UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 1-9016
___________________________
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact name of registrant as specified in its charter)
Texas 75-6335572
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6220 North Beltline Road, Suite 205
Irving, Texas 75063-2656
(Address of principal executive offices) (Zip code)
(214) 550-6053
(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 _____
9,075,400 Shares of Beneficial Interest were outstanding as
of May 10, 1996.
American Industrial Properties REIT
Form 10-Q
For the Quarter Ended March 31, 1996
INDEX
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations for the three months
ended March 31, 1996 and 1995 3
Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II - Other Information
Item 1. Legal Proceedings 11
Item 3. Defaults Upon Senior Securities 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
American Industrial Properties REIT
Consolidated Statements of Operations
(unaudited, in thousands except share and per share data)
<TABLE>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
REVENUES
Rents $ 2,150 $ 2,104
Tenant reimbursements 667 675
Interest income 87 67
2,904 2,846
REAL ESTATE EXPENSES
Property operating expenses:
Property taxes 376 337
Property management fees 106 107
Utilities 107 114
General operating 230 177
Repairs and maintenance 49 119
Other property operating expenses 72 60
Depreciation and amortization 701 725
Interest on 8.8% notes payable 1,320 982
Interest on mortgages payable 408 479
Administrative expenses:
Trust administration and overhead 557 482
Litigation and proxy costs 488 9
4,414 3,591
Loss from real estate operations (1,510) (745)
Loss on sales of real estate - (191)
NET LOSS $ (1,510) $ (936)
PER SHARE DATA
Loss from real estate operations $ (0.17) $ (0.08)
Loss on sales of real estate - (0.02)
Net Loss $ (0.17) $ (0.10)
Distributions Paid $ 0.04 -
Number of shares outstanding 9,075,400 9,075,400
</TABLE>
The accompanying notes are an integral part of these financial statements.
American Industrial Properties REIT
Consolidated Balance Sheets
(in thousands, except share and per share data)
<TABLE>
March 31, December 31,
1996 1995
(unaudited)
ASSETS
<S> <C> <C>
Real estate:
Held for investment $ 97,201 $ 97,091
Held for sale 4,832 4,806
102,033 101,897
Accumulated depreciation (24,060) (23,441)
Net real estate 77,973 78,456
Cash and cash equivalents:
Unrestricted 7,053 7,694
Restricted 645 659
Total cash and cash equivalents 7,698 8,353
Other assets, net 2,594 2,573
Total Assets $ 88,265 $ 89,382
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
8.8% notes payable $ 45,239 $ 45,239
Mortgage notes payable 17,520 17,576
Accrued interest 6,498 5,178
Accounts payable, accrued expenses
and other liabilities 1,121 1,620
Tenant security deposits 512 521
Total Liabilities 70,890 70,134
Shareholders' Equity:
Shares of beneficial interest,
$0.10 par value authorized
10,000,000 Shares; issued and
outstanding 9,075,400 Shares 908 908
Additional paid-in capital 124,605 124,605
Retained earnings (deficit) (108,138) (106,265)
Total Shareholders' Equity 17,375 19,248
Total Liabilities and
Shareholders' Equity $ 88,265 $ 89,382
</TABLE>
The accompanying notes are an integral part of these financial statements.
American Industrial Properties REIT
Consolidated Statements of Cash Flows
(unaudited, in thousands)
<TABLE>
Three Months Ended
March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $(1,510) $ (936)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 701 725
Loss on sales of real estate - 191
Changes in operating assets and liabilities:
Decrease (increase) in other assets (45) (53)
Increase (decrease) in accounts payable,
accrued expenses and other liabilities
and tenant security deposits (508) (471)
Net Cash Used In Operating Activities (1,362) (544)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized improvements and
leasing commissions (194) (160)
Net proceeds from sales of real estate - 1,276
Net Cash Provided By (Used In)
Investing Activities (194) 1,116
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders (363) -
Principal repayments on
mortgage notes payable (56) (55)
Increase in accrued interest 1,320 973
Net Cash Provided By
Financing Activities 901 918
Net Change in Cash and Cash Equivalents (655) 1,490
Cash and Cash Equivalents at
Beginning of Period 8,353 7,521
Cash and Cash Equivalents
at End of Period $ 7,698 $ 9,011
Cash Paid for Interest $ 408 $ 488
</TABLE>
The accompanying notes are an integral part of these financial statements.
American Industrial Properties REIT
Notes to Consolidated Financial Statements
March 31, 1996
(unaudited)
Note 1 - Basis of Presentation
The accompanying consolidated financial statements are
presented in accordance with the requirements of Form 10-Q
and consequently do not include all of the disclosures
required by generally accepted accounting principles or
those contained in the Trust's Annual Report on Form 10-K.
Accordingly, these financial statements should be read in
conjunction with the audited financial statements of the
Trust for the year ended December 31, 1995, included in the
Trust's Annual Report on Form 10-K.
The financial information included herein has been prepared
in accordance with the Trust's customary accounting
practices and has not been audited. In the opinion of
management, the information presented reflects all
adjustments necessary for a fair presentation of interim
results. All such adjustments are of a normal and recurring
nature.
Certain amounts in prior year financial statements have been
reclassified to conform with the current year presentation.
Note 2 - Significant Accounting Policies
Principles of Consolidation. The consolidated financial
statements of the Trust include the accounts of American
Industrial Properties REIT and its wholly-owned
subsidiaries. Significant intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates. The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ significantly
from such estimates and assumptions.
Real Estate. The Trust carries its real estate at the lower
of depreciated cost or net realizable value. In accordance
with Statement of Financial Accounting Standards No. 121,
Accounting for Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of, the Trust records impairment
losses on long-lived assets used in operations when events
and circumstances indicate that the assets might be impaired
and the undiscounted cash flows estimated to be generated by
those assets are less than the related carrying amounts. In
addition, the Trust records impairment losses on assets held
for sale when the estimated sales proceeds, after estimated
selling costs, is less than the carrying value of the
related asset. At March 31, 1996, fourteen properties were
classified as held for investment and one property was
classified as held for sale. Should unforeseen factors
cause additional properties to be classified as held for
sale, significant adjustments to reduce the net book value
of such properties could be required.
Property improvements are capitalized while maintenance and
repairs are expensed as incurred. Depreciation of buildings
and capital improvements is computed using the straight-line
method over forty years. Depreciation of tenant
improvements is computed using the straight-line method over
ten years.
American Industrial Properties REIT
Notes to Consolidated Financial Statements (continued)
March 31, 1996
(unaudited)
Other Assets. Other assets consists primarily of deferred
rent receivable, prepaid leasing commissions and loan fees.
Deferred rent receivable arises as the Trust recognizes
rental income, including contractual rent increases or
delayed rent starts, on a straight-line basis over the lease
term. The Trust has recorded deferred rent receivable of
$772,000 and $810,000 at March 31, 1996 and December 31,
1995, respectively. Leasing commissions are capitalized and
amortized on a straight-line basis over the life of the
lease. Loan fees are capitalized and amortized to interest
expense on a level yield basis over the term of the related
loan.
Income Taxes. The Trust operates as a real estate
investment trust ("REIT") for federal income tax purposes.
Under the REIT provisions, the Trust is required to
distribute 95% of REIT taxable income and is allowed a
deduction for dividends paid during the year. No provisions
for Federal income taxes have been required or recorded to
date.
Note 3 - Zero Coupon Notes
In December 1993 and November 1994, the Trust partially in-
substance defeased certain of its Zero Coupon Notes due 1997
(the "Notes") totaling $16,365,000 (face amount at
maturity). At March 31, 1996, the accreted value of these
Notes was $13,492,000.
Note 4 - Litigation
On May 1, 1995, the Trust initiated a lawsuit against the
holder of its 8.8% unsecured notes payable ("MLI"),
alleging, among other things, that MLI and others had
engaged in acts of bad faith and conspiracy. This suit was
subsequently amended to name certain affiliates of Fidelity
Management and Research Company ("Fidelity") as additional
defendants and to specify damages. Based on the facts
surrounding this lawsuit, the Trust elected not to make a
scheduled semi-annual interest payment on May 27, 1995. MLI
thereafter declared the entire principal amount due and
payable and began accruing interest, effective June 13,
1995, at the 11.7% default rate specified in the Note
Purchase Agreement and filed a counterclaim seeking recovery
under the notes and attorneys' fees. Subsequently, on May
10, 1996, Fidelity filed a counterclaim against the Trust
seeking recovery for damages allegedly caused by the Trust's
refusal to consent to a transfer of the notes from MLI to
Fidelity. Management intends to vigorously defend against
the actions of the defendants and believes that the Trust's
claims will ultimately be resolved favorably to the Trust.
Although the Trust has, on occasion, entered into
negotiations with MLI regarding the settlement of this
litigation, including the possible purchase by the Trust of
the unsecured notes at a discount, there is no assurance
that such negotiations will be successful. Accordingly, in
the event that the loan is determined to be immediately due
and payable, and is not otherwise modified or restructured,
the Trust will be forced to consider such action as it deems
necessary to protect the interests of the Trust and its
shareholders, including seeking protection under applicable
bankruptcy laws.
American Industrial Properties REIT
Notes to Consolidated Financial Statements (continued)
March 31, 1996
(unaudited)
On January 8, 1996, the Trust filed a lawsuit in federal
court in Dallas, Texas against a major shareholder of the
Trust, alleging, among other things, violations of federal
and state securities laws. On January 30, 1996, the
defendants filed a counterclaim against the Trust and third
party claims against the Trust Managers, requesting that
certain Bylaw amendments be stricken, that a receiver be
appointed for the assets and business of the Trust, that the
Trust recover certain funds from the Trust Managers, and
that defendants recover an unspecified amount of damages and
attorneys' fees. On March 26, 1996, the court denied Pure
World's motion for partial summary judgment to appoint a
receiver for the Trust. The court ruled that the failure to
elect new Trust Managers or re-elect the current Trust
Managers at the last two annual shareholder meetings has not
resulted in a shareholder deadlock and is insufficient
grounds for the appointment of a receiver. Although
management believes these counterclaims and third party
claims to be without merit, no assurance can be given
regarding the ultimate outcome of this litigation.
On February 22, 1996, a shareholder of the Trust filed a
class action and derivative complaint against the Trust and
its Trust Managers, alleging interference with shareholders'
franchise rights and breach of fiduciary duty. The suit
seeks recovery of unspecified damages and attorneys' fees.
The court has since granted the Trust's and the Trust
Managers' motion to dismiss the class action claim, ruling
that such claim was improper. This suit has recently been
consolidated with the Trust's litigation described in the
preceding paragraph.
The costs of pursuing the above-described litigation and
defending against the actions of the defendants are expected
to be significant and could adversely affect the Trust's
resources and liquidity.
In addition to the foregoing and in the normal course of
business, the Trust is involved in legal actions relating to
the ownership and operations of its properties on occasion.
In management's opinion, the liabilities, if any, that may
ultimately result from such legal actions are not expected
to have a materially adverse effect on the consolidated
financial position of the Trust.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The table below provides a reconciliation of net loss, funds
from operations ("FFO") and funds available for distribution
("FAD") for the quarter ended March 31, 1996 and 1995.
Management believes that the presentation of FFO and FAD will
enhance the reader's understanding of the Trust's financial
condition as well as provide comparability to other real estate
investment trusts. Neither FFO or FAD should be considered an
alternative to net income as an indicator of the Trust's
operating performance or to cash flows from operations as a
measure of liquidity. The determination of FFO is based on the
definition adopted by the National Association of Real Estate
Investment Trusts which is net income (computed in accordance
with generally accepted accounting principles), adjusted to
exclude gains or losses from debt restructuring and sales of
property, depreciation and amortization and to include
adjustments for unconsolidated partnerships and joint ventures.
FAD is generally more indicative of the Trust's ability to make
distributions as it includes the effect of the Trust's capital
expenditures.
<TABLE>
(000)
Quarter Ended
March 31,
<S> <C> <C>
1996 1995
Net loss $(1,510) $(936)
Loss on sales of real estate - 191
Real estate depreciation and
amortization 700 706
Default rate interest accrual 327 -
Funds from operations ("FFO") (483) (39)
Capitalized improvements and
leasing commissions (194) (160)
Funds available for
distribution ("FAD") $(677) $(199)
</TABLE>
Quarter Ended March 31, 1996 and 1995
The net loss of the Trust increased by $574,000 when
comparing the quarter ended March 31, 1996 to the same quarter in
1995. This increase resulted from three factors: 1) the accrual
of default rate interest on the Trust's 8.8% unsecured notes
payable, which began in June 1995 and which amounted to $327,000
in the first quarter of 1996; 2) $488,000 in litigation and
proxy costs during the first quarter of 1996 compared to $9,000
in the first quarter of 1995; and 3) a $191,000 loss on the sale
of the Quadrant property in February 1995.
The Trust had an increase in net operating income of $12,000
when comparing the first quarter of 1996 to the same period in
1995. This reflects the sale of the Quadrant property in
February 1995 and the purchase of the Meridian property in August
1995. The Trust had higher interest income ($87,000 versus
$67,000) representing higher investment balances due to the non-
payment of interest on the Trust's 8.8% unsecured notes payable.
Interest expense on mortgages payable was $71,000 less as a
result of the payoff of mortgages on the Quadrant and Patapsco
properties. General and administrative costs increased by
$75,000 primarily due to higher professional fees.
FFO decreased by $444,000 when comparing the quarter ended
March 31, 1996 to the same quarter in 1995. This is attributable
to the increase of $479,000 in litigation and proxy costs. FAD
decreased by $478,000 due to these same factors affecting FFO and
the higher level of tenant improvements and leasing commissions
in 1996. These expenditures are indicative of the Trust's
leasing activity and, over time, will decrease as the portfolio
occupancy stabilizes.
The overall occupancy of the Trust's portfolio on March 31,
1996 was 93.9%. On a same property basis, overall occupancy
increased to 93.6% at March 31, 1996 from 93.1% a year earlier.
Also on a same property basis, revenue increased by 2.4% and net
operating income increased by 1.2% when comparing the quarter
ended March 31, 1996 to the same period in 1995. These amounts
reflect slightly higher operating expenses in 1996 and the write-
off of certain receivables in 1996 due to tenant defaults.
Liquidity and Capital Resources
At March 31, 1996, the Trust had approximately $7.1 million
in unrestricted cash reserves. These reserves could be decreased
significantly should the Trust elect to purchase additional real
estate properties or effect a refinancing or reduction of
existing debt, including the unsecured debt described below. The
Trust intends to continue efforts to recapitalize its debt
structure and, should such an opportunity materialize, the Trust
may seek to retire existing debt obligations with proceeds from
secured debt financings, property sales, cash on hand or a
combination of these sources. Such a transaction could require
the Trust to utilize significantly all of its unrestricted cash
reserves.
As more fully described in Part II, Item 1. Legal
Proceedings, the Trust is currently involved in litigation with
its unsecured noteholder. Effective June 13, 1995, the
noteholder declared the entire principal amount of $45,239,000
and accrued interest immediately due and payable and began
accruing interest on the outstanding principal amount at the
default rate of 11.7%. Although management disagrees with the
imposition of the default rate by the noteholder based on the
circumstances resulting in the litigation, generally accepted
accounting principles require that the Trust accrue interest at
the default rate. Management intends to vigorously defend
against the actions of the defendants and believes that the
Trust's claims will ultimately be resolved favorably to the
Trust. However, there is no assurance as to the ultimate
resolution of this litigation. Accordingly, in the event that
the loan is determined to be immediately due and payable, and is
not ultimately modified or restructured through the favorable
resolution of the litigation or otherwise, the Trust will be
forced to consider such action as it deems necessary to protect
the interests of the Trust and its shareholders, including
seeking protection under applicable bankruptcy laws.
The costs of pursuing this litigation and defending against
the actions of the defendants in the litigation described in the
previous paragraph and the litigation with Paul O. Koether and
Pure World, Inc. and Robert Strougo referred to in Part II, Item
1. Legal Proceedings, are expected to be significant and could
adversely affect the Trust's resources and liquidity.
Based upon the Trust's liquidity and improving performance
of its properties, the Trust declared a per share distribution of
$0.04 in February 1996. The Trust intends to evaluate future
distributions on a quarterly basis.
The initial capitalization of the Trust included
$179,698,000 face amount at maturity of Zero Coupon Notes due
1997 (the "Notes") secured by first or second liens on all of the
Trust's properties. In November 1994, the Trust completed a
$14,500,000 refinancing of two properties. The proceeds of this
refinancing were used to partially in-substance defease a portion
of the outstanding Notes. This partial defeasance resulted in
the release to the Trust of approximately $7.1 million in
restricted funds previously held by the Trustee as well as the
release of the liens securing the Notes which encumbered the
Trust's properties. At March 31, 1996, the face amount at
maturity and the accreted value of the defeased Notes were
$16,365,000 and $13,492,000, respectively.
Capitalized improvements and leasing commissions were
$194,000 for the quarter ended March 31, 1996 as compared to
$160,000 for the same period in 1995. This increase is primarily
related to the timing of lease turnover and related expenditures
and is reflective of the higher portfolio occupancy rate.
At March 31, 1996, the Trust had $17,520,000 in mortgage
debt outstanding. Of this amount, $1,937,000 represented
variable rate financing (with a weighted average interest rate of
10.75%) and $15,583,000 represented fixed rate financing (with a
weighted average interest rate of 8.62%).
PART II. OTHER INFORMATION
Item 1.Legal Proceedings.
The Manufacturers Life Insurance Company. On May 1, 1995,
the Trust filed a lawsuit against The Manufacturers Life
Insurance Company ("MLI"), the holder of the Trust's $45,239,000
8.8% unsecured notes payable, in the 134th Judicial District
Court in Dallas, Texas. The suit alleges that MLI, which on
April 21, 1995, had declared the Trust in default for non-
monetary violations of the Note Purchase Agreement, had breached
the Note Purchase Agreement between MLI and the Trust and had
unlawfully sought to coerce the Trust into relinquishing certain
of its rights. Specifically, the suit alleges, among other
things, that MLI and certain other entities had engaged in acts
of bad faith and conspiracy in an attempt to force the Trust to
consent to the transfer of the Trust's notes held by MLI to a
third party. The suit was subsequently amended to name Fidelity
Management and Research Company, Fidelity Galileo Fund L.P.,
Belmont Capital Partners II, L.P., Fidelity Puritan Trust, and
Fidelity Management Trust Company (together, the "Fidelity
Entities") as additional defendants and to specify damages to the
Trust of up to $20,000,000, plus an unspecified amount for
punitive damages.
Based on the facts surrounding this lawsuit, the Trust
elected not to make a scheduled semi-annual interest payment on
May 27, 1995. MLI thereafter declared the entire principal
amount and all accrued interest on the unsecured notes due and
payable and began accruing interest, effective June 13, 1995, at
the 11.7% default rate specified in the Note Purchase Agreement
and filed a counterclaim seeking recovery under the notes.
On October 3, 1995, The Manufacturers Life Insurance Company
(U.S.A.), Inc. ("MLI-USA") intervened in the lawsuit asserting
ownership of one of the notes. On the same day, MLI and MLI-USA
filed counterclaims against the Trust seeking recovery of all
amounts due under the notes and attorneys' fees. On October 19,
1995, the Trust filed answers to these counterclaims.
On October 18, 1995, MLI filed an Application for Temporary
Restraining Order and Injunctions in the lawsuit, seeking to
enjoin the Trust from paying a scheduled distribution to its
shareholders on October 23, 1995. On October 20, 1995, the
court, after hearing argument, denied MLI's Application.
On October 19, 1995, a Third Amended Petition, Application
for Declaratory Judgment, and Application for Injunctive Relief
was filed by the Trust, stating that MLI had wrongfully declared
a default and wrongfully accelerated the maturity of the notes.
On May 10, 1996, Fidelity filed a counterclaim against the
Trust seeking recovery for damages allegedly caused by the
Trust's refusal to consent to a transfer of the notes from MLI to
Fidelity.
Although there can be no assurance as to the outcome of the
litigation, management intends to vigorously defend against the
actions of the defendants and believes that the Trust's claims
will ultimately be resolved favorably to the Trust. Although the
Trust has, on occasion, entered into negotiations with MLI
regarding the settlement of this litigation, including the
possible purchase by the Trust of the unsecured notes at a
discount, there is no assurance that such negotiations will be
successful. Accordingly, in the event that the loan is
determined to be immediately due and payable, and is not
otherwise modified or restructured, the Trust will be forced to
consider such action as it deems necessary to protect the
interests of the Trust and its shareholders, including seeking
protection under applicable bankruptcy laws.
Paul O. Koether and Pure World, Inc. On January 8, 1996,
the Trust filed a lawsuit in federal court in Dallas, Texas,
against Pure World, Inc. and Paul O. Koether. The suit alleges,
among other things, violations under federal and state securities
law for material misrepresentations and omissions made by the
defendants in filings made with the Securities and Exchange
Commission regarding undisclosed meetings and correspondence
between the defendants and representatives of MLI, the Trust's
largest unsecured creditor, regarding the proposed purchase at a
discount of the Trust's unsecured notes held by MLI. The Trust
seeks injunctive relief preventing future discussions with MLI
regarding the purchase of the Trust's unsecured notes, further
attempts to gain control of the Trust by the defendants and any
further purchases of shares in the Trust by the defendants until
proper disclosures are made. In addition, the Trust seeks a
declaratory judgment regarding enforcement of the share ownership
restrictions contained in the Trust's Bylaws and injunctive
relief preventing the voting of shares accumulated in excess of
the share ownership limitations contained in the Bylaws. The
Trust also seeks recovery of distributions paid on shares
accumulated in excess of these share ownership limitations.
On January 30, 1996, the defendants filed an answer,
counterclaims and a third party complaint. The third party
complaint was filed against the Trust Managers of the Trust. In
their counterclaim and third party claims, the defendants are
requesting that certain Bylaw amendments be stricken, that the
court issue an injunction until an additional independent Trust
Manager is appointed, that a receiver be appointed for the assets
and business of the Trust, that the Trust recover certain funds
from the Trust Managers, and that the defendants recover an
unspecified amount of damages and attorneys' fees. The Trust
filed a Motion to Dismiss, which the court granted in part,
requiring the defendants to replead their counterclaim. On March
26, 1996, the court denied Pure World's motion for partial
summary judgment to appoint a receiver for the Trust. The court
ruled that the failure to elect new Trust Managers or re-elect
the current Trust Managers at the last two annual shareholder
meetings has not resulted in a shareholder deadlock and is
insufficient grounds for the appointment of a receiver. Although
management believes these counterclaims and third party claims to
be without merit, no assurance can be given regarding the
ultimate outcome of this litigation and its financial effect upon
the Trust.
Robert Strougo. On February 22, 1996, a class action and
derivative complaint was filed against the Trust and its Trust
Managers by an alleged shareholder of the Trust, Robert Strougo.
The suit alleges, among other claims, interference with
shareholders' franchise rights and breach of fiduciary duty and
seeks recovery of unspecified damages and attorneys' fees. The
court has since granted the Trust's and the Trust Managers'
motion to dismiss the class action claim, ruling that such claim
was improper. This suit was recently consolidated with the
Trust's litigation described in "Paul O. Koether and Pure World,
Inc." above. Although management believes that this suit is
without merit, no assurance can be given regarding the ultimate
outcome of this litigation and its financial effect upon the
Trust.
The costs of pursuing the above-described litigation and
defending against the actions of the defendants are expected to
be significant and could adversely affect the Trust's resources
and liquidity.
Item 3.Defaults Upon Senior Securities.
Reference is made to Item 3., Defaults Upon Senior
Securities, in the Trust's Form 10-Q for the period ending June
30, 1995. As of March 31, 1996, the Trust had $45,239,000 in
principal indebtedness to MLI and approximately $6,397,000 of
accrued interest thereon. The accrued interest reflects a
default rate of 11.7% effective June 13, 1995.
Item 6.Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description
27.1 (filed herewith) Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K dated January 8, 1996,
reporting Item 5.
Current Report on Form 8-K dated January 10, 1996,
reporting Item 5.
Current Report on Form 8-K dated February 6, 1996,
reporting Item 5.
Current Report on Form 8-K dated March 1, 1996,
reporting Item 5.
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, thereunto duly authorized.
AMERICAN INDUSTRIAL PROPERTIES REIT
(Registrant)
Date: May 15, 1996 /s/MARC A.SIMPSON
Marc A. Simpson
Vice President and Chief Financial Officer
(principal accounting and financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,698
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 102,033
<DEPRECIATION> (24,060)
<TOTAL-ASSETS> 88,265
<CURRENT-LIABILITIES> 70,890
<BONDS> 0
0
0
<COMMON> 908
<OTHER-SE> 16,467
<TOTAL-LIABILITY-AND-EQUITY> 88,265
<SALES> 0
<TOTAL-REVENUES> 2,904
<CGS> 0
<TOTAL-COSTS> 2,686
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,728
<INCOME-PRETAX> (1,510)
<INCOME-TAX> (1,510)
<INCOME-CONTINUING> (1,510)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,510)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
