Schedule 14-A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
Filed by a Party Other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, for Use of the
Definitive Proxy Statement Commission Only (as permitted
X Definitive Additional by Rule 14a-6(e) (2))
Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-
12
AMERICAN INDUSTRIAL PROPERTIES REIT
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
$500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
Fee computed below on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1)Title of each class of securities to which transaction
applies:
(2)Aggregate number of securities to which transaction
applies:
(3)Per unit price or other underlying value to transaction
computed pursuant to Exchange Act Rule 0-11:
(4)Proposed maximum aggregate value of transaction:
(5)Total fee paid:
X Fee paid previously.
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1)Amount previously paid:
(2)Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4)Date Filed:
American Industrial Properties REIT Letterhead appears here.
Report to Shareholders 1st Quarter 1997
Dear Fellow Shareholders:
American Industrial Properties REIT ("AIP" or, the "Trust")
welcomes the opportunity to report to you the results of
operations for the first quarter of 1997 and other
significant developments for the Trust.
Investment by USAA Real Estate Company and Purchase of MLI
Notes. As previously reported, in December, 1996, USAA Real
Estate Company ("USAA REALCO") acquired the shares of AIP
beneficially owned by Pure World, Inc. and certain other
shareholders of the Trust as part of a settlement agreement
reached in the litigation between AIP and Pure World, Inc.
As part of this process, USAA REALCO also acquired the
shares of AIP that had been owned by Black Bear Realty, Ltd.
and affiliated entities and, in addition, acquired AIP's
924,600 remaining authorized, but unissued shares. With
these purchases, USAA REALCO now holds approximately 31.8%
of AIP's outstanding shares.
In February, 1997, USAA REALCO acquired AIP's
outstanding 8.8% notes from The Manufacturers Life Insurance
Company (U.S.A.). At that time, the notes were modified to
incorporate various amendments, including extending the
maturity of the notes to December 31, 2000, amending the
principal balance on the notes from $9,419,000 to
$7,041,000, and releasing all collateral securing the notes.
AIP also made a $1,591,000 principal payment resulting in a
current principal balance on the notes of $5,450,000. In
connection with this modification, AIP recorded an
extraordinary gain of $2,643,000, or $0.26 per share in the
first quarter of 1997.
As set forth in an agreement reached between AIP and
USAA REALCO on December 18, 1996, the notes will be
convertible at the option of USAA REALCO into shares of the
Trust if such a conversion right and an increase in the
authorized shares of the Trust are approved by AIP's
shareholders. If the notes are converted on or before
December 31, 1997, the conversion price will be $2.00 per
share (the closing price of the Trust's shares on December
18, 1996). If the conversion occurs after December 31, 1997,
but on or before December 31, 2000, the conversion price
will be $2.25 per share.
The proposals to approve the conversion rights of the
notes and to increase the authorized shares of the Trust are
included in AIP's proxy statement described below. If these
proposals are not approved by June 30, 1997, the notes will
accrue interest at the lesser of 18% per annum or the
highest lawful rate effective July 1, 1997 and AIP will be
required to pay the outstanding principal balance of the
notes, plus accrued and unpaid interest, by October 31,
1997.
Investment by Morgan Stanley Asset Management, Inc. We were
pleased to announce on May 2, 1997, that an agreement had
been signed between AIP and Morgan Stanley Asset Management,
Inc. ("MSAM") (on behalf of certain of its clients) and an
affiliate of MSAM whereby such affiliate and clients of MSAM
have agreed to purchase up to $20,000,000 of senior
convertible debt securities (the "Debt") of the Trust,
subject to certain conditions, including the execution of
definitive agreements. AIP will use the proceeds for the
acquisition of real estate properties. The Debt will be non
interest-bearing and, subject to shareholder approval,
convertible into AIP common shares at $2.45 per share. Under
certain conditions, MSAM will have the right to require that
AIP appoint up to two additional members designated by MSAM
to AIP's Board of Trust Managers.
The proposal to approve the conversion of the Debt and
to increase the authorized shares of the Trust are also
included in AIP's Proxy Statement. If this proposal is not
approved by the Shareholders, the Debt will begin to accrue
interest at 10% per annum, payable quarterly, with the full
principal amount due in two years.
Operating Results. The operating performance of the
Trust's properties improved somewhat during the first
quarter of 1997. Leased occupancy declined to 91.1% as of
March 31, 1997, compared to 93.3% as of the same date a year
ago, but the decrease was attributable to the non-renewal of
a single large tenant at the Trust's Meridian Street
Warehouse property in Arlington, Texas. This space has since
been released at a higher rental rate which has returned the
leased occupancy of the Trust's portfolio to slightly over
94%. Revenues for the quarter ended March 31, 1997 were
$2,666,000, compared to $2,904,000 in 1996, however, on a
same property basis revenues increased approximately 3%
compared to the fourth quarter of 1996.
Funds From Operations for the quarter ended March 31,
1997, were $(54,000), or $(0.01) per share, compared to
$(483,000), or $(0.05) per share in 1996. Net income was
$1,936,000 or $0.19 per share compared to a net loss of
$(1,510,000) or $(0.17) per share in 1996 reflecting an
extraordinary gain on extinquishment of debt of $2,643,000
or $0.26 per share in the first quarter of 1997.
Property Sales. On March 26, 1997, AIP successfully closed
the sale of its Burnsville Corporate Center property located
in Minneapolis, Minnesota for a gross sales price of
$2,175,000 and a gain of $312,000. With this sale we have
continued AIP's program of concentrating property
investments in growing markets located in the South and
Southwest regions of the country.
Cash Distributions. As conveyed to you earlier, the
agreement with MLI required that the Trust not pay
distributions to shareholders until the total payments to
MLI provided for in the agreement had been made. With the
transfer of the MLI notes to USAA REALCO, the provision
restricting cash distributions was amended to provide that
distributions to shareholders could be resumed upon the
occurrence of passage by the shareholders of the proxy
providing additional authorized shares and approving the
option for the conversion of the notes by USAA REALCO into
shares of beneficial interest, payment of the notes in full,
or at the sole discretion of USAA REALCO. Future
distributions, if any, 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 following the occurrence of one of the above
events.
Annual Meeting of Shareholders. The Annual Meeting of
Shareholders of AIP will be held on Monday, June 30, 1997,
at 9:00 a.m. (Dallas time) at 2200 Ross Avenue, 40th Floor,
Dallas, Texas, 75201. Proxy statements for this meeting were
distributed on May 14, 1997, to shareholders of record as of
May 12, 1997. The Trust Managers cordially invite each
shareholder to attend.
We believe that passage of each element of this proxy
is crucial to AIP's ability to grow and to create value for
all shareholders. It is important that your shares are
represented at the Annual Meeting regardless of the number
of shares you hold. Please ensure your representation by
completing, signing, dating and promptly returning your
proxy card in the envelope provided. If you have any
questions or comments, please call me directly at AIP's toll
free number, (800) 550-6053, or call The Herman Group, Inc.
at (800) 555-6433.
On behalf of your Trust Managers, we appreciate the
continued confidence we have received while working to
position AIP for future growth. We are confident that AIP's
strategy of investing in light industrial properties is
sound and we are very pleased to have received the support
of USAA Real Estate Company and Morgan Stanley Asset
Management, Inc., of whom we believe are recognized leaders
in the real estate industry. With your support, we pledge to
continue working to increase the value of your investment in
American Industrial Properties REIT.
Sincerely,
/s/Charles W. Wolcott
Charles W. Wolcott
President and CEO
American Industrial Properties REIT
Condensed Consolidated Statements of Operations
(unaudited, in thousands except share and per share data)
<TABLE>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Rents and tenant reimbursements $ 2,637 $ 2,817
Interest income 29 87
2,666 2,904
Property operating expenses 936 940
Depreciation and amortization 693 701
Interest on mortgages
and notes payable 1,404 1,728
Administrative expenses - general 416 557
Administrative expenses
- litigation and proxy 236 488
3,685 4,414
Loss from operations (1,019) (1,510)
Gain on sale of real estate 312 -
Extraordinary gain on
extinguishment of debt 2,643 -
Net income (loss) $ 1,936 $(1,510)
PER SHARE DATA
Loss from operations $ (0.10) $ (0.17)
Gain on sale of real estate 0.03 -
Extraordinary gain on
extinguishment of debt 0.26 -
Net income (loss) $ 0.19 $ (0.17)
Weighted average
shares outstanding 10,000,000 9,075,400
</TABLE>
American Industrial Properties REIT
Condensed Consolidated Balance Sheet Data
(In thousands)
<TABLE>
March 31, December 31,
1997 1996
(unaudited)
<S> <C> <C>
Real Estate $ 91,940 $94,472
Accumulated depreciation (23,637) (23,973)
Net real estate 68,303 70,499
Cash - Unrestricted 1,725 4,010
Cash - Restricted 1,138 1,366
Other assets, net 3,079 3,061
$ 74,245 $ 78,936
Mortgage notes payable $ 41,710 $ 43,797
8.8% notes payable 5,450 9,419
Other liabilities 2,466 3,037
49,626 56,253
Shareholders' equity 24,619 22,683
$ 74,245 $ 78,936
</TABLE>
