6 to Vinings' March 31, 2000
Consolidated Financial Statements. All of Vinings' borrowings are under fixed
rate instruments, except the line of credit, which is at prime plus 1%. As of
March 31, 2000 Vinings' exposure to market risk has changed due to the
acquisition of the Vinings Properties and the assumption of the related mortgage
indebtedness. However, Vinings has determined that there is no material market
risk exposure to its consolidated financial position, results of operations or
cash flows due to changes in interest rates because of the fixed rate nature of
its long-term debt.
The following table presents principal reductions and related weighted average
interest rates by year of expected maturity for Vinings' debt obligations as of
March 31, 2000 and should be read in conjunction with Vinings' December 31, 1999
SEC form 10-K:
(In Thousands) 2000 2001 2002 2003 2004
- --------------------------------------------------------------------------------
Principal Reductions
In Mortgage Notes $ 252 $362 $393 $7,315 $367
Average Interest Rates 8.63% 8.63% 8.63% 8.63% 8.63%
Line Of Credit $1,865 - - - -
Interest Rate 9.50% - - - -
- --------------------------------------------------------------------------------
Fair Value
There March 31,
(In Thousands) -after Total 2000
- -----------------------------------------------------------------
Principal Reductions
In Mortgage Notes $46,305 $55,994 $55,994
Average Interest Rates 8.58% 8.63% 8.63%
Line Of Credit - $ 1,865 $ 1,865
Interest Rate - 9.50% 9.50%
- -----------------------------------------------------------------
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Third Amended and Restated Declaration of Trust of Vinings effective
July 1, 1999 (incorporated by reference to Exhibit 3.1 to Vinings'
Quarterly Report on Form 10-Q for the quarter ended September 30,
1999, No. 0-13693).
3.2 Eighth Amendment to the Amended and Restated Agreement of Limited
Partnership of Vinings Investment Properties, L.P. (filed herewith).
3.3 Certificate of Designation Classifying and designating a series of
Preferred Shares as Series A Convertible Preferred Shares of the Trust
(filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
Current Report on Form 8-K, dated February 23, 2000, was filed with the
Securities and Exchange Commission regarding a change in the Trust's independent
public accountant.
<PAGE>
SIGNATURE
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 thereunto duly authorized.
Vinings Investment Properties Trust
By: /s/ Stephanie A. Reed
-----------------------------
Stephanie A. Reed
Vice President and Treasurer
Dated: May 17, 2000
VININGS INVESTMENT PROPERTIES, L.P.
EIGHTH AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
This Eighth Amendment to the Amended and Restated Agreement of Limited
Partnership of Vinings Investment Properties, L.P. is made as of March 1, 2000
by Vinings Investment Properties Trust, a Massachusetts business trust, as
general partner (the "General Partner") of Vinings Investment Properties, L.P.,
a Delaware limited partnership (the "Partnership"), Hallmark Group Real Estate
Services Corp. (the "Withdrawing Limited Partner") and Peter D. Anzo (the
"Substituted Limited Partner") for the purpose of amending the Amended and
Restated Agreement of Limited Partnership of the Partnership dated June 30,
1997, as amended (the "Partnership Agreement"). All capitalized terms used
herein and not otherwise defined shall have the respective meanings ascribed to
them in the Partnership Agreement.
WHEREAS, the Withdrawing Limited Partner has made a capital contribution
and has been admitted as a Limited Partner of the Partnership; and
WHEREAS, the Withdrawing Limited Partner desires to withdraw as a Limited
Partner from the Partnership and transfer its entire Limited Partner interest in
the Partnership to the Substituted Limited Partner and the General Partner has
consented to such transfer;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
Section 1. Transfer of Limited Partner's Interest.
- --------------------------------------------------
(a) The Withdrawing Limited Partner does hereby sell, grant, convey,
transfer, assign, set over and deliver unto the Substituted Limited Partner all
of its interest in the Partnership, including, but not limited to, all rights to
distributions and returns of capital (the "Interest").
To have and to hold the Interest, together with all and singular rights,
privileges and appurtenances thereto, and anywise belonging or in any way
appertaining to the Withdrawing Limited Partner unto the Substituted Limited
Partner, its successors and assigns, forever.
(b) The Withdrawing Limited Partner hereby represents and warrants that it
is the sole owner of legal and beneficial title to all of the Interest, that it
has made no previous assignment of the Interest and that it owns the Interest
free and clear of all liens, claims and encumbrances and has full authority to
transfer and convey the Interest.
(c) Pursuant to Section 11.4 of the Partnership Agreement, the General
Partner hereby consents to the transfer of the Interest from the Withdrawing
Limited Partner to the Substituted Limited Partner pursuant to Section 11.3 A of
the Partnership Agreement.
(d) The change in limited partnership interests in the Partnership shall
become effective as of the date of this Agreement.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE
SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND EXEMPTIONS FROM THE
SECURITIES ACT OF 1933, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACTS.
<PAGE>
Section 2. Amendment to Partnership Agreement.
- -----------------------------------------------------
Pursuant to Sections 11.4 C and 14.1 B of the Partnership Agreement, the
General Partner, as general partner of the Partnership and as attorney-in-fact
for all its Limited Partners, hereby executes this instrument on their behalves
and amends the Partnership Agreement by deleting Exhibit A thereto in its
entirety and replacing it with the Exhibit A attached hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
VININGS INVESTMENT PROPERTIES TRUST
As General Partner
By: /s/ Stephanie A. Reed
--------------------------------
Name: Stephanie A. Reed
Title: Vice President
HALLMARK GROUP REAL ESTATE SERVICES CORP.
As Withdrawing Limited Partner
By: /s/ Martin H. Petersen
--------------------------------
Name: Martin H. Petersen
Title: President
PETER D. ANZO
As Substituted Limited Partner
By: /s/ Peter D. Anzo
--------------------------------
Name: Peter D. Anzo
CERTIFICATE OF DESIGNATION
CLASSIFYING AND DESIGNATING A SERIES OF PREFERRED SHARES
AS
SERIES A CONVERTIBLE PREFERRED SHARES
OF
VININGS INVESTMENT PROPERTIES TRUST
The Board of Trustees of VININGS INVESTMENT PROPERTIES TRUST, a
Massachusetts business trust (the "Trust"), DO HEREBY CERTIFY:
FIRST: Pursuant to the authority conferred upon the Board of Trustees by
Section 6.1.1 of the Third Amended and Restated Declaration of Trust, on July
28, 1999 the Board of Trustees of the Trust has duly classified and designated a
series of 2,050,000 Preferred Shares as "Series A Convertible Preferred Shares."
SECOND: The following is a description of the voting powers, designations,
preferences and relative, participating, optional and other special rights,
powers and duties of the Series A Convertible Preferred Shares:
SECTION 1. DESIGNATION AND NUMBER. A series of preferred shares designated
as the "Series A Convertible Preferred Shares" (par value $.01 per share) (the
"Series A Convertible Preferred Shares") is hereby established. The number of
authorized shares of Series A Convertible Preferred Shares constituting such
series shall be 2,050,000.
SECTION 2. RANKING. As to the payment of dividends and distributions,
including upon a Triggering Event, the Series A Convertible Preferred Shares
shall rank as set forth in this Section 2. The Series A Convertible Preferred
Shares shall rank senior to (i) all Shares that are not designated as Preferred
Shares of the Trust and (ii) all Shares that are designated Preferred Shares of
the Trust ranking junior to the Series A Convertible Preferred Shares
(collectively "Junior Shares"). The Series A Convertible Preferred Shares shall
rank junior to all Preferred Shares of the Trust designated as ranking senior to
the Series A Convertible Preferred Shares (collectively, "Senior Shares"). The
Series A Convertible Preferred Shares shall rank on a parity with all Preferred
Shares other than Junior Shares and Senior Shares (collectively, "Parity
Shares"). Notwithstanding the foregoing, the Trust shall not authorize or
create, or increase the authorized or issued amount of any class or series of
Series A Convertible Preferred Shares or reclassify any Shares into Senior
Shares, or create, authorize or issue any obligations or security convertible
into or evidencing the right to purchase any Series A Convertible Preferred
Shares, except as provided in Section 8(a).
<PAGE>
SECTION 3. DIVIDENDS AND DISTRIBUTIONS. (a) Payment of Dividends. The
holders of Series A Convertible Preferred Shares shall be entitled to receive
cumulative preferential cash dividends at the rate per annum of $0.4675 per
Series A Convertible Preferred Share. Such dividends shall be cumulative, shall
accrue from the Original Issuance Date and shall be payable (i) in semiannual
installments in arrears, on the fifteenth day (or, if not a Business Day, the
next succeeding Business Day) of February and August of each year commencing on
August 15, 1999 and, in the event of a conversion of Series A Convertible
Preferred Shares, on the conversion date (the "Dividend Payment Date"). The
amount of the dividend payable for any period shall be computed on the basis of
a 360-day year of twelve 30-day months and for any period shorter than a full
semiannual period for which dividends are computed, the amount of the dividend
payable shall be computed on the basis of the actual number of days elapsed in
such a 30-day month. If any date on which dividends are to be paid on the Series
A Convertible Preferred Shares is not a Business Day, then payment of such
dividend shall be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay) except that,
if such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. Dividends on the Series A Convertible
Preferred Shares shall be made to the holders of record of the Series A
Convertible Preferred Shares on the relevant record dates to be fixed by the
Trust, which record dates shall be the same day as the record date for any
dividend payable on Junior Shares, with respect to the same period, or, if no
such dividend is payable in respect of the Junior Shares, the 1st day of the
calendar month in which the applicable dividend falls or on such earlier date
designated on at least ten (10) days' notice by the Board of Trustees of the
Trust as the record date for such dividend that is not more than thirty (30) nor
less than ten (10) days prior to such Dividend Payment Date (the "Record Date").
(b) Dividends Cumulative. Dividends on the Series A Convertible Preferred
Shares shall accrue whether or not the terms and provisions of any agreement of
the Trust, including any agreement relating to its indebtedness at any time
prohibit the current payment of dividends, whether or not there are funds
legally available for the payment of such dividends and whether or not such
dividends are authorized. Accrued but unpaid dividends on the Series A
Convertible Preferred Shares shall accumulate as of the Dividend Payment Date on
which they first become payable. If cash dividends on the Series A Convertible
Preferred Shares are in arrears and unpaid for a period of sixty (60) days or
more, then an additional amount of dividends shall accrue on such amount in
arrears at a rate equal to fifteen percent (15.00%) per annum (the " Default
Rate") from the applicable Dividend Payment Date until paid. Any dividend
payment made on the Series A Convertible Preferred Shares shall first be
credited against any accrued but unpaid dividends with respect to such Series A
Convertible Preferred Shares and then to any current dividends required to be
paid.
(c) Priority as to Distributions. (i) So long as any Series A Convertible
Preferred Shares are outstanding, no distribution of cash or other property
shall be authorized, declared, paid or set apart for payment on or with respect
to any class or series of Junior Shares, nor shall any cash or other property be
<PAGE>
set aside for or applied to the purchase, redemption or other acquisition for
consideration of any Series A Convertible Preferred Shares, or any Shares other
than Senior Shares, unless, in each case, all distributions accumulated on all
Series A Convertible Preferred Shares and Parity Shares have been paid in full.
In determining whether to make any distributions pursuant to this Section 3(c),
the Board of Trustees of the Trust shall conservatively forecast future cash
flow requirements as to the ability to satisfy its obligations to the holders of
the Series A Convertible Preferred Shares. The foregoing sentence shall not
prohibit (a) distributions payable solely in Junior Shares, (b) the conversion
of Junior Shares into Shares ranking junior to the Series A Convertible
Preferred Shares, or (c) the redemption of Shares corresponding to any Series A
Convertible Preferred Share, Parity Share or Junior Share to be purchased by the
Trust pursuant to Section 6.12 of the Declaration of Trust to preserve the
Trust's status as a real estate investment trust, provided that such redemption
shall be upon the same terms as the corresponding purchase pursuant to Section
6.12 of the Declaration of Trust.
(ii) So long as distributions have not been paid in full (or a sum
sufficient for such full payment is not irrevocably deposited in trust for
payment) upon the Series A Convertible Preferred Shares and all Parity
Shares, all distributions authorized and declared on the Series A
Convertible Preferred Shares and all Parity Shares shall be authorized and
declared so that the amount of distributions authorized and declared per
Series A Convertible Preferred Share and per Parity Share shall in all
cases bear to each other the same ratio that accrued distributions per
Series A Convertible Preferred Share and per Parity Share bear to each
other.
(d) Prohibition on Distribution. No distributions on Series A Convertible
Preferred Shares shall be authorized by the Trust or paid or set apart for
payment by the Trust at any such time as the terms and provisions of any
agreement of the Trust or the Operating Partnership, including any agreement
relating to its indebtedness, prohibits such authorization, payment or setting
apart for payment or provides that such authorization, payment or setting apart
for payment would constitute a breach thereof or a default thereunder, or to the
extent that such authorization or payment shall be restricted or prohibited by
law. No such agreement prohibiting such payments prior to default exists as of
the date hereof and except as provided in Section 8(a), no agreement prohibiting
such payments shall be entered into, provided, however, that the Trust and/or
the Operating Partnership have and in the future may enter into agreements that
require the Trust or the Operating Partnership to maintain cash reserves.
(e) No Further Rights. Holders of Series A Convertible Preferred Shares
shall not be entitled to any distributions, whether payable in cash, other
property or otherwise, in excess of the full cumulative distributions described
herein.
SECTION 4. LIQUIDATION PROCEEDS. (a) Upon the occurrence of (i) a voluntary
sale, lease or transfer (for cash, shares, securities or other consideration) of
all or substantially all the assets of the Trust, the Operating Partnership, or
all of the Property Partnerships to any Person, (ii) the consolidation or merger
of the Trust, the Operating Partnership, or all of the Property Partnerships
(but only if such entity is not the surviving entity and the holders of such
<PAGE>
entity's equity securities before such event hold less than fifty percent (50%)
of the survivor's equity securities after such event) with or into any Person,
or (iii) a dissolution or winding up, voluntary or involuntary of the Trust, the
Operating Partnership, or all of the Property Partnerships (each, a "Triggering
Event"), the holders of Series A Convertible Preferred Shares shall be entitled
to receive out of the assets of the Trust legally available for distribution or
the proceeds thereof, after payment or provision for debts and other liabilities
of the Trust, but before any payment or distributions of the assets shall be
made to holders of Junior Shares, an amount equal to the sum of (i) a
liquidation preference in an amount equal to $4.46 per Series A Convertible
Preferred Share, or if a Triggering Event occurs prior to the first anniversary
of the Original Issuance Date, $4.25 per Series A Convertible Preferred Share,
and (ii) an amount equal to any accumulated and unpaid distributions thereon,
whether or not declared, to the date of payment (together, the "Liquidation
Preference"). In the event of any conflict between the provisions of this
Section 4 and Article VI of the Declaration of Trust, the provisions of this
Section 4 shall control.
(b) Notice. Written notice of any Triggering Event, stating the payment
date or dates when, and the place or places where, the amounts distributable in
such circumstances shall be payable, shall be given by (i) fax and (ii) by first
class mail, postage pre-paid, not less than thirty (30) and not more than sixty
(60) days prior to the payment date stated therein, to each record holder of the
Series A Convertible Preferred Shares at the respective addresses of such
holders as the same shall appear on the transfer records of the Trust.
(c) No Further Rights. After payment of the full amount of the Liquidation
Preference to which they are entitled, the holders of Series A Convertible
Preferred Shares shall have no right or claim to any of the remaining assets of
the Trust (it being understood that such holder may have additional rights or
claims to the remaining assets of the Trust as a result of its ownership of
Shares of other classes or series).
SECTION 5. OPTIONAL REDEMPTION. (a) Right of Optional Redemption. The
Series A Convertible Preferred Shares may not be redeemed prior to the third
anniversary of the Original Issuance Date; provided, however, that the Trust
may, in its sole discretion, redeem any Series A Convertible Preferred Shares
prior to such third anniversary to the extent that the proceeds used for such
redemption are obtained from the sale or refinancing of a property. On or after
the third anniversary of the Original Issuance Date, the Trust shall have the
right to redeem the Series A Convertible Preferred Shares, in whole but not in
part, at any time or from time to time, and prior to such third anniversary to
the extent of available proceeds from property sales or refinancings unless the
Board of Trustees of the Trust has determined that such proceeds are to be used
in an exchange pursuant to Section 1031 of the Internal Revenue Code the Trust
shall redeem the Series A Convertible Preferred Shares pro rata, except to the
extent that any holder of such Series A Convertible Preferred Shares has elected
not to have his, her or its pro rata share of Series A Convertible Preferred
Shares redeemed, in each case upon not less than thirty (30) nor more than sixty
(60) days' written notice, at a redemption price (the "Redemption Price"),
payable in cash equal to the Liquidation Preference that the holder would be
entitled to receive on the date fixed for redemption.
<PAGE>
(b) Procedures for Redemption. (i) Notice of redemption (a "Redemption
Notice") will be (a) faxed, and (b) mailed by the Trust, by certified mail,
postage prepaid, not less than thirty (30) nor more than sixty (60) days prior
to the redemption date, addressed to the respective holders of record of the
Series A Convertible Preferred Shares at their respective addresses as they
appear on the records of the Trust. No failure to give or defect in such
Redemption Notice shall affect the validity of the proceedings for the
redemption of any Series A Convertible Preferred Shares except as to the holder
to whom such Redemption Notice was defective or not given. In addition to any
information required by law, each such Redemption Notice shall state: (v) the
redemption date, (w) the Redemption Price, (x) the place or places where such
Series A Convertible Preferred Shares are to be surrendered for payment of the
Redemption Price, (y) that distributions on the Series A Convertible Preferred
Shares to be redeemed shall cease to accumulate on such redemption date and (z)
that payment of the Redemption Price will be made upon presentation and
surrender of such Series A Convertible Preferred Shares.
(ii) If the Trust gives a Redemption Notice in respect of Series A
Convertible Preferred Shares (which Redemption Notice will be irrevocable)
then, by 12:00 noon, New York City time, on the redemption date, the Trust
will deposit irrevocably in trust for the benefit of the Series A
Convertible Preferred Shares being redeemed funds sufficient to pay the
applicable Redemption Price and will give irrevocable instructions and
authority to pay such Redemption Price to the holders of the Series A
Convertible Preferred Shares upon surrender of the Series A Convertible
Preferred Shares by such holders at the place designated in the notice of
redemption. On and after the date of redemption, distributions will cease
to accumulate on the Series A Convertible Preferred Shares or portions
thereof called for redemption, unless the Trust defaults in the payment
thereof. If any date fixed for redemption of Series A Convertible Preferred
Shares is not a Business Day, then payment of the Redemption Price payable
on such date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect of any such delay)
except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price is improperly withheld or
refused and not paid by the Trust, distributions on such Series A
Convertible Preferred Shares will continue to accumulate from the original
redemption date to the date of payment, in which case the actual payment
date will be considered the date fixed for redemption for purposes of
calculating the applicable Redemption Price.
SECTION 6. CONVERSION. (a) Each Series A Convertible Preferred Share, may,
at the option of the holder thereof, be converted, in whole or in part, into one
Common Share at any time on or after the first anniversary of the Original
Issuance Date, whether or not the Trust has given a Redemption Notice under
Section 5, on the terms and conditions set forth in this Section 6.
Notwithstanding the foregoing, if a holder elects to convert its Series A
Convertible Preferred Shares into Common Shares, the Company may, in its sole
and absolute discretion, elect to purchase directly and acquire such Series A
Convertible Preferred Shares by paying to such holder the fair market value of
the Series A Convertible Preferred Shares on the day prior to the conversion
date as determined in good faith by the Board of Trustees of the Trust.
<PAGE>
(b) The holder of any Series A Convertible Preferred Shares may exercise
its right to convert such Series A Convertible Preferred Shares into Common
Shares (having the same economic rights as the Common Shares outstanding on the
date of this Certificate of Designation) by surrendering for such purpose to the
Trust, at its principal office or at such other office or agency maintained by
the Trust for that purpose, a certificate or certificates representing the
Series A Convertible Preferred Shares to be converted duly endorsed to the Trust
in blank accompanied by a written notice stating that such holder elects to
convert all or a specified whole number of such Series A Convertible Preferred
Shares in accordance with the provisions of this Section 6. To the extent that a
holder of Series A Convertible Preferred Shares elects to convert its Series A
Convertible Preferred Shares for Common Shares and such conversion, together
with all other Series A Convertible Preferred Shares tendered by other holders
for conversion into Common Shares, would violate the ownership limitation of the
Trust set forth in Section 6.12 of the Declaration of Trust, each holder of
Series A Convertible Preferred Shares shall be entitled to convert, pursuant to
the terms of this Section 6, only up to its pro rata share of that number of
Series A Convertible Preferred Shares which would comply with such ownership
limitation of the Trust, and any Series A Convertible Preferred Shares not so
exchanged ("Excess Shares") shall be redeemed by the Trust for cash in an amount
equal to the Liquidation Preference on the date of such redemption. The Trust
will pay any and all documentary, stamp or similar issue or transfer taxes that
may be payable in respect of any issue or delivery of Common Shares on
conversion of Series A Convertible Preferred Shares pursuant hereto. As promptly
as practicable, and in any event within five Business Days after the surrender
of such certificate or certificates and the receipt of such notice relating
thereto and, if applicable, payment of all transfer taxes, the Trust shall
deliver or cause to be delivered (i) certificates registered in the name of such
holder representing the number of validly issued, fully paid and nonassessable
Common Shares to which the holder of shares of Series A Convertible Preferred
Shares so converted shall be entitled and (ii) if less than the full number of
Series A Convertible Preferred Shares evidenced by the surrendered certificate
or certificates are being converted, a new certificate or certificates, of like
tenor, for the number of Series A Convertible Preferred Shares evidenced by such
surrendered certificate or certificates less the number of shares converted.
Such conversion shall be deemed to have been made at the close of business on
the date of receipt of such notice and of such surrender of the certificate or
certificates representing the Series A Convertible Preferred Shares to be
converted so that the rights of the holder thereof as to the shares being
converted shall cease except for the right to receive Common Shares and the
person entitled to receive such Common Shares shall be treated for all purposes
as having become the record holder of such Common Shares at such time.
<PAGE>
(c) Series A Convertible Preferred Shares may be converted at any time;
provided, however, that, if a Redemption Notice has been delivered pursuant to
Section 5, Series A Convertible Preferred Shares may not be converted pursuant
to this Section 6 after the twentieth (20th) day following the receipt of the
Redemption Notice by such holder.
(d) In the event of a conversion of Series A Convertible Preferred Shares,
any accrued and unpaid distributions, whether or not declared, to the date of
conversion on any Series A Convertible Preferred Shares tendered for conversion
shall, at the option of the holder, be paid to the holder of such Series A
Convertible Preferred Shares in cash or in Common Shares, and, if such Series A
Convertible Preferred Shares are tendered for Common Shares, the number of
Common Shares to be issued to such holder shall be calculated with reference to
the fair market value of the Common Shares on the day prior to the conversion
date as determined in good faith by the Board of Trustees of the Trust.
SECTION 7. COMPLIANCE WITH THE SECURITIES ACT. As a condition to a
conversion of the Series A Convertible Preferred Shares, the Trust may require
the holders of Series A Convertible Preferred Shares to make such
representations as may be reasonably necessary for the Trust to establish that
the issuance of Common Shares pursuant to such conversion shall not be required
to be registered under the Securities Act of 1933, as amended, or any state
securities laws. Any securities issued upon conversion shall be delivered as
shares which are duly authorized, validly issued, fully paid and nonassessable,
free of pledge, lien, encumbrance or restriction other than those provided in
the Declaration of Trust, the Securities Act of 1933, as amended, and relevant
state securities or blue sky laws or created by the converting holder of Series
A Convertible Preferred Shares.
The certificates representing the securities issued upon conversion of the
Series A Convertible Preferred Shares shall contain the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR (B) AN EXEMPTION FROM REGISTRATION
UNDER SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS THEREUNDER IF THE
COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE
HOLDER OF THE SECURITIES REPRESENTED HEREBY, OR OTHER EVIDENCE SATISFACTORY
TO THE COMPANY, THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION IS EXEMPT FROM SUCH PROVISIONS.
<PAGE>
SECTION 8. VOTING RIGHTS. (a) Holders of Series A Convertible Preferred
Shares shall not be entitled to vote on any matter on which holders of the
Common Shares are entitled to vote, provided that the holders of Series A
Convertible Preferred Shares shall have the right to vote as a separate class of
Shares on the following, each of which shall require the consent of holders of
record of Series A Convertible Preferred Shares representing more than
two-thirds of the Series A Convertible Preferred Shares outstanding at the time:
(i) to authorize or create, or increase the authorized or issued
amount of, any class or series of Senior Shares or reclassify any Shares
into Senior Shares, or create, authorize or issue any obligations or
security convertible into or evidencing the right to purchase any Senior
Shares; or
(ii) to amend, alter or repeal the provisions of the Declaration of
Trust, whether by merger, consolidation or otherwise, in each case in a
transaction or manner that would materially and adversely affect the
powers, special rights, preferences, privileges or voting power of the
Series A Convertible Preferred Shares; provided, however, that with respect
to the occurrence of a merger, consolidation or a sale or lease of all of
the Trust's assets as an entirety, so long as (l) the Trust is the
surviving entity and the Series A Convertible Preferred Shares remain
outstanding with the terms thereof unchanged, or (2) the resulting,
surviving or transferee entity is a partnership, limited liability company
or other pass-through entity organized under the laws of any state and
substitutes the Series A Convertible Preferred Shares for other interests
in such entity having substantially the same terms and rights as the Series
A Convertible Preferred Shares, including with respect to distributions,
voting rights and rights upon liquidation, dissolution or winding-up, then
the occurrence of any such event shall not be deemed to materially and
adversely affect such rights, privileges or voting powers of the holders of
the Series A Convertible Preferred Shares; and provided further that any
increase in the amount of Shares or the creation or issuance of any other
class or series of Shares or obligation or security convertible into or
evidencing the right to purchase any such Shares, in each case ranking
junior to the Series A Convertible Preferred Shares with respect to payment
of distributions or the distribution of assets upon liquidation,
dissolution or winding-up, shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers of the Series
A Convertible Preferred Shares. In the event of any conflict between the
provisions of Article VI of the Declaration of Trust and the provisions of
this Section 8, the provisions of this Section 8 shall control.
(b) In addition to the voting rights set forth in Section 8(a), without the
consent of holders of record of Series A Convertible Preferred Shares
representing more than two-thirds of the Series A Convertible Preferred Shares
outstanding, the Trust shall not consummate a Liquidation Transaction; provided,
however, that upon the effectiveness of an amendment to the Declaration of Trust
that grants to all holders of Shares the right to approve Liquidation
Transactions, the foregoing approval requirement shall terminate and the Trust
shall be permitted to consummate a Liquidation Transaction if it receives the
affirmative vote of at least a majority of the holders of Shares of the Trust,
including the Series A Convertible Preferred Shares voting on an as converted
basis.
<PAGE>
SECTION 9. OWNERSHIP LIMITATION. In applying the ownership limitation
contained in Section 6.12 of the Declaration of Trust to a holder of the Series
A Convertible Preferred Shares, the term "Limit" shall, in all cases, mean the
direct or indirect ownership by such holder (or such holder's group) in the
aggregate of more than 9.8% of the value of all outstanding Shares of the Trust.
All other provisions of Section 6.12 shall remain applicable to the holders of
the Series A Convertible Preferred Shares without alteration.
SECTION 10. DEFINITIONS. Capitalized terms used herein and not defined in
this Section 10 shall have the meanings ascribed to such terms in the
Declaration of Trust The following terms have the following respective meanings:
"Agreement of Purchase and Sale" shall mean, with respect to any Portfolio
Property, that certain Amended and Restated Agreement of Purchase and Sale,
dated February 15, 1999, as the same may be further amended, restated or
modified from time to time, that relates to the purchase and sale of such
Portfolio Property.
"Business Day" shall mean each day, other than a Saturday or a Sunday,
which is not a day on which banking institutions in New York, New York are
authorized or required by law, regulation or executive order to close.
"Declaration of Trust" shall mean the Third Amended and Restated
Declaration of Trust, dated July 1, 1999 of the Trust.
"Default Rate" shall have the meaning set forth in Section 3(b) of this
Certificate of Designation.
"Dividend Payment Date" shall have the meaning set forth in Section 3(a) of
this Certificate of Designation.
"Excess Shares" shall have the meaning set forth in Section 6(b) of this
Certificate of Designation.
"Heritage Transaction" shall mean the direct or indirect purchase by the
Operating Partnership of any interest in the Portfolio Properties.
"Junior Shares" shall mean all classes of Common Shares of the Trust and
each other class or series of interests of the Trust hereinafter created, the
terms of which do not expressly provide that it ranks senior to, or on a parity
with the Series A Convertible Preferred Shares, if authorized, as to dividends
and distributions upon liquidation, winding up and dissolution of the Trust.
<PAGE>
"Liquidation Preference" shall have the meaning set forth in Section 4(a)
of this Certificate of Designation.
"Liquidation Transaction" shall mean the occurrence of any of the
following:
(i) the sale, transfer or other disposition, in a single transaction
or series of related transactions, of greater than twenty five percent
(25%) of the assets of the Trust;
(ii) any merger or consolidation of the Trust with any other Person
other than any merger in which the Trust is the surviving entity and in
which (i) none of the Shares of the Trust outstanding immediately prior to
the merger are converted into, exchanged for or reclassified into cash,
securities or other property (or any combination thereof) pursuant to the
terms of the merger, and (ii) all of the Shares of the Trust outstanding
immediately prior to the merger remain outstanding following the merger
(other than Shares of the Trust voluntarily converted or exchanged by the
holders in accordance with their terms); or
(iii) any other transaction or series of related transactions which
results in the liquidation of the Trust.
"Original Issuance Date" shall mean, (i) with respect to a holder of Series
A Convertible Preferred Shares that were issued by the Trust in exchange for
Series A Convertible Preferred Units, the date on which such holder originally
acquired the Series A Convertible Preferred Units from the Operating
Partnership, and (ii) with respect to any other holder, the date on which such
holder originally acquired Series A Convertible Preferred Shares from the Trust.
"Operating Partnership" shall mean Vinings Investment Properties, L.P., a
Delaware limited partnership.
"Parity Shares" shall mean all classes and series of Shares of the Trust
the terms of which expressly provide that such Shares rank on a parity with the
Series A Convertible Preferred Shares as to dividends and distributions upon
liquidation, winding up and dissolution of the Trust.
"Portfolio Property" means any one of the properties constituting the
Heritage Transaction as described in Article II of the Agreement of Purchase and
Sale relating thereto, and "Portfolio Properties" shall mean all of the 17
multifamily properties constituting the Heritage Portfolio and described on
Exhibit C to the Securities Purchase Agreement, which are being purchased by the
Property Partnerships, whether directly or indirectly, in the Heritage
Transaction.
<PAGE>
"Property Partnership" shall have the meaning ascribed to the term
"Purchaser" in Article I of the Agreement of Purchase and Sale for a particular
Portfolio Property, and "Property Partnerships" shall mean collectively each
Property Partnership purchasing a Portfolio Property in the Heritage
Transaction.
"Securities Purchase Agreement" shall mean collectively, each Securities
Purchase Agreement entered into by and among the Operating Partnership, the
Trust and the purchasers named therein relating to the purchase and sale of
Series A Convertible Preferred Units or Series A Convertible Preferred Shares,
as the case may be.
"Trust" shall have the meaning set forth in the recitals to of this
Certificate of Designation.
"Record Date" shall have the meaning set forth in Section 3(a) of this
Certificate of Designation.
"Redemption Price" shall have the meaning set forth in Section 5(a) of this
Certificate of Designation.
"Series A Convertible Preferred Shares" shall have the meaning set forth in
Section 1 of this Certificate of Designation.
"Series A Convertible Preferred Units" shall mean the series of preferred
units of the Operating Partnership established by the Sixth Amendment to the
Amended and Restated Agreement of Limited Partnership.
"Triggering Event" shall have the meaning set forth in Section 4(a) of this
Certificate of Designation.
Section 11. No Sinking Fund. No sinking fund shall be established for the
retirement or redemption of Series A Convertible Preferred Shares.
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation has been executed on
behalf of the Trust by its President and attested by its Secretary on the 24th
day of March, 2000.
Attest: VININGS INVESTMENT PROPERTIES TRUST,
a Massachusetts business trust
By: /s/ Stephanie A. Reed
---------------------------------
Name: Stephanie A. Reed
Title: Secretary
By: /s/ Peter D. Anzo
---------------------------------
Name: Peter D. Anzo
Title: President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
consolidated balance sheet and statements of operations for Vinings Investment
Properties Trust for the three months ended March 31, 2000 and is qualified in
its entirety by reference to such financial statements as contained in the Form
10-Q report for the three months ended March 31, 2000.
</LEGEND>
<CIK> 0000759174
<NAME> Vinings Investment Properties Trust
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 2020267
<SECURITIES> 0
<RECEIVABLES> 69484
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 67799784
<DEPRECIATION> (3908703)
<TOTAL-ASSETS> 67808293
<CURRENT-LIABILITIES> 0
<BONDS> 56859339
0
0
<COMMON> 0
<OTHER-SE> 448431
<TOTAL-LIABILITY-AND-EQUITY> 67808293
<SALES> 0
<TOTAL-REVENUES> 2879386
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1872097
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1289235
<INCOME-PRETAX> (559171)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (559171)
<EPS-BASIC> (0.51)
<EPS-DILUTED> (0.51)
</TABLE>
