<PAGE> 1
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 June 30, 1997
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 incorporation (I.R.S. Employer
or organization) Identification No.)
6210 NORTH BELTLINE ROAD, SUITE 170
IRVING, TEXAS 75063-2656
(Address of principal executive offices) (Zip Code)
(972) 756-6000
(Registrant's telephone number, including area code)
6220 North Beltline Road, Suite 205, Irving, Texas 75063-2656
(Former name, former address and former fiscal year, if changed since last
report.)
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 _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 23,289,867 Shares
of Beneficial Interest were outstanding as of August 11, 1997.
<PAGE> 2
AMERICAN INDUSTRIAL PROPERTIES REIT
FORM 10-Q
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations for the three months and six months
ended June 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets as of June 30, 1997 (unaudited) and
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the six months ended
June 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 2. Changes in the Rights of the Company's Security Holders . . . . . . . . . . . . . 14
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
2
<PAGE> 3
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- --------------------------
1997 1996 1997 1996
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
REVENUES
Rents $ 1,925 $ 2,268 $ 3,895 $ 4,418
Tenant reimbursements 659 761 1,326 1,428
Interest income 2 52 31 139
---------- --------- ---------- ---------
2,586 3,081 5,252 5,985
---------- --------- ---------- ---------
EXPENSES
Property operating expenses:
Property taxes 332 366 687 742
Property management fees 96 111 194 217
Utilities 86 110 183 217
General operating 203 191 422 421
Repairs and maintenance 90 116 179 165
Other property operating expenses 98 73 176 145
Depreciation and amortization 697 707 1,390 1,408
Interest on 8.8% notes payable 495 1,029 885 2,349
Interest on mortgages payable 947 403 1,961 811
Administrative expenses:
Trust administration and overhead 395 333 811 890
Litigation and proxy costs 201 400 437 888
---------- --------- ---------- ---------
3,640 3,839 7,325 8,253
---------- --------- ---------- ---------
Loss from operations (1,054) (758) (2,073) (2,268)
Extraordinary gain on
extinguishment of debt -- 1,367 2,643 1,367
Gain on sale of real estate -- -- 312 --
---------- --------- ---------- ---------
NET INCOME (LOSS) $ (1,054) $ 609 $ 882 $ (901)
========== ========= ========== =========
PER SHARE DATA
Loss from operations $ (0.11) $ (0.08) $ (0.20) $ (0.25)
Extraordinary gain on
extinguishment of debt -- 0.15 0.26 0.15
Gain on sale of real estate -- -- 0.03 --
---------- --------- ---------- ---------
Net Income (Loss) $ (0.11) $ 0.07 $ 0.09 $ (0.10)
========== ========= ========== =========
Distributions Paid $ -- $ 0.04 $ -- $ 0.04
========== ========= ========== =========
Weighted average number of
common shares outstanding 10,000,000 9,075,400 10,000,000 9,075,400
========== ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
-------- ------------
(unaudited)
<S> <C> <C>
Real estate:
Held for investment $ 92,074 $ 84,693
Held for sale -- 9,779
-------- --------
92,074 94,472
Accumulated depreciation (24,249) (23,973)
-------- --------
Net real estate 67,825 70,499
Cash and cash equivalents:
Unrestricted 1,253 4,010
Restricted 1,104 1,366
-------- --------
Total cash and cash equivalents 2,357 5,376
Other assets, net 3,103 3,061
-------- --------
Total Assets $ 73,285 $ 78,936
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 41,547 $ 43,797
8.8% notes payable 5,450 9,419
Accrued interest 973 602
Accounts payable, accrued expenses and other
liabilities 1,286 1,964
Tenant security deposits 464 471
-------- --------
Total Liabilities 49,720 56,253
-------- --------
Shareholders' Equity:
Preferred shares, $0.10 par value; 50,000,000
shares authorized; none issued or outstanding -- --
Shares of beneficial interest, $0.10 par value;
500,000,000 Shares authorized; 10,000,000
Shares issued and outstanding 1,000 1,000
Additional paid-in capital 127,056 127,056
Accumulated distributions (58,456) (58,456)
Accumulated loss from operations and
extraordinary gains (losses) (47,495) (48,065)
Accumulated net realized gain on sales of
real estate 1,460 1,148
-------- --------
Total Shareholders' Equity 23,565 22,683
-------- --------
Total Liabilities and Shareholders' Equity $73,285 $ 78,936
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
AMERICAN INDUSTRIAL PROPERTIES REIT
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 882 $ (901)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Extraordinary gain on extinguishment of debt (2,643) (1,367)
Gain on sale of real estate (312) --
Depreciation 1,218 1,244
Amortization of deferred financing costs 98 36
Other amortization 172 164
Changes in operating assets and liabilities:
Decrease (increase) in other assets and restricted cash 57 (141)
Decrease in accounts payable, other
liabilities and tenant security deposits (623) (186)
Increase (decrease) in accrued interest 636 (3,294)
------- -------
Net Cash Used In Operating Activities (515) (4,445)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized improvements and leasing commissions (430) (618)
Net proceeds from sales of real estate 2,029 --
------- -------
Net Cash Provided By (Used In) Investing Activities 1,599 (618)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on mortgage notes payable (3,841) (113)
Distributions to shareholders -- (363)
------- -------
Net Cash Used In Financing Activities (3,841) (476)
------- -------
Net Decrease in Unrestricted Cash and Cash Equivalents (2,757) (5,539)
Unrestricted Cash and Cash Equivalents at Beginning of Period 4,010 7,694
------- -------
Unrestricted Cash and Cash Equivalents at End of Period $ 1,253 $ 2,155
======= =======
Cash Paid for Interest $ 2,112 $ 6,454
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(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, 1996, 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 held for investment
at depreciated cost unless the asset is determined to be impaired.
Real estate classified as held for sale is carried at the lower of
depreciated cost or fair market value less costs to sell. 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 expected
undiscounted cash flows estimated to be generated by those assets are
less than the related carrying amounts. If an asset held for
investment is determined to be impaired, the impairment would be
measured based upon the excess of the asset's carrying value over the
fair value. 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 June 30, 1997, all of the Trust's properties were
classified as held for investment. Should unforeseen factors cause
certain properties to be reclassified to 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.
6
<PAGE> 7
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
(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 $553,000 and $599,000 at June 30, 1997 and December 31,
1996, 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.
Earnings per share. Earnings per share is computed based upon the
weighted average number of common shares outstanding. The computation
of earnings per share does not include common share equivalents as the
inclusion of such does not result in dilution (based upon application
of the "treasury stock" method) or, in periods where there is a net
loss, is anti-dilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings Per
Share" ("Statement 128"). Statement 128 specifies the computation,
presentation and disclosure requirements for basic earnings per share
and diluted earnings per share. Management believes that adoption of
Statement 128 will not have a material effect on the Trust's earnings
per share.
Share Compensation. The Trust accounts for its share compensation
arrangements under the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25")
and intends to continue to do so. See Note 5 for a discussion of the
Trust's share compensation arrangements.
NOTE 3 - ZERO COUPON NOTES
In December 1993 and November 1994, the Trust deposited United States
Government investment securities into an irrevocable trust to complete
in-substance defeasance of certain of its Zero Coupon Notes due
November 1997. The debt, which aggregated $15,606,000 at June 30,
1997, was accounted for as if extinguished in December 1993 and
November 1994. The funds in the trust, which will be used solely to
satisfy the principal and interest of the defeased debt, will be
sufficient to satisfy all future debt service requirements for the
defeased debt instruments.
7
<PAGE> 8
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
(unaudited)
NOTE 4 - SHAREHOLDER TRANSACTIONS
On February 26, 1997, USAA Real Estate Company ("REALCO"), the owner
at that time of approximately 31.8% of the Trust's outstanding Shares
of Beneficial Interest (the "Shares"), purchased outstanding
indebtedness of the Trust totaling $9,419,213. Pursuant to an earlier
agreement with the Trust, the notes were then modified by REALCO to,
among other things, reduce the principal amount of these notes from
$9,419,213 to $7,040,721, resulting in an extraordinary gain on
extinguishment of debt (including certain accrued interest) to the
Trust of $2,643,000. At the time the notes were modified, the Trust
made a principal payment of $1,591,103, reducing the outstanding
principal amount to $5,449,618. According to the modification terms,
interest continues to accrue at 8.8%, payable monthly, and the
maturity of the notes is extended from March 31, 1997 to December 31,
2000. Pursuant to shareholder approval on June 30, 1997, REALCO has
the option to convert the principal amount of the notes into Shares of
the Trust at the conversion rate of $2.00 per share (if converted
prior to December 31, 1997) or $2.25 per share (if converted between
December 31, 1997 and December 31, 2000). The Trust currently expects
REALCO to elect this conversion in the fourth quarter of 1997. As a
result, the Trust will reflect approximately $1,022,000, based upon
the difference between the market trading price of $2.38 per share on
February 26, 1997 and the $2.00 conversion price, as interest expense
between February 26, 1997 and September 30, 1997. The date of February
26, 1997 is used to measure market value as this is deemed to be the
date of issuance of the modified note, which contains the
convertibility option. Based upon these assumptions, the Trust
recorded additional interest expense of $375,000 in the second quarter
of 1997 ($647,000 for the six months ended June 30, 1997) and expects
to record the remaining $375,000 in interest expense in the third
quarter of 1997.
On June 30, 1997, the shareholders of the Trust approved an increase
in the authorized number of shares of beneficial interest from
10,000,000 to 500,000,000 and approved the authorization of 50,000,000
preferred shares. The preferences or rights of the preferred shares,
which have a par value per share of $0.10, will be set as such shares
are issued.
NOTE 5 - INCENTIVE COMPENSATION
On June 30, 1997, the shareholders of the Trust approved an Employee
and Trust Manager Incentive Share Plan (the "Plan"). The Plan, which
is to be administered by the Compensation Committee of the Board of
Trust Managers (the "Committee"), reserves a total of 800,000 common
shares for issuance under the Plan pursuant to the exercise of
incentive and non-qualified share options and the grant of restricted
share awards. On June 30, 1997, the Committee awarded a total of
625,000 options to management with an exercise price of $3.00 (the
closing trading price of common shares on June 30, 1997), an
expiration date of June 30, 2007, and vesting of 20% annually,
beginning on June 30, 1997. As provided in the Plan, the Committee
also awarded 10,000 options to each Trust Manager with an exercise
price of $3.00, an expiration date of June 30, 2007, and immediate
vesting.
The Trust has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because the alternative fair
value accounting provided for under Statement 123 requires use of
option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of
the Trust's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
8
<PAGE> 9
AMERICAN INDUSTRIAL PROPERTIES REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
(unaudited)
NOTE 6 - SUBSEQUENT EVENTS
In July 1997, the Trust sold a total of 7,167,418 Shares to clients
and affiliates of Morgan Stanley Asset Management, Inc. (collectively
"MSAM"). Pursuant to an earlier agreement, the Shares were issued at
$2.45 per Share, generating total proceeds of $17,560,176. Also in
July 1997, the Trust sold to certain clients of ABKB/LaSalle
Securities Limited Partnership and LaSalle Advisors Limited
Partnership (collectively, "ABKB") a total of 6,122,449 Shares at
$2.45 per Share for total proceeds of $15,000,000. The agreement with
MSAM allows them to purchase an additional 995,847 Shares at $2.45 per
Share. In connection with these transactions, the Board of Trust
Managers was expanded from five to eight members, with two MSAM
representatives and one ABKB representative appointed as Trust
Managers.
On July 7, 1997, the Trust signed definitive merger agreements with
USAA Real Estate Income Investments I, A California Limited
Partnership, USAA Real Estate Income Investments II Limited
Partnership, a Texas limited partnership, USAA Income Properties III
Limited Partnership, a Delaware limited partnership, and USAA Income
Properties IV Limited Partnership, a Delaware limited partnership
(collectively, the "RELPs") pursuant to which the RELPs will be merged
into the Trust (the "Merger"). If the Merger is accomplished, the
Trust will acquire nine real estate properties consisting of three
office buildings totaling 550,000 square feet, two industrial
properties totaling 320,000 square feet, three office/research and
development properties totaling 156,000 square feet, and one retail
property totaling 77,000 square feet. In addition, the Trust will
acquire a 55.84% joint venture interest in a 291,000 square foot office
property. The agreed value of the interests in these properties,
including assumption of $31,704,000 in related debt, is $89,622,000.
Pursuant to the terms of the agreements, the Trust will issue an
aggregate of 22,064,147 shares of beneficial interest at $2.625 per
share (for a total value of $57,918,385) to the limited partners in the
RELPs in exchange for their limited partnership interests in the RELPs.
The Merger, which has been approved by the Trust's Board of Trust
Managers and the Board of Directors of each of the general partners of
the RELPs, is subject to due diligence by both parties and certain
other conditions, including approval by the shareholders of the Trust
and the limited partners of each of the RELPs.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with all of the
financial statements and notes thereto appearing elsewhere in this report as
well as the audited financial statements appearing in the Trust's 1996 Annual
Report to Shareholders. The statements contained in this report that are not
historical facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Sections 21E of the
Securities Act of 1934, as amended. Actual results may differ materially from
those included in the forward-looking statements. These forward-looking
statements involve risks and uncertainties including, but not limited to, the
following: changes in general economic conditions in the markets that could
impact demand for the Trust's properties and changes in financial markets and
interest rates impacting the Trust's ability to meet its financing needs and
obligations.
RESULTS OF OPERATIONS
The table below provides a reconciliation of net loss, funds from
operations ("FFO") and funds available for distribution ("FAD") for the three
months and six months ended June 30, 1997 and 1996. The determination of FFO
is based on the definition adopted by the National Association of Real Estate
Investment Trusts ("NAREIT") which is net income (loss) computed in accordance
with generally accepted accounting principles, excluding gains or losses from
debt restructuring and sales of property, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures. In addition, NAREIT recommends that extraordinary items or
significant non-recurring items that distort comparability should not be
considered in arriving at FFO. Accordingly, the Trust does not include the
interest expense accrued related to the expected future conversion of certain
debt into equity or the default rate interest accrued on its $45.2 million in
unsecured notes payable in the determination of FFO. FAD is also presented as
it more accurately portrays the ability of the Trust to make distributions
because it reflects capital expenditures. The Trust believes FFO and FAD are
appropriate measures of performance relative to other REITs. FFO provides
investors with an understanding of the ability of the Trust to incur and
service debt and make capital expenditures. There can be no assurance that FFO
and FAD presented by the Trust is comparable to similarly titled measures of
other REITs. While other REITs may not always use a similar definition, this
information does add comparability to those which have adopted the NAREIT
definitions.
FFO and FAD should be not be considered as an alternative to net
income or other measurements under generally accepted accounting principles as
an indicator of the Trust's operating performance or to cash flows from
operating, investing or financing activities as a measure of liquidity. FFO
does not reflect working capital changes, cash expenditures for capital
improvements or principal payments on indebtedness.
10
<PAGE> 11
<TABLE>
<CAPTION>
(000) (000)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $(1,054) $ 609 $ 882 $ (901)
Exclude effects of:
Gain on sales of real estate - - (312) -
Extraordinary gain on extinguishment of debt - (1,367) (2,643) (1,367)
Real estate depreciation and amortization 696 704 1,389 1,404
Additional interest accrual assuming future
conversion of debt to equity 375 - 647 -
Default rate interest accrual - 42 - 369
------- ------- ------- --------
FUNDS FROM OPERATION ("FFO") $ 17 $ (12) $ (37) $ (495)
======= ======= ======= ========
Funds from operation ("FFO") $ 17 $ (12) $ (37) $ (495)
Capitalized improvements and leasing commissions (254) (424) (430) (618)
GAAP straight line rent adjustment 1 71 45 109
------- ------- ------- --------
Funds available for distribution ("FAD") $ (236) $ (365) $ (422) $ (1,004)
======= ======= ======= ========
</TABLE>
Three Months Ended June 30, 1997 and 1996
The overall occupancy of the Trust's portfolio on June 30, 1997 was
93.7%, compared to 93.9% on June 30, 1996 and 91.1% on March 31, 1997.
Property revenues decreased from $3,029,000 to $2,584,000 and property
operating expenses decreased from $967,000 to $905,000 when comparing the
quarter ended June 30, 1996 to the same quarter in 1997, primarily as a result
of the sale of two properties during the fourth quarter of 1996 and one
property during the first quarter of 1997. When comparing the quarter ended
June 30, 1997 to the same period in 1996 on a same property basis, revenue
increased 4.7% and net operating income increased 2.7% for the Trust's
industrial properties whereas revenue decreased 17.4% and net operating income
decreased 28.3% for the Trust's retail property. The decline in the
performance of the Trust's retail property was primarily related to collection
of approximately $80,000 in lease termination fees during the second quarter of
1996 and to a decline in average occupancy from 85.5% for the quarter ended at
June 30, 1996 to 83.8% for the quarter ended June 30, 1997. The Trust is
continuing its efforts to increase leasing at this property.
The Trust had a net loss from operations of $1,054,000 for the
quarter ended June 30, 1997 compared to $758,000 for the same quarter in 1996.
This increased loss was primarily related to the decrease in property net
operating income of $383,000 explained above and an increase in administration
and overhead expenses of $62,000 (due primarily to the addition of two Trust
Managers in December 1996 and the use of compensation and computer consultants
during 1997), offset by a decrease in litigation and proxy costs of $199,000
(due to the settlement of litigation matters during 1996, offset by the costs
of the Trust's special shareholder meeting in June 1997).
FFO for the Trust improved from $(12,000) to $17,000 when comparing
the quarter ended June 30, 1996 to the same quarter in 1997. This improvement
primarily results from the increased loss from operations explained above and
the offsetting elimination of $375,000 in accrued interest related to the
expected future conversion of the REALCO debt to equity.
11
<PAGE> 12
Six Months Ended June 30, 1997 and 1996
When comparing the six months ended June 30, 1997 with the same period
in 1996, property revenues decreased from $5,846,000 in 1996 to $5,221,000 in
1997 and property operating expenses decreased from $1,907,000 in 1996 to
$1,841,000 in 1997, primarily as a result of the sale of two properties during
the fourth quarter of 1996 and one property during the first quarter of 1997.
When comparing the six months ended June 30, 1997 to the same period in 1996 on
a same property basis, revenue increased 6.7% and net operating income
increased 5.6% for the Trust's industrial properties whereas revenue decreased
14.3% and net operating income decreased 24.6% for the Trust's retail property.
The decline in the performance of the Trust's retail property was primarily
related to nonrecurring collections of approximately $80,000 in lease
termination fees and $76,000 in percentage rents in 1996, bad debt writeoffs of
approximately $20,000 in 1997 and a decline in average occupancy from 86.2% in
1996 to 84.8% in 1997. As noted above, the Trust is continuing its efforts to
increase leasing at this property.
The Trust had a net loss from operations of $2,073,000 for the six
months ended June 30, 1997 compared to $2,268,000 for the same period in 1996.
This change was primarily related to the decrease in property net operating
income of $559,000 explained above, a decrease in interest income of $108,000
(resulting from a decrease in investable funds due to the settlement of
litigation in 1996), a decrease in litigation and proxy costs of $451,000 (due
to the settlement of litigation matters during 1996, offset by the costs of the
Trust's special shareholder meeting in June 1997), a net decrease in interest
expense of $314,000 (due to the paydown/forgiveness of debt during 1996 and
1997, offset by the accrual of $647,000 in interest expense relating to the
expected future conversion of the REALCO debt to equity), and a decrease in
administration and overhead expenses of $79,000 (due to $240,000 in incentive
compensation expense in January 1996, offset by the addition of two Trust
Managers in December 1996 and the use of compensation and computer consultants
during 1997).
FFO for the Trust improved from $(495,000) to $(35,000) when comparing
the six months ended June 30, 1996 to the same period in 1997. This
improvement reflects the loss from operations explained above and adjustments
to eliminate $647,000 in accrued interest related to the expected future
conversion of the REALCO debt to equity in 1997 and $369,000 in default rate
interest on the MLI notes in 1996.
Net cash used in operating activities was $515,000 for the six months
ended June 30, 1997. This is primarily the net result of the operational items
discussed above, a decrease in accounts payable, other liabilities and tenant
security deposits of $623,000 (due principally to the payment of property taxes
during the first quarter) and an offsetting increase in accrued interest of
$636,000 (due to the accrual of $647,000 in interest related to the REALCO debt
conversion). Included in net cash used in operating activities is
approximately $437,000 in litigation and proxy costs, which management believes
is of a nonrecurring nature. Management believes that, in the future, cash
flow provided by operations will increase due to the elimination of such
nonrecurring items and the Trust's plans to pursue a growth strategy.
Net cash provided by investing activities was $1,599,000 for the six
months ended June 30, 1997 resulting from the expenditure of $430,000 for
capitalized leasing commissions and improvements to real estate properties and
$2,029,000 received from the sale of the Trust's Burnsville property in March
1997.
Net cash used in financing activities was $3,841,000, resulting from
the payment of principal on mortgage notes payable. Included in this amount is
approximately $1,924,000 related to the payment of the mortgage lien on the
Trust's Burnsville property which was sold in March 1997.
12
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
On July 10, 1997 and July 17, 1997, the Trust sold a total of
7,167,418 Shares to clients and affiliates of Morgan Stanley Asset Management,
Inc. (collectively "MSAM"). Pursuant to an earlier agreement, the shares were
issued at $2.45 per Share, generating total proceeds of $17,560,176. On July
11, 1997, the Trust sold to certain clients and affiliates of ABKB/LaSalle
Securities Limited Partnership and LaSalle Advisors Limited Partnership
(collectively, "ABKB") a total of 6,122,449 Shares at $2.45 per Share for total
proceeds of $15,000,000. The agreement with MSAM allows them to purchase an
additional 995,847 Shares at $2.45 per Share.
The Trust intends to utilize these funds to execute a growth strategy
which will emphasize the purchase of light industrial real estate properties.
The Trust believes that such properties represent a highly fragmented sector of
the industry and offer superior yields because of the general lack of pricing
pressure from institutional investors. The Trust also believes that the
management intensive nature of these properties offers opportunities for
enhancing returns through efficient customer-oriented operating systems.
Although the Trust believes that it can make reasonable and prudent purchases
of such real estate properties, there is no assurance that such investments
will be available to the Trust or that the yield on such investments will
result in an adequate return to shareholders. The Trust may make additional
private placements of equity or secondary public offerings or may issue
additional debt in the form of acquisition lines or mortgage financings in
order to raise additional capital to invest in real estate properties.
The Trust has not paid distributions on a regular basis since 1993.
The Trust intends to evaluate its distribution policy on a quarterly basis.
Future distributions to shareholders will be evaluated by the Trust Managers
based on the liquidity of the Trust, performance of the Trust's portfolio, cash
flow of the Trust and other circumstances existing at such time.
At June 30, 1997, the Trust had $41,547,000 in mortgage debt
outstanding, all of which is comprised of fixed rate debt with a weighted
average interest rate of 8.61%. This debt represents a debt to total market
capitalization ratio of approximately 58%. The Trust intends to lower this
ratio in the future through additional equity placements and future purchases
of real estate properties with less leverage.
On February 26, 1997, REALCO purchased outstanding indebtedness of the
Trust totaling $9,419,213. Pursuant to an earlier agreement with the Trust, the
notes were then modified by REALCO to, among other things, reduce the principal
amount of these notes from $9,419,213 to $7,040,721, resulting in an
extraordinary gain on extinguishment of debt (including certain accrued
interest) to the Trust of $2,643,000. At the time the notes were modified, the
Trust made a principal payment of $1,591,103, reducing the outstanding principal
amount to $5,449,618. According to the modification terms, interest continues
to accrue at 8.8%, payable monthly, and the maturity of the notes is extended
from March 31, 1997 to December 31, 2000. Pursuant to shareholder approval on
June 30, 1997, REALCO has the option to convert the principal amount of the
notes into Shares of the Trust at the conversion rate of $2.00 per share (if
converted prior to December 31, 1997) or $2.25 per share (if converted between
December 31, 1997 and December 31, 2000). The Trust currently expects REALCO to
elect this conversion in the fourth quarter of 1997.
On July 7, 1997, the Trust signed definitive merger agreements with
USAA Real Estate Income Investments I, A California Limited Partnership, USAA
Real Estate Income Investments II Limited Partnership, a Texas limited
partnership, USAA Income Properties III Limited Partnership, a Delaware limited
partnership, and USAA Income Properties IV Limited Partnership, a Delaware
limited partnership (collectively, the "RELPs") pursuant to which the RELPs
will be merged into the Trust (the "Merger"). If the Merger is accomplished,
the Trust will acquire nine real estate properties consisting of three office
buildings totaling 550,000 square feet, two industrial properties totaling
320,000 square feet, three office/research and development properties totaling
156,000 square feet, and one retail property totaling 77,000 square feet. In
addition, the Trust will acquire a 55.84% joint venture interest in a 291,000
square foot office property. The agreed value of the interests in these
properties, including assumption of $31,704,000 in related debt, is
$89,622,000. Pursuant to the terms of the agreements, the Trust will issue an
aggregate of 22,064,147 shares of beneficial interest at $2.625 per share (for
a total value of $57,918,385) to the limited partners in the RELPs in exchange
for their limited partnership interests in the RELPs. The Merger, which has
been approved by the Trust's Board of Trust Managers and the Board of Directors
of each of the general partners of the RELPs, is subject to due diligence by
both parties and certain other conditions, including approval by the
shareholders of the Trust and the limited partners of each of the RELPs.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Trust is not currently subject to any significant litigation and
is not aware of any material pending litigation.
ITEM 2. CHANGES IN THE RIGHTS OF THE COMPANY'S SECURITY HOLDERS
REALCO holds outstanding debt of the Trust in the amount of $5,449,618
and has the option to convert the principal amount of this debt into Shares of
the Trust at $2.00 per share (if converted prior to December 31, 1997) or $2.25
per share (if converted between December 31, 1997 and December 31, 2000). If
REALCO converts prior to December 31, 1997, REALCO will receive 2,724,809
Shares. This transaction was determined to be exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, because the transaction
did not involve a public offering.
In two separate transactions in July 1997, the Trust sold a total of
7,167,418 Shares at $2.45 per Share (total proceeds of $17,560,176) to certain
clients and affiliates of Morgan Stanley Asset Management, Inc. (collectively,
"MSAM"). The placement agent for the transaction was Prudential Securities,
Inc. and the total commission charged was $702,407. The agreement with MSAM
allows them to purchase an additional 995,847 Shares at $2.45 per Share. This
transaction was determined to be exempt from registration under Section 4(2) of
the Securities Act of 1933, as amended, because the transaction did not involve
a public offering and the sale was made to an accredited investor.
In July 1997, the Trust sold a total of 6,122,449 Shares at $2.45 per Share
(total proceeds of $15,000,000) to certain clients of ABKB/LaSalle Securities
Limited Partnership and LaSalle Advisors Limited Partnership. The placement
agent for the transaction was Prudential Securities, Inc. and the total
commission charged was $600,000. This transaction was determined to be exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
because the transaction did not involve a public offering and the sale was made
to an accredited investor.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 30, 1997, the Trust's shareholders approved all proposals
presented at the Annual Meeting of Shareholders. A complete list of the
proposals, and the voting results, is incorporated by reference to the Current
Report on Form 8-K dated June 30, 1997, filed with the Securities and Exchange
Commission (the "Commission") on July 22, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
2.1 Agreement and Plan of Merger by and between the Trust and USAA
Real Estate Investments I, A California Limited Partnership
dated as of June 30, 1997 (filed as Exhibit 10.1 to the
Trust's Current Report on Form 8-K dated June 30, 1997, filed
with the Commission on July 22, 1997 (File No. 1-9016), and
incorporated by reference herein)
2.2 Agreement and Plan of Merger by and between the Trust and USAA
Real Estate Investments II Limited Partnership dated as of
June 30, 1997 (filed as Exhibit 10.2 to the Trust's Current
Report on Form 8-K dated June 30, 1997, filed with the
Commission on July 22, 1997 (File No. 1-9016), and
incorporated by reference herein)
14
<PAGE> 15
2.3 Agreement and Plan of Merger by and between the Trust and USAA
Income Properties III Limited Partnership dated as of June 30,
1997 (filed as Exhibit 10.3 to the Trust's Current Report on
Form 8-K dated June 30, 1997, filed with the Commission on
July 22, 1997 (File No. 1-9016), and incorporated by reference
herein)
2.4 Agreement and Plan of Merger by and between the Trust and USAA
Income Properties IV Limited Partnership dated as of June 30,
1997 (filed as Exhibit 10.4 to the Trust's Current Report on
Form 8-K dated June 30, 1997, filed with the Commission on
July 22, 1997 (File No. 1-9016), and incorporated by reference
herein)
3.1 Third Amended and Restated Declaration of Trust (filed as
Exhibit 3.1 to the Trust's Registration Statement on Form S-4
filed with the Commission on July 22, 1997 (File No.
333-31823), and incorporated by reference herein)
3.2 Fourth Amended and Restated Bylaws of Trust (filed as Exhibit
3.1 to the Trust's Current Report on Form 8-K dated October 3,
1995, filed with the Commission on October 3, 1995 (File No.
1-9016), and incorporated by reference herein)
3.3 Amendment to the Fourth Amended and Restated Bylaws of Trust
(filed as Exhibit 99.1 to the Trust's Current Report on Form
8-K dated November 13, 1995, filed with the Commission on
November 15, 1995 (File No. 1-9016), and incorporated by
reference herein)
3.4 Amendment to the Fourth Amended and Restated Bylaws of Trust
(filed as Exhibit 99.3 to the Trust's Current Report on Form
8-K dated December 23, 1996, filed with the Commission on
December 24, 1996 (File No. 1-9016), and incorporated by
reference herein)
3.5 Amendments to the Fourth Amended and Restated Bylaws of Trust
(filed as Exhibit 99.3 to the Trust's Current Report on Form
8-K dated December 23, 1996, filed with the Commission on
December 24, 1996 (File No. 1-9016), and incorporated by
reference herein)
4.1 Registration Rights Agreement dated as of December 19, 1996 by
and between the Trust and USAA Real Estate Company ("REALCO")
(filed as Exhibit 99.8 to the Trust's Current Report on Form
8-K dated December 23, 1996, filed with the Commission on
December 24, 1996 (File No. 1-9016), and incorporated by
reference herein)
4.2 Registration Rights Agreement dated as of December 20, 1996 by
and between the Trust and REALCO (filed as Exhibit 99.8 to the
Trust's Current Report on Form 8-K dated December 23, 1996,
filed with the Commission on December 24, 1996 (File No.
1-9016), and incorporated by reference herein)
4.3 Registration Rights Agreement dated as of June 20, 1997, by
and among the Trust, MS Real Estate Special Situations, Inc.
("MSRE") and Morgan Stanley Asset Management, Inc. ("MSAM") as
agent and attorney-in-fact for specified clients (the "MSAM
Purchasers") (filed as Exhibit 10.6 to the Trust's Current
Report on Form 8-K dated June 30, 1997, filed with the
Commission on July 22, 1997 (File No. 1-9016), and
incorporated by reference herein)
4.4 Registration Rights Agreement dated as of July 10, 1997, by
and among the Trust, ABKB/LaSalle Securities Limited
Partnership as agent for and for the benefit of certain
clients, and LaSalle Advisors Limited Partnership as agent for
and for the benefit of a certain client (filed as Exhibit
10.10 to the Trust's Current Report on Form 8-K dated June 30,
1997, filed with the Commission on July 22, 1997 (File No.
1-9016), and incorporated by reference herein)
15
<PAGE> 16
4.5 Renewal, Extension, Modification and Amendment Agreement dated
as of February 26, 1997, executed by the Trust in favor of
REALCO (filed as Exhibit 10.1 to the Trust's Current Report on
Form 8-K dated March 4, 1997, filed with the Commission on
March 4, 1997 (File No. 1-9016), and incorporated by reference
herein)
10.1 Common Share Purchase Agreement dated as of June 20, 1997, by
and among the Trust, MSRE and MSAM, as agent and
attorney-in-fact on behalf of the MSAM Purchasers (filed as
Exhibit 10.5 to the Trust's Current Report on Form 8-K dated
June 30, 1997, filed with the Commission on July 22, 1997
(File No. 1-9016), and incorporated by reference herein)
10.2 Common Share Purchase Agreement dated as of July 3, 1997, by
and between the Trust and ABKB/LaSalle Securities Limited
Partnership as agent for and for the benefit of a certain
client (filed as Exhibit 10.7 to the Trust's Current Report on
Form 8-K dated June 30, 1997, filed with the Commission on
July 22, 1997 (File No. 1-9016), and incorporated by reference
herein)
10.3 Common Share Purchase Agreement dated as of July 3, 1997, by
and between the Trust and ABKB/LaSalle Securities Limited
Partnership as agent for and for the benefit of a certain
client (filed as Exhibit 10.8 to the Trust's Current Report on
Form 8-K dated June 30, 1997, filed with the Commission on
July 22, 1997 (File No. 1-9016), and incorporated by reference
herein)
10.4 Common Share Purchase Agreement dated as of July 3, 1997, by
and between the Trust and LaSalle Advisors Limited Partnership
as agent for and for the benefit of a certain client (filed as
Exhibit 10.9 to the Trust's Current Report on Form 8-K dated
June 30, 1997, filed with the Commission on July 22, 1997
(File No. 1-9016), and incorporated by reference herein)
10.5 Employee and Trust Manager Incentive Share Plan (filed as
Exhibit 3.1 to the Trust's Registration Statement on Form S-4
filed with the Commission on July 22, 1997 (File No.
333-31823), and incorporated by reference herein)
22.1 Final Report of Inspectors of Election (filed as Exhibit 99.1
to the Trust's Current Report on Form 8-K dated June 30, 1997,
filed with the Commission on July 22, 1997 (File No. 1-9016),
and incorporated by reference herein)
27.1 Financial Data Schedule (filed only electronically with the
Commission)
(b) Reports on Form 8-K
Current Report on Form 8-K dated May 1, 1997 and filed on May
13, 1997, containing information under Item 5 (Other Events) and Item
7 (Financial Statements, Pro Forma Financial Information and Exhibits)
Current Report on Form 8-K dated June 9, 1997 and filed on
June 13, 1997, containing information under Item 5 (Other Events) and
Item 7 (Financial Statements, Pro Forma Financial Information and
Exhibits)
Current Report on Form 8-K dated June 30, 1997 and filed on
July 22, 1997, containing information under Item 5 (Other Events) and
Item 7 (Financial Statements, Pro Forma Financial Information and
Exhibits)
16
<PAGE> 17
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: August 14, 1997 /s/ Marc A. Simpson
------------------------------------
Marc A. Simpson
Vice President and Chief Financial Officer
(principal accounting and financial officer)
17
<PAGE> 18
INDEX TO EXHIBITS
Exhibit
Number Description
-------- -----------
2.1 Agreement and Plan of Merger by and between the Trust and USAA
Real Estate Investments I, A California Limited Partnership
dated as of June 30, 1997 (filed as Exhibit 10.1 to the
Trust's Current Report on Form 8-K dated June 30, 1997, filed
with the Commission on July 22, 1997 (File No. 1-9016), and
incorporated by reference herein)
2.2 Agreement and Plan of Merger by and between the Trust and USAA
Real Estate Investments II Limited Partnership dated as of
June 30, 1997 (filed as Exhibit 10.2 to the Trust's Current
Report on Form 8-K dated June 30, 1997, filed with the
Commission on July 22, 1997 (File No. 1-9016), and
incorporated by reference herein)
2.3 Agreement and Plan of Merger by and between the Trust and USAA
Income Properties III Limited Partnership dated as of June 30,
1997 (filed as Exhibit 10.3 to the Trust's Current Report on
Form 8-K dated June 30, 1997, filed with the Commission on
July 22, 1997 (File No. 1-9016), and incorporated by reference
herein)
2.4 Agreement and Plan of Merger by and between the Trust and USAA
Income Properties IV Limited Partnership dated as of June 30,
1997 (filed as Exhibit 10.4 to the Trust's Current Report on
Form 8-K dated June 30, 1997, filed with the Commission on
July 22, 1997 (File No. 1-9016), and incorporated by reference
herein)
3.1 Third Amended and Restated Declaration of Trust (filed as
Exhibit 3.1 to the Trust's Registration Statement on Form S-4
filed with the Commission on July 22, 1997 (File No.
333-31823), and incorporated by reference herein)
3.2 Fourth Amended and Restated Bylaws of Trust (filed as Exhibit
3.1 to the Trust's Current Report on Form 8-K dated October 3,
1995, filed with the Commission on October 3, 1995 (File No.
1-9016), and incorporated by reference herein)
3.3 Amendment to the Fourth Amended and Restated Bylaws of Trust
(filed as Exhibit 99.1 to the Trust's Current Report on Form
8-K dated November 13, 1995, filed with the Commission on
November 15, 1995 (File No. 1-9016), and incorporated by
reference herein)
3.4 Amendment to the Fourth Amended and Restated Bylaws of Trust
(filed as Exhibit 99.3 to the Trust's Current Report on Form
8-K dated December 23, 1996, filed with the Commission on
December 24, 1996 (File No. 1-9016), and incorporated by
reference herein)
3.5 Amendments to the Fourth Amended and Restated Bylaws of Trust
(filed as Exhibit 99.3 to the Trust's Current Report on Form
8-K dated December 23, 1996, filed with the Commission on
December 24, 1996 (File No. 1-9016), and incorporated by
reference herein)
4.1 Registration Rights Agreement dated as of December 19, 1996 by
and between the Trust and USAA Real Estate Company ("REALCO")
(filed as Exhibit 99.8 to the Trust's Current Report on Form
8-K dated December 23, 1996, filed with the Commission on
December 24, 1996 (File No. 1-9016), and incorporated by
reference herein)
4.2 Registration Rights Agreement dated as of December 20, 1996 by
and between the Trust and REALCO (filed as Exhibit 99.8 to the
Trust's Current Report on Form 8-K dated December 23, 1996,
filed with the Commission on December 24, 1996 (File No.
1-9016), and incorporated by reference herein)
<PAGE> 19
Exhibit
Number Description
-------- -----------
4.3 Registration Rights Agreement dated as of June 20, 1997, by
and among the Trust, MS Real Estate Special Situations, Inc.
("MSRE") and Morgan Stanley Asset Management, Inc. ("MSAM") as
agent and attorney-in-fact for specified clients (the "MSAM
Purchasers") (filed as Exhibit 10.6 to the Trust's Current
Report on Form 8-K dated June 30, 1997, filed with the
Commission on July 22, 1997 (File No. 1-9016), and
incorporated by reference herein)
4.4 Registration Rights Agreement dated as of July 10, 1997, by
and among the Trust, ABKB/LaSalle Securities Limited
Partnership as agent for and for the benefit of certain
clients, and LaSalle Advisors Limited Partnership as agent for
and for the benefit of a certain client (filed as Exhibit
10.10 to the Trust's Current Report on Form 8-K dated June 30,
1997, filed with the Commission on July 22, 1997 (File No.
1-9016), and incorporated by reference herein)
4.5 Renewal, Extension, Modification and Amendment Agreement dated
as of February 26, 1997, executed by the Trust in favor of
REALCO (filed as Exhibit 10.1 to the Trust's Current Report on
Form 8-K dated March 4, 1997, filed with the Commission on
March 4, 1997 (File No. 1-9016), and incorporated by reference
herein)
10.1 Common Share Purchase Agreement dated as of June 20, 1997, by
and among the Trust, MSRE and MSAM, as agent and
attorney-in-fact on behalf of the MSAM Purchasers (filed as
Exhibit 10.5 to the Trust's Current Report on Form 8-K dated
June 30, 1997, filed with the Commission on July 22, 1997
(File No. 1-9016), and incorporated by reference herein)
10.2 Common Share Purchase Agreement dated as of July 3, 1997, by
and between the Trust and ABKB/LaSalle Securities Limited
Partnership as agent for and for the benefit of a certain
client (filed as Exhibit 10.7 to the Trust's Current Report on
Form 8-K dated June 30, 1997, filed with the Commission on
July 22, 1997 (File No. 1-9016), and incorporated by reference
herein)
10.3 Common Share Purchase Agreement dated as of July 3, 1997, by
and between the Trust and ABKB/LaSalle Securities Limited
Partnership as agent for and for the benefit of a certain
client (filed as Exhibit 10.8 to the Trust's Current Report on
Form 8-K dated June 30, 1997, filed with the Commission on
July 22, 1997 (File No. 1-9016), and incorporated by reference
herein)
10.4 Common Share Purchase Agreement dated as of July 3, 1997, by
and between the Trust and LaSalle Advisors Limited Partnership
as agent for and for the benefit of a certain client (filed as
Exhibit 10.9 to the Trust's Current Report on Form 8-K dated
June 30, 1997, filed with the Commission on July 22, 1997
(File No. 1-9016), and incorporated by reference herein)
10.5 Employee and Trust Manager Incentive Share Plan (filed as
Exhibit 3.1 to the Trust's Registration Statement on Form S-4
filed with the Commission on July 22, 1997 (File No.
333-31823), and incorporated by reference herein)
22.1 Final Report of Inspectors of Election (filed as Exhibit 99.1
to the Trust's Current Report on Form 8-K dated June 30, 1997,
filed with the Commission on July 22, 1997 (File No. 1-9016),
and incorporated by reference herein)
27.1 Financial Data Schedule (filed only electronically with the
Commission)
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<SECURITIES> 0 0
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<DEPRECIATION> (24,249) (23,973)
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